Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: At all times material to this proceeding, Respondent was eligible for, and licensed as, an insurance agent in the State of Florida. The Respondent is currently eligible for, and licensed as, an insurance agent in the State of Florida. At all times material to this proceeding, Respondent was a licensed agent for United States Fidelity and Guaranty Company (USF&G). At all times material to this proceeding, Respondent was an officer, director, and stockholder of D.E. Brewer and Company (Company), an incorporated general lines insurance agency primarily located in Jacksonville, Florida. On or about April 24, 1986, the Company entered into an agency agreement with USF&G whereby the Company was given authority to solicit and sell insurance on behalf of USF&C. This agency agreement was cancelled unilaterally by USF&G on November 24, 1986. At all times material to this proceeding, all funds received by the Company on behalf of USF&G represented premium funds paid by consumers for the purpose of obtaining insurance and were trust funds received in a fiduciary capacity to be paid over to USF&G in the applicable regular course of business. Under the agency agreement with USF&G, accounts of premium funds received by the Company on behalf of USF&G were to be "rendered at the end of each month" and any "balance shown to be due to" USF&G was to "be paid to the designated reporting office not later than the twentieth day of the second succeeding month". On or about October 27, 1986, Southland Services of Jacksonville, Inc. (Southland) issued a check to the Company in the amount of $15,799.00 as a monthly installment for an auto policy and a general liability policy issued by USF&G. These premium funds were collected by the Company on behalf of USF&G. On or about November 21, 1986, Southland issued a check to the Company in the amount of $13,785.00 as a monthly installment for auto policy and a general liability policy issued by USF&G. These premium funds were collected by the Company on behalf of USF&G. On or about November 12, 1986, S. Gordon Blalock (Blalock) issued a check to the Company in the amount of $1,341.00 as a premium on an auto policy issued by USF&G. These premium funds were collected on behalf of USF&G. On or about December 3, 1986, USF&G notified Blalock that USF&G had not received the premium and unless Blalock remitted the premium within 15 days his policy would be cancelled. This matter was cleared up by Blalock with USF&G and the policy was not cancelled. On or about November 5, 1986, Anita Grusenmeyer, on behalf of Grusenmeyer & Associates, Inc. (Grusenmeyer) issued a check to the Company in the amount of $2,810.00 as a premium payment for insurance policies issued by USF&G. These premium funds were collected by the Company on behalf of USF&G. On or about December 15, 1986, USF&G requested documentation from Grusenmeyer as to proof of premium payment to the Company on these insurance policies since the Company had not rendered the premium payment to USF&G. This documentation was furnished and there was no interruption of the coverage. On or about November 24, 1986, USF&G unilaterally terminated its agency agreement with the Company due to the Company's failure to remit premium funds collected on behalf of USF&G. Prior to, and at the time of the termination of the agency agreement by USF&G, Respondent was Vice President, a director and stockholder (11%) of the Company, but on or about November 24, 1986, the date of the termination of the agency agreement, Respondent became president of the Company. By letter dated December 12, 1986 and addressed to Respondent, USF&G, under paragraph 9 of the agency agreement, made a demand on the Company for the records pertaining to business dealings between the Company and USF&G. This demand was again made by letter on January 21, 1987. However, there was some concern on Respondent's part in turning these records over to USF&G and it was determined that USF&G could make copies of such records with someone from the Company being present. Due to conflicts in schedules of both parties this was never accomplished, and, in the interim, USF&G concluded that it had the capability to reproduce the records on its computer. No further demand for the records was made and the records were never turned over to USF&G by the Company. Also in its letter dated January 2, 1987, USF&G advised the Company that the premium funds received in November, 1986, were overdue as well as the August, 1986, and October, 1986, account. The August, 1986, and October, 1986, account would be for premium funds received in June, 1986, and August, 1986, respectively. The September, 1986, account had been paid on or about November 20, 1986, using premium funds received from Southland on November 21, 1986, in the amount of $13,785.00 to cover a check previously issued by Donald Brewer on an account that did not have sufficient funds to cover the check. The deposit of the Southland check into the account made the check written by Donald Brewer "good". In accordance with the agency agreement, the premium funds received from Southland ($15,799.00) in October, 1986, were due and payable on December 20, 1986, and the premium funds received from Southland ($13,785.00), Blalock ($1,341.00) and Grusenmeyer ($2,810.00) during November, 1986, were funds due and payable on January 20, 1987. However, these premium funds had been disposed of prior to Respondent becoming president of the Company on November 24, 1986, and the Company having insufficient funds that could be used to pay USF&G after Respondent became president, the funds were not remitted to USF&G in the regular course of business set forth in the agency agreement. All the premium funds received by the Company from Southland ($15,799.00 and $13,785.00), Blalock ($1,341.00) and Grusenmeyer ($2,810.00) in October and November of 1986 were deposited in the Southeast Bank, N.A., of Jacksonville, Florida, Account No. 001632637, an account on which Respondent had no check writing authority. All of the above-referenced funds were deposited in that account prior to Respondent becoming president on November 24, 1986. The Respondent was not the responsible agent for the three insurance accounts: Southland; Blalock; and Grusenmeyer, and none of the premium funds remitted to the company by these accounts were "received by" the Respondent. There is no evidence that these premium funds were "received by" any employee of the Company who was under the Respondent's direct supervision and control. There is no evidence that Respondent had access to, or responsibility for, the premium funds paid by Southland, Blalock and Grusenmeyer during October and November of 1986. Likewise, there is no evidence that the Respondent diverted or appropriated any of such premium funds to his own use or to the use of anyone other than to those entitled to receive them. Upon becoming president, Respondent opened a new bank account with the Florida National Bank, but there was no evidence that the account ever had sufficient funds, other than possibly premium funds belonging to other insurers which had been received on their behalf by the Company, to pay USF&G the premium funds due it from the Southland, Blalock and Grusenmeyer accounts. There was evidence that the Respondent had paid salaries to the employees out of the account, but no amount was established. Upon becoming president, Respondent began negotiating a settlement with USF&G on the amount of premium funds due USF&G. There was a dispute as to the amount but a settlement of approximately $52,000.00 was reached. Some of this amount has been paid, but there is a remaining balance. There was no evidence that Respondent, prior to becoming President of the Company, took any part in the policy decisions or administration of the Company, such as determining the manner in which the Company's receipts would be spent or to direct, control or supervise the activities of the employees or other insurance agents of the Company.
Recommendation Based upon the Findings of Fact, Conclusions of Law, the evidence in the record and the candor and demeanor of the witnesses, it is RECOMMENDED that the Petitioner, Department of Insurance and Treasurer enter a Final Order dismissing all counts of the Administrative Complaint filed against the Respondent, John Lanahan, Brewer in Case No. 87-2692. Respectfully submitted and entered this 26th day of July, 1988, in Tallahassee, Leon County, Florida. WILLIAM R. CAVE Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 26th day of July, 1988. APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 87-2692 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on the proposed findings of fact submitted by the parties in this case. Specific Rulings on Proposed Findings of Fact Submitted by Petitioner Adopted in Finding of Fact 2, except that there was no evidence presented as to the types of insurance licenses Respondent held. Adopted in Finding of Fact 1. 3.-9. Adopted in Findings of Fact 3 through 9, respectively. 10. Adopted in finding of Fact 10 but clarified to show the date of the check to be November 12, 1986, rather than November 21, 1986. 11-14. Adopted in Findings of Fact 11 through 14. 15-16. Adopted in Finding of Fact 15. 17-18. Adopted in Finding of Fact 16. 19. Adopted in Findings of Fact 16 and 17. 20-22. Adopted in Finding of Fact 18. Adopted in Finding of Fact 19 and 22. Adopted in Finding of Fact 20 except that there is competent evidence to show that the Grusenmeyer payment was received and deposited prior to Respondent assuming the Presidency. Adopted in Finding of Fact 18. Adopted in Finding of Fact 23, but although there was a sincere dispute as to the amount there was no competent evidence that that amount was $200,000 or that the settlement figure of $52,000 was not a fair representation of the amount owed to USF&G by the Company. Specific Rulings on Proposed Findings of Fact Submitted by Respondent Adopted in Findings of Fact 1 and 2. Adopted in Findings of Fact 3, 19, and 24. Adopted in Findings of Fact 8, 9, and 19 but clarified. Adopted in Finding of Fact 18. Adopted in Finding of Fact 12. Adopted in Findings of Fact 18 and 19. 7-8. Adopted in Findings of Fact 12, 18 and 19. Adopted in Findings of Fact 20, 21 and 22. Adopted in Finding of Fact 23. 11-12. Rejected as being argument, not a finding of fact. COPIES FURNISHED: S. Marc Herskovitz, Esquire William W. Tharpe, Jr., Esquire 413-B Larson Building Tallahassee, Florida 32399-0300 Judith S. Beaubouef, Esquire Peter L. Dearing, Esquire Post Office Box 4099 Jacksonville, Florida 32201 Honorable William Gunter State Treasurer ana Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300
The Issue Whether Respondents violated various provisions of the Florida Insurance Code, and, if so, what disciplinary action should be taken against them, if any.
Findings Of Fact At all times material hereto, Respondent The Administrators Corporation (hereinafter "TAC") has been an authorized administrator, and Respondent Charles N. Zalis (hereinafter "Zalis") has been licensed or eligible for licensure as a life insurance agent, a life and health insurance agent, and a legal expense insurance sales representative in the State of Florida. Zalis is the chief executive officer of TAC. TAC is not licensed in Florida as an insurer. An authorized administrator in Florida may engage in the solicitation, negotiation, transaction and/or sale of insurance in Florida if such activity takes place pursuant to an agreement between the authorized administrator and an authorized insurer. Life and Health Insurance Company of America (hereinafter "Life & Health"), which is not a party to this administrative proceeding, is an authorized insurer in Florida. On April 13, 1988, TAC entered into a contract with Life & Health to market and service group health insurance. The term of that contract was for four years and one month. Life & Health attempted to terminate its Administrator Agreement with TAC by letter dated March 16, 1989, effective immediately. The date on which the responsibilities under that Administrator Agreement terminated, if ever, is an issue in dispute between Life & Health and TAC. The Department takes no position on that issue. That issue is the subject of a civil lawsuit filed in Broward County, between Life & Health and TAC, which is currently being litigated. Although Life & Health's original position was that the contract between it and TAC terminated as of March 16, 1989, that position apparently changed because Life & Health continued paying claims up to July 1, 1989. TAC's position was that Life & Health's responsibilities under that contract did not terminate until September 26, 1989, when George Washington, an authorized group health insurance carrier in Florida, agreed to assume the risk for the block of business retroactive to July 1, 1989. TAC could have obtained a replacement carrier earlier than September 26, 1989, if the Department had advised TAC and Zalis as to the procedure involved to allow Summit Homes, an authorized property and casualty insurer, to broaden the scope of its certificate of authority to include group health insurance. The simple procedure could have been accomplished in as little as 24 to 48 hours. A group health insurance carrier remains on the risk to its policyholders until there has been a valid cancellation or termination of that coverage. In the pending Circuit Court litigation between Life & Health and TAC, the validity of the termination or cancellation and the date of same are ultimate issues in that law suit and have not yet been determined by the Court. On March 27, 1989, Life & Health sent a letter to agents informing them of its termination of its relationship with TAC and that it would not accept any new business written after March 16, 1989. The evidence in this cause, however, indicates that Life & Health did continue to accept new business after that date. The Department became aware of the dispute between Life & Health and TAC on June 8, 1989. The Department knew as of July 12, 1989, that TAC was continuing to write business on Life & Health "paper." At some point after the attempted March 16, 1989, termination of the contract by Life & Health, TAC and Life & Health informally agreed to a July 1, 1989, date after which Life & Health would no longer be responsible for any claims and TAC would have a replacement insurer in place to take over the block of business. That agreement was based upon TAC and Life & Health each agreeing to cooperate with each other and to take certain actions to facilitate the transfer of the book of business. Both the Department and the Circuit Court were aware of the informal agreement whereby Life & Health agreed to remain on the risk for the block of business at least through July 1, 1989, and Zalis and TAC would issue no further policies on Life & Health "paper" and would not remain involved in the processing or payment of claims after July 1, 1989. Prior to July 12, 1989, those matters required to take place in connection with the July 1, 1989, "cutoff" date had not been accomplished, and Zalis and TAC continued writing new business on Life & Health "paper" believing that Life & Health was still legally responsible. Zalis informed the Department's investigator on July 12, 1989, that he was writing and that he intended to continue to write new business on Life & Health "paper." No evidence was presented to show that the Department notified Zalis or TAC that they could not do so, and the Department took no action to stop that activity. Additionally, Life & Health took no action to enjoin TAC or Zalis from writing new business on Life & Health "paper." The evidence does suggest that Life & Health may have continued to accept the benefits and liabilities. The premiums for policies written by TAC on Life & Health "paper" after July 1, 1989, were not forwarded to Life & Health; rather, they were retained by TAC in a trust account. Zalis and TAC offered to deposit those monies with the Circuit Court in which the litigation between TAC and Life & Health was pending or to transmit those monies to the Department to insure that the monies would be available for the payment of claims. Pursuant to an agreement with the Department, the monies representing those premium payments were transmitted to the Department On September 26, 1989, George Washington Insurance Company, an authorized health insurance company in the State of Florida, agreed to take over the block of business from Life & Health, retroactive to July 1, 1989. Life & Health, however, had not yet signed the assumption agreement to transfer its responsibility to George Washington Insurance Company as of the time of the final hearing in this cause. TAC and Zalis did not place any Florida insurance business with any companies not authorized to do business in Florida. Respondent Zalis has been in the insurance business for 26 years and enjoys a good reputation for honesty and integrity. Zalis and TAC have never had prior administrative action taken against them. As of the date of the final hearing in this matter, there had been no Circuit Court determination of the effectiveness or ineffectiveness of Life & Health's termination of the Administrators Agreement nor of the date of that termination, if any.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered finding Respondents not guilty of the allegations contained in the Order to Show Cause and dismissing the Order to Show Cause filed against them. DONE and ENTERED this 9th day of July, 1990, at Tallahassee, Florida. LINDA M. RIGOT, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 9th day of July, 1990. APPENDIX TO RECOMMENDED ORDER DOAH CASE NO. 89-5981 Petitioner's proposed findings of fact numbered 1-3, 6-9, 14-17, 20, 21, and 25-27 have been adopted either in substance or verbatim in this Recommended Order. Petitioner's proposed findings of fact numbered 4 and 5 have been rejected as not constituting findings of fact but rather as constituting conclusions of law or argument of counsel. Petitioner's proposed findings of fact numbered 10, 11, 13, and 22 have been rejected as being unnecessary for determination of the issues in this cause. Petitioner's proposed findings of fact numbered 12 and 19 have been rejected as being irrelevant to the issues under consideration in this cause. Petitioner's proposed findings of fact numbered 18, 23, and 24 have been rejected as not being supported by the weight of the evidence in this cause. Respondents' proposed findings of fact numbered 1-17 have been adopted either verbatim or in substance in this Recommended Order. COPIES FURNISHED: Peter D. Ostreich, Esquire Office of Treasurer and Department of Insurance 412 Larson Building Tallahassee, Florida 32399-0300 Jerome H. Shevin, Esquire Wallace, Engels, Pertnoy, Martin, & Solowsky, P.A. CenTrust Financial Center 21st Floor 100 Southeast 2nd Street Miami, Florida 33131 William M. Furlow, Esquire Katz, Kutter, Haigler, Alderman, Davis, Marks & Rutledge, P.A. Post Office Box 1877 Tallahassee, Florida 32302-1877 Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Don Dowdell, General Counsel Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, Florida 32399-0300
The Issue Whether the School Board of Broward County's award of a contract for Excess General and Auto Liability insurance coverage to United National Insurance Company is barred because of illegality?
Findings Of Fact The Parties Ranger Insurance Company, Petitioner, is the holder of a Certificate of Authority dated September 9, 1996 and issued by the Department of Insurance and Bill Nelson, Insurance Commissioner and Treasurer. Good through June 1, 1997, the certificate authorizes Ranger to write in a number of lines of insurance business, including, Private Passenger Auto Liability, Commercial Automobile Liability, Private Passenger Automobile Auto Physical Damage, Commercial Auto Physical Damage and Other Liability. As such, Ranger is an "authorized" or "admitted" insurer in the State of Florida. L.B. Bryan & Company, Alexander & Alexander, Inc., and Benefactor Financial Group, Inc., is a joint venture and co- petitioner with Ranger in this proceeding through whom Ranger proposed to procure the Excess General and Auto Liability (“Excess GL/AL”) coverage. A timely proposal under Request for Proposal 97- 072S was submitted to the School Board of Broward County by the petitioners to provide the Excess GL/AL Insurance Coverage sought by the RFP. United National Insurance Company is an "eligible" surplus lines insurer, approved by the Florida Department of Insurance to transact all surplus lines coverages in the State of Florida and licensed as such. The Department has notified insurance agents of United Nation's eligibility as a surplus lines insurer since 1978. It is the insurer of the Excess General and Excess Auto Liability insurance coverage awarded by the School Board under RFP 97-072S. Arthur J. Gallagher & Company ("Gallagher,") is the eighth largest insurance broker in the world. It has four sales offices, nine service offices, and approximately 150 employees in the State of Florida alone. The office from which it conducted business related to this proceeding is in Boca Raton, Florida, an office for which Area President David L. Marcus is responsible. Gallagher submitted a timely proposal (the "Gallagher proposal,") in response to the RFP on behalf of United National. The School Board of Broward County is the authority that operates, controls, and supervises all free public schools in the Broward County School District, "[i]n accordance with the provisions of s. (4)(b) of Article IX of the State Constitution ...". Section 230.03(2), F.S. In accord with its powers, the School Board may contract directly to purchase insurance. It is not required by its purchasing rules to use a competitive bidding or procurement process to purchase insurance. Nonetheless, on Friday, April 26, 1996, it issued a request for proposals, the RFP at issue in this proceeding, for insurance coverages including for Excess GL/AL insurance coverages. Siver Insurance Management Consultants Siver Insurance Management Consultants ("Siver,") are the drafters of RFP 97-072S. The School Board relied on Siver to draft the RFP, particularly its technical sections. Technical review of the proposals made under the RFP was conducted by Siver. And Siver put together for the School Board's use a summary of the policies proposed by both United National and Ranger. The summary was considered by the School Board's Evaluation Committee when it evaluated the competing proposals. The determination of whether the competing proposers were properly licensed was made by Siver. The School Board's Evaluation Committee, indeed the School Board, itself, played no role in determining the licensing credentials of the proposers while the proposals were under consideration. Under the arrangement between Siver and the School Board, however, the School Board retained the primary responsibility for administering the RFP. The RFP Request for Proposal 97-072S was mailed to 324 vendors (prospective proposers) the same day as its issuance, April 26, 1996. None of the vendors knew the contents of the RFP until it was issued. The RFP sought proposals for seven coverages, each of which was severable from the remainder of the coverages and was allowed to be proposed separately. The scope of the request was described in the RFP as follows: The School Board of Broward County, Florida ... is seeking proposals for various insurance coverages and risk management services. To facilitate distribution of the underwriting data and the requirements for each of the coverages, this consolidated Request for Proposals ... has been prepared. However, each of the coverages is severable and may be proposed separately. The following are included: Boiler & Machinery Excess General and Automobile Liability Excess Workers' Compensation School Leaders Errors & Omissions Crime Including Employee Dishonesty - Faithful Performance, Depositor's Forgery Claim and Risk Management Services (Including Managed Care Services) Statutory Death Benefits Petitioner's Ex. 1, pg. I-1. Since the seven coverages are severable and no proposer had to submit a proposal on all seven coverages, one way of looking at RFP 97-072S is as a consolidated RFP composed of seven, separate proposals, each for a different type of insurance coverage. Of the 324 vendors to whom the RFP was sent, only two, Gallagher, on behalf of United National, and Ranger, through the action of the joint venture, submitted proposals with respect to the Excess GL/AL coverages. Reasons for Using an RFP The School Board, under the auspices of Siver, chose to seek insurance coverage through an RFP rather than an Invitation to Bid, or what is colloquially referred to as a "straight bid," for a number of reasons. As one familiar with RFPs and Invitations to Bid might expect, the School Board and Siver were attracted to the RFP by the increased flexibility it offered in the ultimate product procured in comparison to the potentially less flexible product that would be procured through an invitation to bid. More pertinent to this case, however, Siver chose to use an RFP for the School Board in this case because "as explained ... by the Department of Insurance over the ... years, while there may... [be a] prohibition against any surplus lines agents submitting a straight bid, there would not be a prohibition against a ... [surplus lines] agent responding to a request for proposal " (Tr. 149.) The RFP approach was not chosen, however, in order to avoid any legal requirement or to circumvent the Insurance Code. As explained by Mr. Marshall, the approach was born of hard reality: Id. [O]ne of the primary motivations [for using an RFP rather than an Invitation to Bid] was to allow us [The School Board and Siver] to consider surplus lines companies because of the fact that very often they were the only insurers that would respond on the number of coverages and clients that we were working for. The Insurance Code and the Surplus Lines Law The Insurance Code in Section 624.401, Florida Statutes, requires generally that an insurer be authorized by the Department of Insurance (the "Department,") to transact business in the State of Florida before it does so: (1) No person shall act as an insurer, and no insurer or its agents, attorneys, subscribers, or representatives shall directly or indirectly transact insurance, in this state except as authorized by a subsisting certificate of authority issued to the insurer by the department, except as to such transactions as are expressly otherwise provided for in this code. One place in the code where transactions are "expressly otherwise provided for ...," is in the Surplus Lines Law, Section 626.913 et seq., Florida Statues. The purposes of the law are described as follows: It is declared that the purposes of the Surplus Lines Law are to provide for orderly access for the insuring public of this state to insurers not authorized to transact insurance in this state, through only qualified, licensed, and supervised surplus lines agents resident in this state, for insurance coverages and to the extent thereof not procurable from authorized insurers, who under the laws of this state must meet certain standards as to policy forms and rates, from unwarranted competition by unauthorized insurers who, in the absence of this law, would not be subject to similar requirements; and for other purposes as set forth in this Surplus Lines Law. Section 626.913(2), F.S. Surplus lines insurance is authorized in the first instance only if coverages cannot be procured from authorized insurers: If certain insurance coverages of subjects resident, located, or to be performed in this state cannot be procured from authorized insurers, such coverages, hereinafter designated "surplus lines," may be procured from unauthorized insurers, subject to the following conditions: The insurance must be eligible for export under s. 626.916 or s. 626.917; The insurer must be an eligible surplus lines insurer under s. 626.917 or s. 626.918; The insurance must be so placed through a licensed Florida surplus lines agent; and The other applicable provisions of this Surplus Lines Law must be met. Section 626.915, Florida Statutes, and then only subject to certain other conditions: No insurance coverage shall be eligible for export unless it meets all of the following conditions: The full amount of insurance required must not be procurable, after a diligent effort has been made by the producing agent to do so, from among the insurers authorized to transact and actually writing that kind and class of insurance in this state ... . Surplus lines agents must verify that a diligent effort has been made by requiring a properly documented statement of diligent effort from the retail or producing agent. However, to be in compliance with the diligent effort requirement, the surplus lines agent's reliance must be reasonable under the particular circumstances surrounding the risk. Reasonableness shall be assessed by taking into account factors which include, but are not limited to, a regularly conducted program of verification of the information provided by the retail or producing agent. Declinations must be documented on a risk-by-risk basis. It is not possible to obtain the full amount of insurance required by layering the risk, it is permissible to export the full amount. Section 626.916, F.S. Authorized vs. Unauthorized Insurers Unlike authorized insurers, unauthorized insurers do not have their rates and forms approved by the Department of Insurance, (the "Department.") Similarly, unauthorized insurers are not member of the Florida Insurance Guaranty Association, which guarantees payment of claims if an insurer becomes insolvent. Unauthorized insurers may qualify to transact Florida insurance business under the Surplus Lines Law and so, for purposes of the Surplus Lines Law, be considered "eligible" to transact surplus lines business in Florida. When a Surplus Lines insurer is eligible, Department of Insurance employees refer to the insurer in Surplus Lines terms as "authorized," a term in everyday English that is synonymous with "eligible." But an eligible surplus lines insurer remains an "unauthorized" insurer when compared to an "authorized" insurer for purposes of the Insurance Code and that part of the code known as the Surplus Lines Law. Submission and Review of Proposals Both L.B. Bryan & Company, Alexander & Alexander, Inc., and Benefactor Financial Group, Inc., (the "Joint Venture") and Gallagher submitted timely proposals with regard to Excess GL/AL coverage in response to the RFP. The Joint Venture's proposal was submitted, of course, on behalf of Ranger, an authorized insurer, and Gallagher's was submitted on behalf of United National, an insurer eligible to transact insurance in the State of Florida as a surplus lines insurer but otherwise an unauthorized insurer. The School Board's Insurance Evaluation Committee met on May 30, 1996, to evaluate proposals received pursuant to the RFP. Although briefly discussed by the Evaluation Committee, the issue of proper licensing was not determined independently by the committee. Instead of making that determination, the committee turned to its insurance consultant, Siver. Siver had determined that both proposers, Ranger and United National, were properly licensed for purposes of responding to the RFP and being considered by the committee. Siver communicated that determination to the committee. The committee relied on Siver's determination. Aside from receiving Siver's determination of proper licensing when "briefly discussed" (Tr. 108,) the Evaluation Committee did not address whether either Ranger or United National were properly licensed. Certainly, no issue of whether Ranger should take precedence over United National by virtue that it was an authorized insurer when United National was an unauthorized insurer and a mere eligible Surplus Lines insurer was ever discussed by the committee. In evaluating the proposals, the Committee awarded 73 points to the Gallagher proposal and 69 points to the Ranger proposal. Points were awarded on the basis of three criteria or in three categories: Qualifications (20 points maximum); Scope of Coverages/Services Offered (30 points maximum); and, Points for Projected Costs (50 points maximum.) The Ranger proposal outscored the Gallagher proposal in the "projected cost" category, 50 to 23, but it scored lower in the "qualifications" category, 14 versus 20 for Gallagher, and significantly lower in the "scope of coverages" category, five points versus 30 for Gallagher. The United National coverage was more than twice as costly as Ranger's, a $491,000 annual premium as opposed to Ranger's $226,799, which explains the points awarded in the "projected cost" category. The Gallagher proposal received more points than the Ranger proposal in the "qualifications" category because United National has provided the School Board with Excess GL/AL coverage for a number of years and Ranger has never provided the School Board with such coverage. The Ranger proposal fell so drastically short of the Gallagher proposal in the "scope of coverages/services offered" category primarily because of an athletic participation exclusion appearing in a rider to the specimen policy appearing in its proposal. Ranger had intended to cover athletic participation and the rider was included with the Ranger proposal in error. Ranger notified the School Board of its intent immediately after the tabulations were released. Nonetheless, the Evaluation Committee was never informed of the error and no attempt was made by the School Board to negotiate with Ranger to improve the coverages offered, despite authority in the RFP for the School Board to negotiate with any of the proposers. (The language used in the RFP is "with one or more" of the proposers.) The Ranger proposal also fell short of the Gallagher proposal in the "scope of coverages/service offered" category because the Gallagher proposal was made in several ways. One way was as to only Excess GL/AL coverage. Another way included School Leaders' Errors and Omissions ("E & O") coverage. The E & O coverage was offered by United National in the Gallagher proposal together with the Excess GL/AL coverage in a "combined lines" package, similar to United National coverages already existing for the School Board. Furthermore, the Ranger proposal expressly excluded coverage for Abuse and Molestation, a needed coverage due to the School Board's prior claims history. On June 5, 1996, the Evaluation Committee submitted its recommendations to the School Board's Purchasing Department. With regard to GL/AL coverage, the Evaluation Committee recommended the purchase of the GL/AL/E & O "combined lines" coverage offered by Gallagher through United National. The School Board posted its Proposal Recommendation/Tabulations adopting the recommendation, two days later, on June 7, 1996. Ranger Seeks Redress from the Department Following the School Board's award, Ranger, thinking that it should have received the award under the RFP as the only authorized insurer to submit a proposal for Excess GL/AL coverage, sought redress from the Department. On June 14, 1996, Ranger personnel met with the head of the Department's Surplus Lines Section, Carolyn Daniels, alleging a violation of the Insurance Code's Surplus Lines Law. On June 18, 1996, Ranger reiterated its complaint in writing and asked Ms. Daniels to find a violation that day. On June 24, 1996, Ranger, now through its attorneys, met with Ms. Daniels and her supervisor. Again, on July 4, 1996, Ranger's attorneys wrote to Ms. Daniels, further pleading for her to find a violation and asking for an administrative hearing if Ms. Daniels did not find in favor of the Ranger position. On a fifth attempt, Ranger wrote Ms. Daniels on July 11, 1996, requesting that she adopt Ranger's position. Ms. Daniels reviewed Ranger's five complaints with her supervisor, the Chief of the Bureau of Property and Casualty Solvency and Market Conduct. In a letter dated August 14, 1996, to the School Board's Purchasing Agent, Ms. Daniels announced her determination: I did not find any evidence to indicate that Mr. David L. Marcus of Arthur J. Gallagher & Company or United National Insurance Company violated the Surplus Lines Law in providing a quote for the School Board. Intervenor's Ex. No. 2. Ms. Daniel's determination was based on a number of factors, including the School Board's position in the transaction as an "informed consumer," (Tr. 422-423,) and that the School Board had possessed a United National policy for 13 years. But, the determination was primarily based on the fact that Gallagher had received three declinations from authorized insurers to provide Excess GL/AL coverage and so had performed that which was required prior to deciding that the coverage was eligible for export and provision by a surplus lines insurer: due diligence. Due Diligence Section 626.916(1)(a), Florida Statutes, provides, [n]o insurance coverage shall be eligible for export unless it meets ... the following condition[]: ... [t]he full amount of insurance required must not be procurable, after a diligent effort has been made by the producing agent to do so, from among the insurers authorized to transact and actually writing that kind and class of insurance in this state, and the amount of insurance exported shall be only the excess over the amount so procurable from authorized insurers. (e.s.) The statute goes on to require that the diligent effort, "be reasonable under the particular circumstances surrounding the export of that particular risk." Reasonableness is assessed by taking into account factors which include, but are not limited to, a regularly conducted program of verification of the information provided by the retail or producing agent. Declinations must be documented on a risk-by- risk basis. Section 626.916(1)(a), F.S. "'Diligent effort' means seeking coverage from and having been rejected by at least three authorized insurers currently writing this type of coverage and documenting these rejections." Section 626.914(4), F.S. Under this definition, the "producing agent should contact at least three companies that are actually writing the types of clients and the business in the area [that they are] wanting to write." (Tr. 268.) A specific form to help insurance agents document their three rejections is adopted by Department rule. The rule provides: When placing coverage with an eligible surplus lines insurer, the surplus lines agent must verify that a diligent effort has been made by requiring from the retail or producing agent a properly documented statement of diligent effort on form DI4-1153 (7/94), "Statement of Diligent Effort", which is hereby adopted and incorporated by reference. Rule 4J-5.003(1), F.A.C. Fully aware of the requirement for documentation of diligent effort to find authorized insurers, and cognizant that it would be unlikely that an authorized insurer could be found based on experience, Gallagher began soliciting proposals for coverage in the middle of April, 1996, several weeks before the School Board had issued the RFP. In fact, at the time that Gallagher started soliciting bids, the School Board had not yet assembled or distributed the underwriting data needed by bidders. Nonetheless, with good reason based on experience, Gallagher expected that the School Board would seek a "combined lines" package of GL/AL/E & O coverages like the School Board then received through United National, and that it would be unlikely that an authorized insurer would step forward to propose coverage. Gallagher, therefore, used the policy form current in April of 1996, that is the form providing Excess GL/AL/E & O coverage in a "combined lines" package, "as an example of what the School Board had been looking for this type of program and seeking a program similar to that and similar in coverage." (Tr. 242.) But it also sought Excess GL/AL without combination with E & O coverage. As Mr. Marcus testified, when seeking coverage from authorized insurers beginning in April of 1996, Gallagher "would be looking at a variety of different ways, whether they were package or not." (Tr. 243.) One authorized insurer, Zurich-American, declined to quote because it could not offer a combined line SIR program (a package of excess general liability and excess auto liability coverages) as requested by the RFP. Furthermore, the School Board risk was too large for Zurich-American to handle. A second authorized insurer, American International Group, declined to quote due to the School Board's adverse loss experience. A third authorized insurer, APEX/Great American, declined to provide a quote to Gallagher due to the large size of the School Board account. The responses of these three authorized insurers were listed in a Statement of Diligent Effort provided to Ms. Daniels, which she considered in determining that Gallagher and Mr. Marcus had committed no violation of the Surplus Lines Law. Gallagher also provided Ms. Daniels with a second Statement of Diligent Effort. The statement documented the attempt to attract quotes by adding a school leaders errors and omission component to the Excess GL/AL coverage. It, too, was used by Ms. Daniels in making her determination of no violation of the Surplus Lines Law by Gallagher. The same three insurers refused to quote for the "combined lines" program. Attempts by other Authorized Insurers Gallagher requested that any responses to its requests for quotes be submitted by May 10, 1996, so that it could prepare and submit its proposal by the RFP's deadline for submission of original proposals by all vendors, 2:00 p.m. May 16, 1996. One insurer, Discover Re/USF&G attempted to submit a quote on May 15, 1996, one day before the RFP deadline but five days after May 10. By then, Gallagher had already started printing its 625 page proposal. Furthermore, the company failed to provide the required policy forms until the day after the School Board's deadline for filing proposals. Coregis Insurance Company offered coverage of up to $700,000 for each claim and for each occurrence, but like Discover Re/USF&G, failed to provide the required policy forms until after the RFP deadline. Furthermore, definitive coverage under the Coregis policy would only be provided on the condition that the Florida Legislature pass a Legislative Claims bill, a limiting condition not authorized in the RFP or requested by Gallagher. American Home Assurance Company never responded to Gallagher with the School Board's required quote or policy forms. Rather, the company merely provided an "indication" that the company declined to provide a quote. An "indication" consists of an approximate premium rate, without any terms or conditions. A "quote," on the other hand, includes the terms and conditions of a policy. The Department places with the producing agent the responsibility of determining whether an insurer's communication constitutes and "indication" or a "quote." An agent, according to Ms. Daniels, can only violate the Surplus Lines Law if the agent receives a reliable quote. Gallagher even requested a quote from Ranger, despite never having been appointed to transact insurance on its behalf. But Ranger declined. In response to a request by Gallagher's minority business partner, McKinley Financial Services, Ranger, through E. Michael Hoke on American E & S letterhead, wrote in a letter dated May 6, 1996, "[w]e have received a prior submission on this account so we are returning the attached." Intervenor's Ex. No. 7. The Petition Ranger's petition for formal administrative hearing is the letter dated June 19, 1996, to the Director of Purchasing for the School Board under the signature of E. Michael Hoke, CPCU, Assistant Vice President of AES/Ranger Insurance Company. The letter asks its readers to "bear[] in mind we are not attorneys," p. 1 of the letter, before it outlines three protest issues. The third protest issue is the one about which Ms. Daniels made her determination that no violation of the statute had been committed by Gallagher or its employees: "3) Florida Statute 626.901 (Representing or aiding unauthorized insurer prohibited)." The other two issues deal not with the propriety of Gallagher's actions but the legality of the School Board's award to an unauthorized insurer, United National, when coverage was available from an authorized insurer, Ranger: Florida Statute 626.913 (Surplus Lines Law). . . Our Position * * * Ranger Insurance Company is an admitted authorized insurer ... Its proposal for excess general and auto liability is proof that the Board requested coverage was procurable. United National Insurance Company is an unauthorized insurer under the laws of the State of Florida ... . The United National Insurance Company proposal and/or its offer to extend it's current policies appear to us as "unwarranted competition." Ranger Insurance Company is protected from unwarranted competition from United National Insurance Company in accordance with the Florida Statute 626.913. Florida Statute 626.913 (Eligibility for Export) ... Our Position * * * Ranger Insurance Company is an admitted authorized insurer under the laws of the State of Florida. ... It's proposal for excess general and auto liability is proof that the Board requested amounts were available. The proposal and/or contract extensions offered by United National are for the full amount of coverage sought and not excess over the amount procurable from Ranger, an authorized insurer. The petition, therefore, set in issue not just whether Gallagher acted illegally but whether the School Board acted illegally when it made the award to United National, an unauthorized insurer when Ranger, an authorized insurer, had also submitted a proposal. Extension As soon as the School Board was made aware of the Ranger protest, it extended the existing insurance contracts procured under RFP 92-080S, awarded approximately five years earlier. The extension was on a month-to-month basis until resolution of the protest. The extension was necessary to avoid a lapse in the School Board's coverage during this proceeding.
Recommendation Based on the foregoing, it is, hereby, RECOMMENDED: That the award to United National under the Gallagher proposal in response to RFP 97-072S be rescinded. DONE AND ENTERED this 28th day of January, 1997, in Tallahassee, Florida. DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 28th day of January, 1997. COPIES FURNISHED: Paul R. Ezatoff, Esquire Christopher B. Lunny, Esquire Katz, Kutter, Haigler, Alderman, Marks, Bryant & Yon, P.A. Post Office Box 1877 Tallahassee, Florida 32302-1877 Edward J. Marko, Esquire Robert Paul Vignola, Esquire Office of the School Board Attorney K.C. Wright Administrative Building 600 Southeast Third Avenue - 11th Floor Fort Lauderdale, Florida 33301 A. Kenneth Levine, Esquire Blank, Risby and Meenan, P.A. Post Office Box 11068 Tallahassee, Florida 32302-3068 Dr. Frank Petruzielo, Superintendent Broward County School Board 600 Southeast Third Avenue Fort Lauderdale, Florida 33301-3125
The Issue Should discipline be imposed by Petitioner against Respondent's insurance agent licenses alleged as life including variable annuity (2-14), general lines (2-20), and health (2-40), pursuant to Chapters 624 and 626, Florida Statutes?
Findings Of Fact Petitioner issued license E125386 to Respondent. At present the license is valid in the following categories: life including variable annuity (2-14) and general lines (2-20). At present Respondent has appointments with American Family Life Assurance Company of Columbus in the categories life including variable annuity and health (2-15) and general lines (2-20). February 9, 2005, is the relevant date in this case. On that date Respondent held a license in categories (2-14) and (2-20). The category (2-14) was for an appointment with Direct Life Insurance Company. The category (2-20) was an appointment with Direct General Insurance. At the time Respondent worked at an office in Tallahassee, Florida, referred to as the Case Register Insurance Agency, that sold life insurance offered by Direct Life Insurance Company, among other products. On February 9, 2005, Denise Daley Turnbull worked at Case Register. She was a customer representative category (4- 40), appointed by Direct General Insurance Agency, Inc. Respondent worked with Ms. Turnbull. On February 9, 2005, Patrician Ann Brown came to the Cash Register Insurance Agency to purchase personal injury protection (PIP) automobile insurance mandated by the State of Florida. Ms. Turnbull dealt with the customer. In doing so, Ms. Turnbull followed a script which in relevant part stated: * * * How did you hear about Cash Register? Are you currently insured? Have you had the policy for at least 6 months with no more than a 7-day lapse in coverage? If they say yes, say . . . Great! We will need you to bring in a copy of your renewal offer or a letter from your current company when we write the policy. This will make you eligible for a discount. Are you buying, leasing or do you own your vehicle? Is the vehicle registered or titled in your name? * * * What coverage will you be purchasing with us? Inform the customer about the work loss option. Under the mandatory Personal Injury Protection, there is a work loss option should you be involved in an accident that will pay up to 60% of your lost wages. Would you like to include this option? Quote only PIP/PD unless the client asks for BI. Always quote $750.00 deductible for Comp/Coll and $1000 deductible NI or NIRR for PIP. Other deductibles are available upon request. * * * What is your date of birth? Are you married or single? If married, get spouses information) What tickets, accidents, or suspensions have you had in the last 3 years? (Do you need an SR-22?) Who else living in your household is 14 years or older? Are there other drivers who do not live in the house? * * * What is the year, make and model of your vehicle? Does it have air bags, anti-lock brakes or an anti-theft device? Is the vehicle used for personal, business or commercial use? Is your vehicle customized in any way? (remember, we do not cover any customization) Mr/Mrs. I have quoted you with the State Mandatory liability limits up to $10,000 dollars Property Damage, Personal Injury Protection up to $10,000 dollars with a $1,000 deductible, Comprehensive and Collision with $750 deductibles and offered with this quote are the optional policies for Accident Medical Coverage, Rental Reimbursement and a $10,000 term life benefit. You will need only $ to start your policy and have 12 payments of only $ . How does that sound? (Always quote 20/27 day pay plan-can offer 10 day plan when client comes into office) (emphasis added) How does that compare to other quotes you have received? * * * Mr./Mrs. , Direct is now offering to our customers, a Direct Visa Debit Card for a special low price of only $699. This requires no bank account, no credit check and is valid wherever Visa is accepted! Only $699, so be sure to bring that amount in with your down payment so you can take advantage of this special offer. Ms. Patricia M. Brown purchased automobile insurance from Direct General Insurance Company, including PIP and property damage liability (PD) totaling $848.00 with fees assigned. In addition, Ms. Brown purchased a policy through American Banking Travel Protection Plan for one year. The cost for that policy was $60.00. Ms. Brown purchased from Lloyds Accident Medical Protection Plan an individual accident medical protection plan. The cost was $110.00. Ms. Brown bought life insurance with a one-year period, that was renewable, $10,000.00 coverage, with a premium charge of $108.00. In making her purchases, Ms. Brown signed a form titled Explanation of Policies, Coverages and Cost Breakdown (including non-insurance products). The total cost for all purchases was $1,133.99. Ms. Brown signed a form that referred to American Bankers Insurance Company of Florida, Travel Protection Plan- Florida Declarations. That form was counter-signed by Ms. Turnbull. Ms. Brown signed another form referred to as American Bankers Insurance Company Optional Travel Protection Plan. Ms. Brown and Ms. Turnbull signed a form entitled Accident Medical Protection Plan Application. Ms. Brown signed a related form referred to as 100% Certain Underwriters @ Lloyds/London (DB/33) ACCIDENT MEDICAL PROTECTION PLAN. Ms. Turnbull signed a page referred to as a Scan Cover Sheet Life Policy Policy No. FLAD162704741:1627016705. In that connection Ms. Brown completed an application for life insurance with Direct Life Insurance Company by initialing information in the application form about her insurability for such things as heart trouble or high blood pressure, cancer, tumors, etc. Ms. Brown signed the application. Although Respondent had no direct participation with Ms. Brown in relation to the details of the life insurance policy, leaving the task to explain the policy to Ms. Turnbull, Respondent placed his name on the application in two places. He printed his name as agent and wrote his license ID number E125386 and he signed it with his agent signature on that same page. In conversation, Ms. Turnbull asked Ms. Brown about possible medical problems such as high blood pressure or stroke or seizure as part of the process of initialing those questions on the application form. Ms. Turnbull told Ms. Brown that the life insurance policy was optional and that it was a $10,000.00 term life benefit.
Recommendation Upon consideration of the facts found and the conclusions of law reached, it is RECOMMENDED: That Petitioner enter a final order suspending Respondent's license for six months for the violations. DONE AND ENTERED this 27th day of March, 2007, in Tallahassee, Leon County, Florida. S CHARLES C. ADAMS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 27th day of March, 2007.
The Issue Whether the Petitioner meets the pre-licensing qualifications for a general lines agent, pursuant to Sections 626.731 and 626.732, Florida Statutes.
Findings Of Fact Petitioner, Carmen Rosa Maldonado (Maldonado), has been employed by M & D Group, Inc. (M & D), an insurance agency, since 1992. M & D writes property and casualty lines of insurance. Maldonado is the bookkeeper for M & D. Her responsibilities include inputting data into the computer and translating for the Spanish-speaking customers. L & W Group (L & W) is a sister corporation of M & D. L & W writes life, health, and disability insurance policies and annuities. If M & D has a customer who desires a life, health, or disability policy, a representative of M & D will contact Mr. Weinberg at L & W and give him the customer information. Mr. Weinberg prepares the quote for the policy and either sends the quote to M & D for an agent at M & D to explain to the customer or comes himself to the M & D office to explain the quote and policy to the customer. If a Spanish-speaking client is involved, Maldonado is the translator. M & D provides three to seven quotes each month for health insurance through L & W. In September 1997, Maldonado participated in writing a surety bond, and on February 2, 1998, Maldonado assisted Erica Woodham, Vice President of M & D, in giving a quote on a surety bond. The evidence is not clear whether the quote and bond were provided through another insurance agency, because according to Ms. Woodham, M & D does not write surety bonds. On June 6, 1997, Maldonado filed an application for licensure as a general lines agent with the Department. She listed her insurance experience as "customer service" and indicated she wanted her experience to be the basis for meeting the pre-licensing qualifications. On June 13, 1997, the Department returned Maldonado's application and requested that she provide additional information concerning her experience. The letter stated: To qualify for this examination through experience you must have completed, within the past 4 years, at least 1 year of substantially full-time responsible duties as a bona fide employee. Your duties during this time must have been in all lines of Property, Casualty, Surety, Health and Marine Insurance. Please complete and return the enclosed certificates of employment. On or about June 18, 1997, Maldonado resubmitted her application with an addendum to the Department for the purpose of determining whether she was qualified to sit for the pre- licensing examination or to be licensed as a general lines insurance agent. Maldonado's addendum did not indicate that she was experienced in marine, health, or surety lines. By letter dated July 11, 1997, the Department advised Maldonado that her application for a general lines insurance agent was denied because she did not meet the pre-licensing educational requirements for a general lines agent. The denial letter was later amended to state that Maldonado lacked the one year of experience in health, flood, surety, and fire insurance. On August 1, 1997, Maldonado sent a letter to the Department, stating that she inadvertently failed to mark the appropriate boxes on the addendum form regarding her experience in health, surety, and marine insurance.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered denying Petitioner's application for a general lines agent. DONE AND ENTERED this 10th day of March, 1998, in Tallahassee, Leon County, Florida. SUSAN B. KIRKLAND Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 10th day of March, 1998. COPIES FURNISHED: Bill Nelson State Treasurer and Insurance Commissioner Department of Insurance The Capitol, Plaza Level 1 Tallahassee, Florida 32399-0300 Daniel Y. Sumner General Counsel Department of Insurance The Capitol, Lower Level 26 Tallahassee, Florida 32399-0300 Joe DeMember, Esquire Department of Insurance and Treasurer Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399-0333 Carmen Rosa Maldonado, pro se 2931 Southwest 11 Court Fort Lauderdale, Florida 33312-2805
The Issue Whether proposed rules promulgated by the Florida Department of Insurance related to sale of insurance products by agents affiliated with financial institutions are an invalid exercise of delegated legislative authority.
Findings Of Fact The Florida Department of Insurance is responsible for regulation of insurance transactions in the State of Florida. On January 29, 1997, the Department of Insurance issued a notice to interested parties of a rules workshop to address "parity" of insurance regulation. The workshop was conducted on February 21, 1997. The Department of Insurance published the final rule proposal on May 23, 1997. A public hearing was conducted on June 19, 1997. The record of the public hearing remained open until June 25, 1997, for submission of written comments. A Notice of Change was published on July 18, 1997. A Second Notice of Change was published on August 8, 1997. The Petitioners timely filed petitions challenging the proposed rules. All parties have standing to participate in this proceeding. As set forth in the rule proposal, the purpose and effect of the proposed rules is as follows: Section 626.5715, Florida Statutes, requires the Department to adopt rules to assure parity of regulation in this state of insurance transactions as between an insurance agency owned by or an agent associated with a federally chartered financial institution, an insurance agency owned by or an agent associated with a state- chartered financial institution, and an insurance agency owned by or an agent associated with an entity that is not a financial institution. (Emphasis supplied.) The summary portion of the published rule proposal states that the "proposed rules implement standards to provide parity pursuant to Section 626.5715, Florida Statutes." Section 626.5715, Florida Statutes, the "parity statute," provides as follows: The department shall adopt rules to assure the parity of regulation in this state of insurance transactions as between an insurance agency owned by or an agent associated with a federally chartered financial institution, an insurance agency owned by or an agent associated with a state-chartered financial institution, and an insurance agency owned by or an agent associated with an entity that is not a financial institution. Such rules shall be limited to assuring that no insurance agency or agent is subject to more stringent or less stringent regulation than another insurance agency or agent on the basis of the regulatory status of the entity that owns the agency or is associated with the agent. For the purposes of this section, a person is "associated with" another entity if the person is employed by, retained by, under contract to, or owned or controlled by the entity directly or indirectly. This section does not apply with respect to a financial institution that is prohibited from owning an insurance agency or that is prohibited from being associated with an insurance agent under state or federal law. (Emphasis supplied.) The word "parity" is not defined in the statute. Webster's Dictionary defines "parity" as "[t]he quality or state of being equal or equivalent." Pursuant to the specific statute requiring the Department to adopt rules, the Department's authority to adopt rules related to this issue is limited to those rules which provide for equivalent regulation of insurance transactions without regard to ownership or affiliation of the insurance agent or agency. Rule 4-224.002 (Settings and Circumstances) Proposed Rule 4-224.002 provides as follows: 4-224.002 Setting and Circumstances of Insurance Transactions. The setting and circumstances in which insurance transactions occur shall be structured so as to avoid deception as to, and to assist the consumer in understanding, the nature of the product sold, the identity of the insurer, and the identity and representative capacity of the insurance agent. When an agent is transacting insurance, any business cards and stationery used shall reflect his status as an insurance agent. Other materials used in insurance transactions which address the representative capacity of the agent shall identify the individual as an insurance agent. The published rule proposal indicates that Proposed Rule 4-224.002, Florida Administrative Code, is specifically authorized by Section 624.308, Florida Statutes, and implements Sections 624.307, 626.5715, 626.951, 626.9521, 626.9541, 626.9561 and 626.9611, Florida Statutes. Section 624.308, Florida Statutes, provides the Department with the general authority to adopt "reasonable rules necessary to effect any of the statutory duties of the department...." and states that willful violation of Department rules may result in a range of penalties including revocation of licensure. Section 624.307, Florida Statutes, generally sets forth the powers and duties of the Department. Section 626.5715, Florida Statutes, the "parity" statute, provides as set forth herein. Section 626.951, Florida Statutes, is the "declaration of purpose" for the Unfair Insurance Trade Practices Act, and in part states as follows: The purpose of this part is to regulate trade practices relating to the business of insurance in accordance with the intent of Congress as expressed in the Act of Congress of March 9, 1945 (Pub. L. No. 15, 79th Congress), by defining, or providing for the determination of, all such practices in this state which constitute unfair methods of competition or unfair or deceptive acts or practices and by prohibiting the trade practices so defined or determined. Section 626.9521, Florida Statutes, prohibits and penalizes unfair methods of competition and unfair or deceptive acts or practices and provides penalties. Section 626.9541, Florida Statutes, addresses "unfair methods of competition and unfair or deceptive acts" and provides as follows: UNFAIR METHODS OF COMPETITION AND UNFAIR OR DECEPTIVE ACTS.--The following are defined as unfair methods of competition and unfair or deceptive acts or practices: Misrepresentations and false advertising of insurance policies.--Knowingly making, issuing, circulating, or causing to be made, issued, or circulated, any estimate, illustration, circular, statement, sales presentation, omission, or comparison which: Misrepresents the benefits, advantages, conditions, or terms of any insurance policy. Misrepresents the dividends or share of the surplus to be received on any insurance policy. Makes any false or misleading statements as to the dividends or share of surplus previously paid on any insurance policy. Is misleading, or is a misrepresentation, as to the financial condition of any person or as to the legal reserve system upon which any life insurer operates. Uses any name or title of any insurance policy or class of insurance policies misrepresenting the true nature thereof. Is a misrepresentation for the purpose of inducing, or tending to induce, the lapse, forfeiture, exchange, conversion, or surrender of any insurance policy. Is a misrepresentation for the purpose of effecting a pledge or assignment of, or effecting a loan against, any insurance policy. Misrepresents any insurance policy as being shares of stock or misrepresents ownership interest in the company. False information and advertising generally.--Knowingly making, publishing, disseminating, circulating, or placing before the public, or causing, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public: In a newspaper, magazine, or other publication, In the form of a notice, circular, pamphlet, letter, or poster, Over any radio or television station, or In any other way, an advertisement, announcement, or statement containing any assertion, representation, or statement with respect to the business of insurance, which is untrue, deceptive, or misleading. Defamation.--Knowingly making, publishing, disseminating, or circulating, directly or indirectly, or aiding, abetting, or encouraging the making, publishing, disseminating, or circulating of, any oral or written statement, or any pamphlet, circular, article, or literature, which is false or maliciously critical of, or derogatory to, any person and which is calculated to injure such person. Boycott, coercion, and intimidation.-- Entering into any agreement to commit, or by any concerted action committing, any act of boycott, coercion, or intimidation resulting in, or tending to result in, unreasonable restraint of, or monopoly in, the business of insurance. False statements and entries.-- Knowingly: Filing with any supervisory or other public official, Making, publishing, disseminating, circulating, Delivering to any person, Placing before the public, Causing, directly or indirectly, to be made, published, disseminated, circulated, delivered to any person, or placed before the public, any false material statement. Knowingly making any false entry of a material fact in any book, report, or statement of any person, or knowingly omitting to make a true entry of any material fact pertaining to the business of such person in any book, report, or statement of such person. Stock operations and advisory board contracts.--Issuing or delivering, promising to issue or deliver, or permitting agents, officers, or employees to issue or deliver, agency company stock or other capital stock, benefit certificates or shares in any common- law corporation, or securities or any special or advisory board contracts or other contracts of any kind promising returns or profits as an inducement to insurance. Section 626.9561, Florida Statutes, authorizes the Department to "investigate the affairs of every person involved in the business of insurance in this state in order to determine whether such person has been or is engaged in any unfair method of competition or in any unfair or deceptive act or practice. " Section 626.9611, Florida Statutes, provides for the adoption of Department rules as follows: 626.9611 Rules.--The department may, in accordance with chapter 120, promulgate reasonable rules as are necessary or proper to identify specific methods of competition or acts or practices which are prohibited by s. 626.9541 or s. 626.9551, but the rules shall not enlarge upon or extend the provisions of ss. 626.9541 and 626.9551. (Emphasis supplied.) Proposed Rule 4-224.002 is an invalid delegation of legislative authority. The proposed rule exceeds the Department specific grant of rulemaking authority which is limited in this case to those rules which provide for equivalent regulation of insurance transactions without regard to ownership or affiliation of the insurance agent or agency. The rule does not provide parity of regulation. Proposed Rule 4-224.002 is an invalid exercise of delegated legislative authority because it is vague, fails to establish adequate standards for agency decisions and vests unbridled discretion in the agency. The proposed rule provides no information as to how an insurance transaction may be "structured" so as to "avoid deception" of the purchaser. The determination of whether an insurance transaction has been "structured" to "avoid deception" is at the discretion of the Department. The proposed rule provides no standards for Department decisions which will be made under the rule. The proposed rule provides no assistance or information to regulated parties as to what types of transaction structures are prohibited or acceptable, other than to require that the agent be identified as such during the insurance transaction. Proposed Rule 4-224.002 is an invalid exercise of delegated legislative authority because it is not supported by competent substantial evidence. Neither the testimony of the Department's witnesses, nor the research information offered by the Department in support of the proposed rule, are sufficient to support validation of this rule. The evidence fails to establish the existence of substantial consumer confusion regarding marketing of insurance products by financial institutions. The Department cites a previous administrative action related to the sale of insurance products in a financial institution as evidence that consumer confusion exists. The Department also cites another administrative action where the agency prosecuted an insurer for the misleading sale of insurance products. The evidence establishes that the cited cases were prosecuted under currently existing rules and regulations and does not establish the validity of the proposed rules at issue in this proceeding. The existence of other rules relating to manner and means of insurance product sales is insufficient to establish the validity of the proposed rules at issue in this case. Rule 4-224.004 (Underwriting of Insurance- Authorization Required) Proposed Rule 4-224.004 provides: No entity which is not licensed as an insurer by the Department shall directly or indirectly assume the obligation to provide the benefits of an insurance contract, or otherwise transact insurance as an insurer in this state. As identified in the published rule proposal, Proposed Rule 4-224.004, Florida Administrative Code, is specifically authorized by Section 624.308, Florida Statutes, and implements Sections 624.11, 624.401, 626.5715, 626.051 and 628.151(1), Florida Statutes. Section 624.308, Florida Statutes, provides general rulemaking authority to the Department. Section 624.11, Florida Statutes, prohibits any person from transacting insurance in Florida without complying with the provisions of the Insurance Code, and provides for operation of "risk retention groups" pursuant to law. Section 624.401, Florida Statutes, requires each insurer to obtain a certificate of authority from the Department in order to conduct business either directly or indirectly, and provides that failure to obtain a certificate is a third degree felony. The section also provides for preemption by the state of the field of regulating insurers and their agents and representatives from local regulation. Section 626.5715, Florida Statutes, the "parity" statute, provides as set forth herein. Section 626.051, Florida Statutes, provides a definition of "life agent." Section 628.151(1), Florida Statutes, provides as follows: No domestic insurer shall engage directly or indirectly in any business other than the insurance business and business activities reasonably and necessarily incidental to such insurance business. At the hearing, the Department's witness testified that the proposed rule was in response to comments offered by participants in the rulemaking proceeding suggesting that recent court decisions would permit financial institutions to act as insurers and to assume the obligations of insurance contracts. Proposed Rule 4-224.004 is an invalid exercise of delegated legislative authority because it exceeds the specific grant of rulemaking authority which is limited in this case to those rules which provide for equivalent regulation of insurance transactions without regard to ownership or affiliation of the insurance agent or agency. The proposed rule does not implement, interpret or make specific any provision of Florida law. Proposed Rule 4-224.004 is an invalid exercise of delegated legislative authority because it is not supported by competent substantial evidence. Anecdotal recollections of comments made by unidentified persons during rulemaking workshops do not constitute competent substantial evidence. Rule 4-224.007 (Primary Agent) Proposed Rule 4-224.007 provides: Each agency location where a licensed and appointed insurance agent is engaged in transactions with respect to insurance products shall be considered an insurance agency for purposes of Section 626.592, Florida Statutes. In those instances where an agent legally conducts insurance transactions at two or more agency locations, a separate primary agent need not be designated at each location, provided that no insurance transactions shall occur at any location when the agent is not present, and no unlicensed employee at the location has engaged in insurance activities requiring licensure. In those instances the agent shall be responsible for insurance transactions occurring at each location and one location shall be designated as the primary location. As identified in the published rule proposal, Proposed Rule 4-224.007, Florida Administrative Code, is specifically authorized by Section 624.308, Florida Statutes, and implements Sections 626.5715, 626.031, 626.041, 626.0428, 626.051, 626.062, 626.094, 626.112, 626.592, Florida Statutes. Section 624.308, Florida Statutes, sets forth the general rulemaking authority of the Department. Section 626.5715, Florida Statutes, the "parity" statute, provides as set forth herein. Section 626.031, Florida Statutes, provides a definition of "agent." Section 626.041, Florida Statutes, provides a definition of "general lines agent." Section 626.0428, Florida Statutes, provides limitations on the activities of agency personnel as follows: 626.0428 Agency personnel powers, duties, and limitations.-- An individual employed by an agent or agency on salary who devotes full time to clerical work, with incidental taking of insurance applications or quoting or receiving premiums on incoming inquiries in the office of the agent or agency, is not deemed to be an agent, customer representative, or solicitor if his or her compensation does not include in whole or in part any commissions on such business and is not related to the production of applications, insurance, or premiums. No employee of an agent or agency may bind insurance coverage unless licensed and appointed as a general lines agent or customer representative. No employee of an agent or agency may initiate contact with any person for the purpose of soliciting insurance unless licensed and appointed as a general lines agent, customer representative, or solicitor. Section 626.051, Florida Statutes, provides a definition of "life agent." Section 626.062, Florida Statutes, provides a definition of "health agent." Section 626.094, Florida Statutes, provides a definition of "insurance agency" as follows: 626.094 "Insurance agency" defined.--An "insurance agency" is a business location at which an individual, firm, partnership, corporation, association, or other entity, except for an employee of the individual, firm, partnership, corporation, association, or other entity, and other than an insurer as defined by s. 624.03 or an adjuster as defined by s. 626.101, engages in any activity or employs individuals to engage in any activity which by law may be performed only by a licensed insurance agent or solicitor. (Emphasis supplied.) Section 626.112, Florida Statutes, requires licensure of agents, agencies and related personnel. Section 626.592, requires the designation of "primary agents" as follows: 626.592 Primary agents.-- On or before January 1, 1990, and annually thereafter, each person operating an insurance agency and each location of a multiple location agency shall designate a primary agent for each insurance agency location and shall file the name of the person so designated, and the address of the insurance agency location where he or she is primary agent, with the Department of Insurance, on a form approved by the department. The designation of the primary agent may be changed at the option of the agency and any change shall be effective upon notification to the department. For the purpose of this section, a "primary agent" is the licensed agent who is responsible for the hiring and supervision of all individuals within an insurance agency location who deal with the public in the solicitation or negotiation of insurance contracts or in the collection or accounting of moneys from the general public. An agent may be designated as primary agent for only one insurance agency location. For the purpose of this section, an "insurance agency" is a location where any agent is engaged in the business of insurance. The department may suspend or revoke the license of the primary agent if an insurance agency employs any person who has had a license denied or any person whose license is currently suspended or revoked. However, when a person has been denied a license for failure to pass a required examination, he or she may be employed to perform clerical or administrative functions for which licensure is not required. The primary agent in an unincorporated agency, or the primary agent in an incorporated agency in which no officer, director, or stockholder is an agent, shall be responsible and accountable for the acts of salaried employees under his or her direct supervision and control, while acting on behalf of the agency. Nothing in this section shall be construed to render any person criminally liable or subject to any disciplinary proceedings for any act unless such person personally committed or knew or should have known of such act and of the facts constituting a violation of this chapter. The department may suspend or revoke the license of any agent who is employed by a person whose license is currently suspended or revoked. No insurance agency location shall conduct the business of insurance unless a primary agent is designated at all times. Failure to designate a primary agent as required under this section shall constitute grounds for requiring that the agency obtain a license in accordance with ss. 626.112 and 626.172. Any insurance agency may request, on a form prescribed by the department, verification from the department of any person's current licensure status. If a request is mailed to the department within 5 working days after the date an agent is hired, and the department subsequently notifies the agency that an employee's license is currently suspended, revoked, or has been denied, the license of the primary agent shall not be revoked or suspended if the unlicensed person is immediately dismissed from employment as an insurance agent with the agency. (emphasis supplied) Proposed Rule 4-224.007 is an invalid exercise of delegated legislative authority because it exceeds the grant of rulemaking authority provided in Section 626.5715, Florida Statutes. The proposed rule does not provide parity of regulation. The proposed rule is not limited to assuring that no insurance agency or agent is subject to more stringent or less stringent regulation than another insurance agency or agent on the basis of the regulatory status of the entity that owns the agency or is associated with the agent. Proposed Rule 4-224.007 is an invalid exercise of delegated legislative authority because it enlarges, modifies and contravenes the specific provisions of law implemented. The proposed rule specifically states that "where an agent legally conducts insurance transactions at two or more agency locations, a separate primary agent need not be designated at each location. " Section 626.592, Florida Statutes, requires the designation of a primary agent for each insurance agency location. An insurance agency is defined as a location where any agent is engaged in the business of insurance. No insurance agency location can conduct the business of insurance unless a primary agent is designated at all times. A primary agent may be so designated for only one insurance agency location. The Department has no authority to waive the requirements of Section 626.592, Florida Statutes. Further, the proposed rule permits an agent to designate one location of several as a "primary location." There is no statutory authorization for designation of a "primary location." Proposed Rule 4-224.007 is an invalid exercise of delegated legislative authority because it is not supported by competent substantial evidence. The only testimony regarding this proposed rule relates to the alleged expense involved in requiring separate primary agent designation for some banks which may choose to offer insurance products. The testimony is not persuasive and does not constitute competent substantial evidence supporting the rule. Rule 4-224-012 (Coercion) Proposed Rule 4-224.012 provides: 4-224.012 Coercion No person shall by words, actions, or distribution of written materials require or imply that the purchase of insurance by a borrower or prospective borrower from a particular agent, agency, insurer or other entity is required as a condition of, or will influence the terms or conditions of, the lending of money or the extension of credit. To the extent that insurance may permissibly be marketed in connection with or in conjunction with any activities described in this section; The agent shall disclose at or before the initial discussion or in response concerning insurance coverage required or offered in connection with a loan or credit application, that: the purchase of insurance from any particular source is not a condition to the provision of, and will not affect the terms of, any loan of money or extension of credit; Insurance is available through agent not associated with a lender or creditor; and The choice of another insurance provider will not affect decisions relating to or terms of any loan or credit extension. 1. A written disclosure which addresses the elements of paragraph (a) above shall be provided to the consumer in a separate documents on Form DI4- (rev /97) or Form DI4- (rev /97) [sic] which are adopted and incorporated herein by reference, or on another form approved in advance by the Department that provides equivalent disclosure, at or before the time the consumer completes an application or enrollment form or otherwise applies for coverage. 2. One copy of the form signed by the consumer shall be retained by the agent. The requirements of this rule 4-224.012 are inapplicable to credit insurance for which disclosures provided satisfy the disclosure requirements for excluding the premium of charge for insurance from the finance charge pursuant to Federal Truth in Lending Regulation Z, Section 12 CFR 226.4(d)(1) and (2), which is adopted incorporated herein by reference. As identified in the published rule proposal, Proposed Rule 4-224.012, Florida Administrative Code, is specifically authorized by Sections 624.308 and 626.9611, Florida Statutes, and implements Sections 626.5715, 626.051, 626.9541, 626.9551, and 626.9641, Florida Statutes. Section 624.308, Florida Statutes, provides the Department's general rulemaking authority. Section 626.9611, Florida Statutes, provides the Department's authority to adopt rules pursuant to Section 120, Florida Statutes, which specifically identify prohibited methods of competition, but limits such rules to those acts prohibited under Sections 626.9541 and 626.9551. Section 626.5715, Florida Statutes, the "parity" statute, provides as set forth herein. Section 626.051, Florida Statutes, defines "life agent." Section 626.9541, Florida Statutes, addresses "unfair methods of competition and unfair or deceptive acts" and is set forth herein. Section 626.9551, Florida Statutes, addresses the issue of coercion or "favoritism" and provides as follows: 626.9551 Favored agent or insurer; coercion of debtors.-- No person may: Require, as a condition precedent or condition subsequent to the lending of money or extension of credit or any renewal thereof, that the person to whom such money or credit is extended, or whose obligation the creditor is to acquire or finance, negotiate any policy or contract of insurance through a particular insurer or group of insurers or agent or broker or group of agents or brokers. Unreasonably disapprove the insurance policy provided by a borrower for the protection of the property securing the credit or lien. For purposes of this paragraph, such disapproval shall be deemed unreasonable if it is not based solely on reasonable standards, uniformly applied, relating to the extent of coverage required by such lender or person extending credit and the financial soundness and the services of an insurer. Such standards shall not discriminate against any particular type of insurer, nor shall such standards call for the disapproval of an insurance policy because such policy contains coverage in addition to that required. Require, directly or indirectly, that any borrower, mortgagor, purchaser, insurer, broker, or agent pay a separate charge in connection with the handling of any insurance policy required as security for a loan on real estate or pay a separate charge to substitute the insurance policy of one insurer for that of another. This paragraph does not include the interest which may be charged on premium loans or premium advances in accordance with the security instrument. Use or disclose information resulting from a requirement that a borrower, mortgagor, or purchaser furnish insurance of any kind on real property being conveyed or used as collateral security to a loan, when such information is to the advantage of the mortgagee, vendor, or lender, or is to the detriment of the borrower, mortgagor, purchaser, or insurer, or the agent or broker, complying with such a requirement. The department may investigate the affairs of any person to whom this section applies to determine whether such person has violated this section. If a violation of this section is found to have been committed knowingly, the person in violation shall be subject to the same procedures and penalties as provided in ss. 626.9571, 626.9581, 626.9591, and 626.9601. Section 626.9641, Florida Statutes, sets forth a series of standards known as Policyholder's Bill of Rights and provides as follows: 626.9641 Policyholders, bill of rights.-- The principles expressed in the following statements shall serve as standards to be followed by the department in exercising its powers and duties, in exercising administrative discretion, in dispensing administrative interpretations of the law, and in promulgating rules: Policyholders shall have the right to competitive pricing practices and marketing methods that enable them to determine the best value among comparable policies. Policyholders shall have the right to obtain comprehensive coverage. Policyholders shall have the right to insurance advertising and other selling approaches that provide accurate and balanced information on the benefits and limitations of a policy. Policyholders shall have a right to an insurance company that is financially stable. Policyholders shall have the right to be serviced by a competent, honest insurance agent or broker. Policyholders shall have the right to a readable policy. Policyholders shall have the right to an insurance company that provides an economic delivery of coverage and that tries to prevent losses. Policyholders shall have the right to a balanced and positive regulation by the department. This section shall not be construed as creating a civil cause of action by any individual policyholder against any individual insurer. Proposed Rule 4-224.012 is an invalid exercise of delegated legislative authority because it exceeds the Department's grant of rulemaking authority. Such authority is limited to those rules which provide for equivalent regulation of insurance transactions without regard to ownership or affiliation of the insurance agent or agency. The evidence fails to establish that this rule provides for parity of insurance regulation. Proposed Rule 4-224.012 is an invalid exercise of delegated legislative authority because it enlarges the specific provisions of law being implemented. The rule mandates a statement of disclosure for which there is no statutory requirement. The statutes cited as being implemented by this proposed rule clearly prohibit coercive activities, but do not impose any disclosure requirement as would be required by the rule. Proposed Rule 4-224.012 is an invalid exercise of delegated legislative authority because there is no competent substantial evidence supporting the rule. The Department asserts that research indicates consumers can be, and are, coerced into purchasing insurance products by lenders during credit transactions. The Department also cites a previous administrative action prosecuted under existing statutes as evidence that coercion occurs. The evidence offered by the Department, including the testimony of the Department's witnesses, fails to support the assertion that coercion by financial institutions in the sale of insurance products is a substantial problem. Neither the cited research nor the related testimony by the Department's witnesses was persuasive. The greater weight of the evidence, including the testimony of Dr. Michael White, establishes that there is little empirical evidence of coercion in the sale of insurance products by financial institutions. As additional support for the rule, the Department offered testimony related to the existence of other regulatory disclosure rules and of model language adopted by the National Association of Insurance Commissioners. Neither the other rules or the model language establish that the proposed coercion rule meets the current requirements of law. Other disclosure regulations were adopted prior to recent amendments to Chapter 120, Florida Statutes, the Administrative Procedures Act (APA), which altered the "reasonableness" standard under which such rules could have been appropriate. The relevant model language of the NAIC has not been adopted by the Florida legislature. Rule 4-224.013 (Remedies) Proposed Rule 4-224.013 provides as follows: 4-224.013 Remedies Any person violating the provisions of the Insurance Code implemented by this rule chapter shall be subject to the issuance of a Cease and Desist Order in accordance with the provisions of Sections 624.310(3) and 626.9581, Florida Statutes, and to the imposition of an administrative penalty pursuant to Sections 624.310(5) and 626.9521, Florida Statutes, and to such other sanctions or proceedings as are authorized by the Florida Insurance Code. If the majority owner, partner, manager, director, officer or other person who manages or controls an insurance agency violates any provision of the Insurance Code or any department rule, or knowingly permits violation of any requirement of these rules by an agent or employee of the agency, the agency must obtain a license as an insurance agency in accordance with the provisions of Section 626.112(8), Florida Statutes. As identified in the published rule proposal, Proposed Rule 4-224.013, Florida Administrative Code, is specifically authorized by Section 624.308, Florida Statutes, and implements Sections 624.310, 624.4211, 646.418, 626.5715, 626.051, 626.112, 626.9521 and 626.9581. Section 624.308, Florida Statutes, provides the Department with general rulemaking authority. Section 624.310, Florida Statutes, provides the Department with enforcement and prosecutorial powers for violations of the Insurance Code, including cease and desist orders, administrative fines, and removal of "affiliated parties." Section 624.4211, Florida Statutes, provides for imposition of administrative fines in lieu of other disciplinary penalties. Section 624.418, Florida Statutes, provides suspension or revocation of certificates of authority for certain violations and other conditions. Section 626.5715, Florida Statutes, the "parity" statute, provides as set forth herein. Section 626.051, Florida Statutes, provides a definition of "life agent." Section 626.112, Florida Statutes, provides for licensure of agencies, agents and other representatives. Section 626.9521, Florida Statutes, prohibits and penalizes unfair methods of competition and unfair or deceptive acts or practices which are statutorily defined or determined pursuant to Sections 626.951 and 626.9651, Florida Statutes. Section 626.9581, Florida Statutes, provides the Department with the ability to issue cease and desist orders related to the commission of unfair or deceptive acts or practices or the unlawful transaction of insurance, and states as follows: 626.9581 Cease and desist and penalty orders.--After the hearing provided in s. 626.9571, the department shall enter a final order in accordance with s. 120.569. If it is determined that the person charged has engaged in an unfair or deceptive act or practice or the unlawful transaction of insurance, the department shall also issue an order requiring the violator to cease and desist from engaging in such method of competition, act, or practice or the unlawful transaction of insurance. Further, if the act or practice is a violation of s. 626.9541 or s. 626.9551, the department may, at its discretion, order any one or more of the following: Suspension or revocation of the person's certificate of authority, license, or eligibility for any certificate of authority or license, if he or she knew, or reasonably should have known, he or she was in violation of this act. Such other relief as may be provided in the insurance code. The Department presented no evidence with respect to Proposed Rule 4-224.013. The Department asserts only that the proposed rule is intended to provide notice to non-traditional sellers of insurance that a violation of the Insurance Code will subject them to the penalties set forth in the Insurance Code. Proposed Rule 4-224.013 is an invalid exercise of delegated legislative authority because it is redundant and unnecessary. The rule does not implement, interpret or make specific any provision of Florida law. There is no competent substantial evidence which establishes the validity of the proposed rule. Rule 4-224.014 (Confidential Information) Proposed Rule 4-224.014 provides: 4-224.014 Confidential Information Obtaining confidential information for a stated purpose unrelated to the transaction of insurance when it is known that the information will or may be used for purposes of marketing insurance, and when the insurance-related purpose is not disclosed, constitutes a deceptive statement or omission and is an unfair and deceptive act or practice under the provisions of the Unfair Insurance Trade practices Act, Part X, Chapter 626, Florida Statutes. (2)(a) Any entity which is a non-insurance transaction obtains confidential information concerning an individual or entity where it is known the information will be used by an affiliate insurance agent or agency for purposes of marketing insurance, or where it is known or reasonably should be known that there is a present intent or plan to use such information in such a manner, shall conspicuously and clearly disclose that fact to the person at the time the information is obtained and the consumer should be afforded an opportunity to object to the utilization of such information. (b) If the disclosure is not provided on a separate form, it must be made on a document signed by the person, in which case the disclosure shall be made in a larger type size than that used elsewhere in the document, or in a manner that is otherwise clearly distinguishable from the remaining text of the document, and must appear immediately adjacent to the person's signature. If the disclosure is made on a separate form and if information obtained as a result of future transaction may be used for marketing purpose; The disclosure shall clearly reflect such fact, and After a period of three years a new disclosure form must be provided if additional confidential information is secured and this paragraph is not complied with. (3)(a) Insurance agents and insurance companies are prohibited under the Insurance Code from engaging in practices which are injurious to policyholders or the public. (b) Use of confidential information concerning any person for purposes of marketing insurance when the person has directed that the information not be used for such purposes entails conduct which is injurious to policyholders or the public. (4) For purposes of this rule 4-224.014, confidential information is information pertaining to an individual or entity that is generally not available, provided that in no event shall the name, address, or telephone number or any person be considered confidential. As identified in the published rule proposal, Proposed Rule 4-224.013, Florida Administrative Code, is specifically authorized by Section 624.308, Florida Statutes, and implements Sections 624.418(1)(b), 626.5715, 626.621(6), 626.9541(1), 626.9611 and 626.964(1), Florida Statutes. Section 624.308, Florida Statutes, provides the Department's general rulemaking authority. Section 624.418, Florida Statutes, provides suspension or revocation of certificates of authority for certain violations and other conditions. Subsection (1)(b) specifically provides for such penalties where the insurer is using such methods and practices in the conduct of its business as to render its further transaction of insurance in this state hazardous or injurious to its policyholders or to the public. Section 626.5715, Florida Statutes, the "parity" statute, provides as set forth herein. Section 626.621(6), Florida Statutes, sets forth grounds for denial or suspension of licensure, and provides as follows: 626.621 Grounds for discretionary refusal, suspension, or revocation of agent's, solicitor's, adjuster's, customer representative's, service representative's, managing general agent's, or claims investigator's license or appointment.--The department may, in its discretion, deny an application for, suspend, revoke, or refuse to renew or continue the license or appointment of any applicant, agent, solicitor, adjuster, customer representative, service representative, managing general agent, or claims investigator, and it may suspend or revoke the eligibility to hold a license or appointment of any such person, if it finds that as to the applicant, licensee, or appointee any one or more of the following applicable grounds exist under circumstances for which such denial, suspension, revocation, or refusal is not mandatory under s. 626.611: * * * (6) In the conduct of business under the license or appointment, engaging in unfair methods of competition or in unfair or deceptive acts or practices, as prohibited under part X of this chapter, or having otherwise shown himself or herself to be a source of injury or loss to the public or detrimental to the public interest. Section 626.9541, Florida Statutes, addresses "unfair methods of competition and unfair or deceptive acts" and is set forth herein. Section 626.9611, Florida Statutes, provides the Department's authority to adopt rules pursuant to Section 120, Florida Statutes, which specifically identify prohibited methods of competition, but limits such rules to those acts prohibited under Sections 626.9541 and 626.9551. Section 626.9641(1), Florida Statutes, is the "Policyholder's Bill of Rights" and is set forth herein. Proposed Rule 4-224.014 is an invalid exercise of delegated legislative authority because it exceeds the Department's grant of rulemaking authority. The evidence fails to establish that the cited statutes provide the Department with the authority to prohibit the collection or utilization of information. The proposed rule exceeds the Department's specific grant of rulemaking authority which is limited in this case to those rules which provide for equivalent regulation of insurance transactions without regard to ownership or affiliation of the insurance agent or agency. Proposed Rule 4-224.014 is an invalid exercise of delegated legislative authority because it is vague, fails to establish adequate standards for agency decisions and vests unbridled discretion in the agency. The rule states that collection of information "when it is known that the information will or may be used for purposes of marketing insurance, and when the insurance-related purpose is not disclosed, constitutes a deceptive statement or omission. " The phrase "when it is known that the information...may be used" is vague and requires a post-collection determination of the intent of the data collector at the time the information was gathered. Further, proposed definition of "confidential information" as that which is "generally not available" is vague. The vagueness of the rule results in a lack of adequate standards for decision making and vests unbridled discretion in the Department. Proposed Rule 4-224.014 is an invalid exercise of delegated legislative authority because it is not supported by competent substantial evidence. The testimony related to this proposed rule consisted primarily of an analysis of the statutory support for the rule. The evidence is insufficient to establish that the undisclosed collection of information which may be used at some time in a non-insurance setting constitutes an unfair or deceptive trade practice. There is no statutory provision which prohibits or restricts the sharing of information between a financial institution and an affiliated insurance agency. There is evidence that such prohibition as the Department intends to impose by this rule may violate the federal Fair Credit Reporting Act, 12 U.S.C. 1681t(b)(2), and the state Banking Code, Section 655.059(2)(b), Florida Statutes.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: At all times pertinent to the allegations of the First Amended Administrative Complaint, respondent Dennis Victor Daniels was licensed as an Ordinary Life including Disability Agent in Florida and was employed by Gulf Health/Life, Inc. in St. Petersburg, Florida. On or about January 14, 1980, Julie Stratton (then Julie Marzec) contacted respondent at the offices of Gulf Health/Life, Inc. for the purpose of purchasing health insurance. She and respondent discussed different insurance policies, and respondent informed her that if she joined the American Benevolent Society (ABS) she could obtain a lower rate for her policy and obtain the best policy for her money. Mrs. Stratton could not remember if respondent informed her of the exact amount of money she would save on her insurance if she joined the ABS. She was informed that other benefits and discounts from area businesses would be available to her as a member of the ABS. Mrs. Stratton joined the ABS in order to obtain less expensive insurance. She wrote two checks -- one in the amount of $15.00 payable to the ABS and the other in the amount of $54.26 payable to CNA Insurance Company. She obtained two insurance policies. The form numbers on these policies were 51831 and 52176. Based upon a referral from an agent with Allstate Insurance Company, John Valentine and his wife went to the offices of Gulf Health/Life in order to obtain hospitalization and surgical insurance coverage. Before moving to Florida, Mr. Valentine was covered by a group policy through his place of employment. Respondent informed Mr. Valentine that members of the ABS could obtain a policy at group rates which entailed a lesser premium than individual rates. Mr. Valentine wrote two checks -- one in the amount of $178.73 payable to CNA Insurance Company and the other in the amount of $25.00 payable to the ASS. Mr. Valentine received two policies from CNA -- one bearing form number 51831 and the other bearing form number 52176. He also received a brochure listing the places of business from which he could receive discounts as a member of the ABS. Gulf Health/Life, Inc. was a general agent for CNA. During the relevant time periods involved in this proceeding, CNA had different policies for health insurance. Policies with a form number of 51831 required the policyholder to be a member of an organization endorsing CNA in order to purchase that policy. Form 51831 policyholders paid a lesser premium for their policies. The difference in premiums between the group or organization policy and an individual policy with the same coverage is approximately $10.00. To obtain the policy bearing form number 52176, there is no requirement that the policyholder be a member of a group or an organization. Ms. Watkins, a secretary employed with Gulf Health/Life, Inc. between December of 1978 and June of 1979 observed a device known as a "light box" on the premises of Gulf Health/Life. This was a square-shaped plywood box with a slanted glass top and a high-intensity lightbulb within the box. On from a half-dozen to a dozen occasions on Fridays between January and April, 1979, Ms. Watkins observed respondent bent over the light box with a pen in his hand tracing a signature onto an insurance application. She could not produce any documents or recall any names of any insurance applicant whose signature was traced or copied by the respondent.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the First Amended Administrative Complaint filed against the respondent on April 29, 1982, be DISMISSED. Respectfully submitted and entered this 10th day of September, 1982, in Tallahassee, Florida. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of September, 1982. COPIES FURNISHED: Curtis A. Billingsley, Esquire Franz Dorn, Esquire 413-B Larson Building Tallahassee, Florida 32301 William A. Patterson, Esquire Masterson, Rogers, Patterson and Masterson, P. A. 447 Third Avenue North St. Petersburg, Florida 33701 Honorable Bill Gunter Insurance Commissioner The Capitol Tallahassee, Florida 32301
Findings Of Fact 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 Should discipline be imposed by Petitioner against Respondent's insurance agent licenses as, Life (2-16), Life and Health (2-18), and Health (2-40), held pursuant to Chapter 626, Florida Statutes?
Findings Of Fact The Parties Petitioner was created in accordance with Section 20.13, Florida Statutes. Petitioner has been conferred general power by the Legislature, to regulate the insurance industry in Florida, in accordance with Section 624.307, Florida Statutes. Chapter 626, Florida Statutes, grants Petitioner the authority to license and discipline insurance agents doing business in Florida. Petitioner issued Respondent license No. A140590. At times relevant to the inquiry, Respondent has been licensed in Florida as agent for insurance in Life (2-16), and Life and Health (2-18). On December 2, 1992, Respondent had been issued a Health (2-40) license, but that license is no longer valid having been voluntarily cancelled. The cancellation occurred at a time previous to December 18, 2003, when a license history document was prepared, Petitioner's Exhibit numbered 1. Respondent conducts business as an insurance agent under the name Business Insurance Cafeteria. The business is located at 828 Hamilton Avenue, St. Augustine, Florida. Respondent has been licensed as an insurance agent for over 50 years, 44 years of which have been in Florida. Acting as an insurance agent has been Respondent's principal occupation. During that time the emphasis in his business has been on health insurance. TRG Affiliation In April 2001, an acquaintance and insurance agent Ellen Averill introduced Respondent to Robert Trueblood, Sr. Respondent understood that Mr. Trueblood was the Managing General Agent for TRG. Mr. Trueblood, at the time, was from Hobe Sound, Florida. Mr. Trueblood gave information to Respondent about TRG pertaining to its involvement in the insurance business. Mr. Trueblood told Respondent that individuals within TRG were personal friends of Mr. Trueblood. In turn, Respondent made a call to Petitioner at the end of April or first part of May 2001. Someone that he spoke to, whose identity and position within the Petitioner's hierarchy was not established in the record, made a comment which cannot be established as fact given its hearsay nature. Nonetheless, following this conversation, Respondent became affiliated with the TRG organization which Respondent understood to be an ERISA program, not subject to Petitioner's oversight. At that time, Respondent's knowledge of what an ERISA program entailed was based upon reading he had done in the past. Respondent was of the impression that the ERISA program was under the auspices of the federal government, as opposed to the state government. Respondent had never taken specific courses concerning the ERISA program before his engagement with TRG. Respondent's involvement with TRG was his first effort to market what he considered to be ERISA program insurance. When Respondent commenced his participation with TRG, he believed that an ERISA program was instituted by a document filed with the Department of Labor outlining insurance benefits and that TRG had put up reserves associated with the ERISA program. Respondent did not obtain anything in writing from the Department of Labor concerning TRG as an ERISA program. To begin with, Respondent believed that ERISAs had to involve 51 or more lives in being before coverage could be obtained. Again, this was not a market that Respondent had worked in but he understood that ERISAs involved coverage of that number of individuals. From conversations with Mr. Trueblood and Tom Dougherty, another managing General Agent for TRG, of Cocoa Beach, Florida, Respondent became persuaded that ERISAs could be marketed to companies with a single life being insured or two to three lives in a small group market. Respondent relied on Mr. Trueblood when Mr. Trueblood told Respondent that ERISA, as a federal program did not have to be licensed by the state. Mr. Dougherty made a similar comment to Respondent. Ms. Averill also commented to Respondent concerning her impression about TRG as an ERISA program. From this record, Respondent was not officially told by persons within the Petitioner's agency, that the TRG program was an ERISA program that did not have to be licensed in Florida. TRG provided Respondent marketing material. Respondent was impressed with the "very professional" appearance of that material. Respondent's Exhibit numbered 1 admitted into evidence is constituted of material provided to Respondent by TRG. It refers to the TRG health plan under "the Redwood Group." It refers to marketing under an organization identified as Premier Financial Group USA, Inc. It describes PPO networks available with the TRG products. The document refers to the TRG/USA health plan (the Redwood Group, L.L.C./USA Services Group, Inc.) and various versions of employer health and welfare benefit plans and a client fee schedule effective May 1, 2001, for enrollees in the 80/60 plan and 90/70 plan. Participant co- pays for physician office visits are related. Those plans identified in the material describe the amount of deductibles according to age groups and participation by members and additional family participants. The TRG document speaks of benefits attributable to the 80/60 and 90/70 health plans. This information contained comments about the Redwood Companies- Corporate Overview. Respondent's Exhibit numbered 1 comments upon the ERISA program and the provision of health benefits for employees through self-funded employee health and welfare benefit plans as a means, according to the document, to exempt those plans from state insurance regulation. Respondent's Exhibit numbered 1 touts what it claims are savings to be derived compared to current health insurance plans held by prospective purchasers. Respondent's Exhibit numbered 1 contains an associate application agreement setting forth policies and procedures that Respondent would be obligated to meet as an associate with TRG acting as an independent contractor. Respondent's Exhibit numbered 1 contains an application format for prospective enrollees in the TRG preferred provider plans to execute in applying for coverage. Respondent's Exhibit numbered 1 refers to Robert W. Trueblood, Sr., as being affiliated with Premier Financial Group, USA Inc., under the TRG banner. Mr. Trueblood sent Respondent's Exhibit numbered 1 to Respondent. Respondent began his contacts with TRG in May 2001 and wrote his first enrollment contract in association with TRG in August or September 2001. Beyond that time, Respondent was notified on November 27, 2001, that effective November 30, 2001, a cease and desist order had been issued against TRG's offering its health coverage in Florida. The commissions earned by Respondent in selling the TRG health insurance product ranged from five to seven percent. Respondent earned less than $1,000.00 in total commissions when selling TRG health insurance products. The persons who participated with TRG in its preferred provider plan were referred to the claims administrator of USA Services. Participants in the TRG preferred provider plan sold by Respondent received information outlining the benefits. Participants received medical I.D. cards. This information was provided directly to the participants. Respondent was aware of the information provided to the participants. An example of this information is set out in Respondent's Exhibit numbered 2. In offering the TRG health coverage, Respondent told his customers that this plan was not under the purview of the Department of Insurance in Florida, that this was an ERISA program. Respondent told his customers that any problems experienced with the program could be addressed through resort to the federal court. Respondent did remind the customers that making the Florida Department of Insurance aware of their claims could create a record in case they went to federal court. Respondent is familiar with the prohibition against acting as an insurance agent for companies not authorized to transact business in Florida. But he held to the opinion that TRG was an ERISA program under the federal auspices and not subject to Petitioner's control. At the inception, Respondent believed that offering the TRG health insurance coverage would be an acceptable choice. That proved not to be true. When it was discovered that TRG would not pay claims related to health coverage for policies Respondent sold to his customers, Respondent made an attempt to find replacement coverage. To this end, Respondent had received information reflected in Respondent's Exhibit numbered 5. The document discussed the prospect that insurance would be provided from the Clarendon Insurance Company (Clarendon), using the provider Network Beechstreet, with Baftal/Quik Quote Insurance Brokers in Plantation, Florida, being involved in the process to substitute coverage for TRG. Baftal is the shorthand reference for Bertany Association for Travel and Leisure, Inc. Baftal is an insurance agency. Respondent made some explanation to his customers insured through TRG of the prospect of using Clarendon to take over from TRG, which had not honored any of the claims for reimbursement made by Respondent's customers. A copy of this December 28, 2001, correspondence from Respondent to TRG's insureds who had been sold policies through Respondent, is reflected in Respondent's Exhibit numbered 6. As described in Respondent's Exhibit numbered 7, Baftal sent information concerning health care coverage to business owners, to include Respondent's customers, as described in the Amended Administrative Complaint. This correspondence indicated that the benefit plan would become effective December 1, 2001, upon condition that the insured meet applicable underwriting standards. This communication was made following receipt of premiums paid by the insured. Reimbursement for claims were to be processed through Advancement Administration in Maitland, Florida. Baftal did not assume the claims that had not been honored by TRG, and Clarendon did not become the insurer for those customers. Baftal did not follow through with the offer to provide health benefits to Respondent's customers who had begun with TRG. On February 11, 2002, as evidenced by Respondent's Exhibit numbered 8, Baftal wrote the customers to advise that health benefits would not be provided. That exhibit mentions American Benefit Plans through a Mr. David Neal and some intention for Mr. Neal's organization to provide a benefits program, including insurance through Clarendon, as administered through Advanced Administration. The Baftal communication goes on to say that Baftal had learned that Clarendon was not an insurer on the program, that the only insurer on the program was an offshore insurance company about which Baftal had not received credible information. The letter remarks that premiums paid to Baftal by the customers were being returned. On April 4, 2002, as related in Respondent's Exhibit numbered 9, TRG wrote to persons who were identified as health plan participants, to include Respondent's customers who are the subject of the Amended Administrative Complaint. The letter stated that due to a problem with USA Services Group, the claims administrator on November 30, 2001, when the TRG plan ended, claims were not being paid. The correspondence remarks about difficulties with USA Services experienced by TRG, promising that TRG would fulfill obligations to the customers who were participants in the health plan. Contrary to this promise, TRG has not honored claims for those customers who are the subject of the Amended Administrative Complaint. On December 12, 2001, as reflected in Respondent's Exhibit numbered 4, Petitioner had written consumers who had enrolled in the TRG health plan to advise that the Petitioner did not consider the TRG health plan to be an ERISA program. Under the circumstances, the correspondence indicated that TRG should have sought authorization from Petitioner to sell health plans in Florida, which had not been done. The correspondence refers to some acknowledgement by TRG that it was not an ERISA program and needed to be licensed in Florida to conduct business. The correspondence advises the consumer to cease payment of any further premiums to TRG, to include the cancellation of automatic bank drafts for payment of premiums. The correspondence advises the consumer to obtain replacement insurance through Florida licensed insurance companies or HMOs. The letter goes on to remind the consumer of certain plans that were not licensed in Florida to conduct business because they were perceived to be illegitimate companies. The communication urged the consumer not to enroll in those health insurance plans. Respondent was made aware of this communication. Count I: Vicki Brown Vicki Brown has a business known as Rainbows End Ranch located in St. Johns County, Florida. This is a one-person business involving boarding and training of horses. Ms. Brown was interested in obtaining permanent health insurance, in that her COBRA policy was expiring. As a consequence, she was referred to Respondent by a friend. Respondent met Ms. Brown at her place of business. She explained to him her health insurance needs. Respondent suggested obtaining health insurance through TRG. Ms. Brown agreed. Ms. Brown paid $165.00 to TRG by check to cover the premium for September 2001. Two additional amounts of $165.00 were withdrawn from her checking account to pay premiums to TRG for the months that followed. Subsequently, Ms. Brown received Petitioner's December 12, 2001, letter informing her that TRG was not allowed to conduct business in Florida, Petitioner's Exhibit numbered Beyond that point, Ms. Brown had difficulties in her attempt to be reimbursed for her medical treatment, presumably covered by the TRG plan, by seeking reimbursement through another insurance firm other than by TRG. That process was pursued through Baftal in relation to insurance offered by Clarendon. Ms. Brown made Respondent aware that she had problems with reimbursement and of the receipt of Petitioner's letter. Respondent told her not to worry about the situation, that things were going to be taken care of by Clarendon taking over where TRG left off. Ms. Brown received Respondent's form correspondence dated December 28, 2001, explaining the switch from TRG to Clarendon, Petitioner's Exhibit numbered 6. Ms. Brown also received information from Advancement Administration concerning Clarendon as the insurance company, Beechstreet as the provider network, mentioning Baftal/Quik Quote Insurance as brokers, Petitioner's Exhibit numbered 7. Following her difficulties with TRG, on January 2, 2002, Ms. Brown wrote a check to the Baftal Escrow Account in the amount of $513.40 for premiums in relation to Clarendon. As can be seen, the payment to Clarendon represented an increase in premium compared to TRG. The check for $513.40 had been written out to LPI Clarendon and changed by Respondent to reflect the Baftal Escrow Account. In January 2002, Ms. Brown called Respondent and was told that the paperwork he was filling out was wrong and that he needed to complete new forms for Baftal "Insurance Brokers." According to Respondent, that explained why the coverage through Baftal had not gone into effect. Ms. Brown had received Petitioner's Exhibit numbered 11, the communication from Baftal calling for additional information as a prerequisite to obtaining insurance benefits effective December 1, 2001. Information provided in the document concerning issues related to her coverage was not useful to Ms. Brown when she made inquiry consistent with the instructions contained in the document. Concerning her claims for reimbursement, Ms. Brown had a health problem with her throat. In addressing the condition, she was told by her primary care doctor, that when trying to arrange for a specialist to attend her care through the Beechstreet Provider Network, which was part of the health care offered through the Baftal Agency, it was reported that Beechstreet was bankrupt. Then Ms. Brown called Respondent to ask his advice. Respondent told her he was not sure how to respond "right now things are in a haywire." Beyond that point Ms. Brown found out that Clarendon, part of the Baftal arrangement was not going to insure her business. In particular, Ms. Brown received the February 11, 2002, communication from Baftal commenting that insurance would not be provided through Baftal, remarking that Clarendon was not an insurer. This communication is Petitioner's Exhibit numbered 12. After the TRG and Baftal experiences, Ms. Brown tried to be placed on her husband's health insurance policy but had trouble getting a certificate to allow her to obtain that coverage. This was in relation to the need for the existence of continuing coverage before being placed on the husband's policy. Fortunately, Ms. Brown was eventually able to get insurance through her husband's policy. Ms. Brown was dismayed by the difficulty experienced in obtaining health insurance when she discovered that TRG and Baftal would not meet her health insurance needs. From the evidence, it has been determined that the TRG plan purchased by Ms. Brown was the 80/60 plan with the $1,000.00 deductible. Although Ms. Brown testified that her medical bills in the period in question would total close to $1,000.00, the evidence found in Petitioner's Exhibit numbered 8, constituted of medical bills around that time do not approximate than amount. Ms. Brown had received a TRG benefit handbook and membership card, Petitioner's Exhibits numbered 9 and 10, associated with her participation in the 80/60 plan with a $1000.00 deductible and co-pay of $10.00 for a physician office visit and $20.00 for a specialist office visit. In summary, none of the companies from whom Ms. Brown purchased insurance through Respondent, commencing with TRG, have paid for any of her claims for reimbursement for medical care during the relevant time period. In addition to not receiving a reimbursement for premiums paid to TRG, Ms. Brown did not receive the return of her premium paid to Baftal either. Count II: Alicia Moore Alicia Moore at one time was employed by Respondent. The position Alicia Moore held with Respondent's insurance agency was that of general office clerk. Ms. Moore has never been licensed in any capacity by Petitioner, related to the sale of insurance and has not taken courses to educate herself about the insurance business. In addition to her employment with Respondent, she purchased health insurance through Respondent with TRG around September 2001. Ms. Moore purchased the TRG health insurance policy in the interest of her husband's subchapter S corporation, small business. Her husband's name is Randy Moore. The name of the company operated by the husband is M-3 Enterprises, Inc. The husband's company has one employee, Randy Moore. The Moores resided in St. Augustine, Florida, at times relevant to the inquiry. The husband's business had been insured for health coverage by Humana, until Humana determined that it was not willing to provide health insurance for the company and the Moores decided that the individual policies offered by Humana in substitution for the group policy were too expensive. The Moores chose TRG for health insurance after Respondent had discussed several health insurance plans including individual or group policies. The reason for the choice was the premium price. On September 19, 2001, Randy Moore paid $434.00 for the health insurance premium to Redwood Group, in the interest of obtaining health insurance from TRG. On November 2, 2001, an additional $434.00 was debited from the checking account for M-3 Enterprises, to TRG for premiums related to the health insurance coverage. Ms. Moore recalls Respondent telling her that the TRG health plan was an ERISA plan but she has no knowledge about ERISA plans being regulated under federal law. In that connection, Ms. Moore commented in a statement given by affidavit, that Respondent told her that TRG was not regulated by Petitioner. Respondent explained to Ms. Moore that the premium payments to TRG were lower in costs because TRG was an ERISA program. TRG sent correspondence to the Moores as participants in the health plan. This is found as Petitioner's Exhibit numbered 15. It enclosed a membership issued to Randy Moore setting forth the $10.00 co-pay for a physician visit, $20.00 co-pay for a specialist office visit, and $50.00 co-pay for emergency room visits associated with the participation in Plan 8033. The nature of the plan that the Moores had was a member- plus family. The cover letter listed the telephone number for the claims administrator USA Services to address claims or customer services questions. Ms. Moore also received a packet from TRG explaining the process of filing claims for health care. After obtaining the TRG health coverage, Ms. Moore and her son received treatment for medical conditions contemplated under the terms in the TRG plan. Notwithstanding the submission of information for reimbursement related to the charges, the charges were not paid under the TRG plan. The total of these claims was approximately $727.00. That $727.00 was less co- payments already made for the medical services. Ms. Moore made the Respondent aware that TRG was not reimbursing her for medical bills. Respondent gave Ms. Moore the telephone number for Tom Dougherty, Managing General Agent for TRG, expecting Mr. Dougherty to be able to assist Ms. Moore in dealing with outstanding medical bills. Ms. Moore called Mr. Dougherty several times, but this did not lead to the payment of the medical bills. Ms. Moore also sent TRG a certified letter in August 2002 concerning bills outstanding since October 2001, attaching the bills and information concerning payment of premiums for the coverage. This is reflected in Petitioner's Exhibit numbered 18. Petitioner's Exhibit numbered 21 is a compilation of information concerning the outstanding medical bills, and a statement from Medical Accounts Services, Inc. (Medical Accounts) concerning a current balance on June 17, 2002, of $229.00. The Moores had to make an arrangement to repay the money which was being collected through Medical Accounts. It is not clear from the record the exact nature of the member with family plan that had been purchased by the Moores. Consequently, the deductible in force when claims were submitted for reimbursement is not readily apparent. Ms. Moore in her testimony was unable to recall the amount of the deductible for the policy issued from TRG. It does appear from a review of the fee schedule associated with the 80/60 plan and the 90/70 plan offered by TRG, that the premium payments made did not entitle the Moores to coverage associated with a $500.00 deductible or $250.00 deductible. The other possible amount for the deductible, by process of elimination is $1,000.00. The Moores received correspondence dated November 28, 2001, sent to Randy Moore as a TRG enrollee, indicating that the coverage would end effective November 30, 2001, and reminding Mr. Moore that, according to the correspondence, he would have to find other health coverage as of December 1, 2001. This correspondence, as with other similar correspondence that has been discussed, promised to continue to process claims for covered services incurred before the coverage ended. The TRG letter terminating coverage for the Moores was received by the Moores five days after the date upon which the correspondence indicated that the coverage would no longer be in effect. This circumstance was very disquieting to Ms. Moore. The claims by Ms. Moore and her child were within the covered period for the TRG policy as to their dates. The letter received from TRG is Petitioner's Exhibit numbered 17. Ms. Moore spoke to Respondent about obtaining coverage when TRG discontinued its coverage. Respondent suggested that the Moores affiliate with Baftal. The Moores made a premium payment to Baftal but within a week of being accepted for coverage, Baftal wrote to advise that coverage had been declined. Beyond that time, the Moores obtained coverage from Medical Savings Insurance, a company that they still use for health insurance. Concerning Baftal, by correspondence dated February 11, 2002, Baftal wrote the Moores as a member, the form letter that has already been described, in which the Moores were told that they would not be provided health benefits. Given the problem described with Clarendon Insurance Company, the letter noted the return of the premium paid for coverage through Baftal. A copy of the letter sent to the Moores is Petitioner's Exhibit numbered 19. Baftal did not reimburse the Moores for the outstanding claims totaling approximately $727.00. Count III: Bruce Chambers Bruce Chambers was another customer who bought TRG health insurance from Respondent. Mr. Chambers was a Florida resident at the time he purchased the TRG coverage. Mr. Chambers and his wife moved to Florida from Georgia earlier in 2001. When they moved, the prior health insurance coverage that the Chambers held carried a high premium given Ms. Chambers diabetic condition. Moving from one state to the next also increased that premium. Under the circumstances, the Chambers agreed to purchase the TRG Health Plan. At one time related to the transaction promoted by Respondent, Mr. Chambers believed that TRG was licensed in Florida. He held this belief even in the instance where Respondent had commented that TRG was an ERISA program. Mr. Chambers also executed a coverage disclaimer in November 2001, upon a form from Respondent's agency noting that the health, welfare program applied for was not under the auspices of the Florida Department of Insurance. This is found as Petitioner's Exhibit numbered 36. After purchasing the TRG policy, the wife developed an illness, and costs were incurred for services by the family's personal physician and for hospitalization. In addition Mr. Chambers had medical expenses. Exclusive of co-pays and the deductibles that are applicable, Mr. Chambers paid $7,478.46 for the health care he and his wife received. None of that amount has been reimbursed through TRG as expected under the terms of the TRG coverage. Mr. Chambers paid $487.00 a month, plus $18.00 in other fees, for two months related to coverage effective October 1, 2001, extending into November 2001, a total of $1,010.00 in premiums and fees paid to TRG. No premiums and fees paid to TRG have been reimbursed. The amount of premium paid by Mr. Chambers corresponds under the client fee schedule in effect May 1, 2001, associated with the TRG Health Plan, as pertaining to an 80/60 plan for a member and family with a $1,000.00 deductible. Petitioner's Exhibit numbered 26 is constituted of the calculation of the expenses, $7,478.46 and attaches billing information, some of which is for services and care received prior to December 1, 2001, and some of which is for services and care beyond that date. When Mr. Chambers discovered that TRG was not reimbursing the costs which it was obligated to pay for health care received by the Chambers, he contacted the Respondent and TRG to gain satisfaction. He also contacted Petitioner. When Mr. Chambers enrolled in the TRG plan he received the transmittal letter enclosing his benefits card, Petitioner's Exhibit numbered 23. The membership card identified his participation in plan 8033, with a co-pay for physician office visits of $10.00, specialty office visits of $20.00, and emergency room visits of $50.00. Mr. Chambers received notice from the Petitioner, presumably the December 12, 2001, notification concerning the lack of authority for TRG to business in Florida and the advice that CHEA (Consumer Health Education Association) was not authorized to do business in Florida either. On December 20, 2001, the Chambers wrote Respondent concerning the unavailability of insurance through TRG and CHEA. The Chambers asked Respondent to give them advice about a list of "small group market carriers" they understood to offer health plans. This letter to Respondent is found within Petitioner's Exhibit numbered 25. Also, within Petitioner's Exhibit numbered 25 was a copy of the letter from Respondent to TRG insureds dated December 28, 2001, which made mention of Clarendon as an alternative to TRG. Within that same exhibit is correspondence dated January 21, 2002, from the Respondent to enrollees in the TRG plan, to include the Chambers, discussing Baftal and the prospect that the latter company might honor TRG claims. Finally, Petitioner's Exhibit numbered 25 contains an August 21, 2002, letter from Mr. Chambers to TRG asking TRG to pay for its portion of the medical expenses as reimbursement. Petitioner's Exhibit numbered 27 is the December 1, 2001, application by Mr. Chambers to obtain medical benefits through CHEA. The application also refers to EOS Health Services. This predates Petitioner's warning about CHEA and EOS being licensed to do business in Florida. On December 1, 2001, Mr. Chambers paid $487.00 for premium payments to EOS Health Services and provided a voided check for future payments for premiums by automatic withdrawal from his account. This effort was made as a follow on to obtain health coverage when TRG no longer provided health insurance to the Chambers. To obtain health coverage, Mr. Chambers paid $1,465.88 to the Baftal Escrow Account. This payment was made by a check dated January 14, 2002. That money was refunded by Baftal on January 12, 2002, and no coverage was offered through that company for health insurance. Mr. Chambers had been provided information about the opportunity to obtain insurance from Baftal as reflected in Petitioner's Exhibit numbered 31. Respondent had also suggested that Mr. Chambers apply for health insurance from American Benefit Plan, following the discontinuance of the TRG coverage. Mr. Chambers applied for that coverage by documents dated February 18, 2002, in the interest of his company, Bruce A. Cambers, CFP. Information concerning that application is found in Petitioner's Exhibit numbered 32. American Benefit Plans was listed by Petitioner as an entity not allowed to conduct business in Florida in the December 12, 2001, letter of advice to insurance consumers following the problem with TRG. Mr. Chambers wrote two checks, one in the amount of $628.60 to Independent Managers Association and one for $799.68 to the Association of Independent Managers, Petitioner's Exhibits numbered 35 and 33 respectively. The two checks were written on February 18, 2002. Those checks were voided in relation to payment for monthly insurance premiums and association dues. The effect was to not accept those checks for premium payments to obtain health insurance. On March 5, 2002, ACH Corporation of America wrote Mr. Chambers stating that because of incorrect procedures, or untimely submission, health coverage would not be extended, pertaining to an application for Ultra Med Choice EPO. Ultra Med was another health insurance business which Petitioner in its December 12, 2001, correspondence to health care consumers had been identified as unlicensed to conduct health insurance business in Florida. The letter declining coverage from ACH and application information for a policy sought to become effective December 1, 2001, is found within Petitioner's Exhibit numbered This application was in relation to Bruce Chambers, CFP as employer. Mr. Chambers remains out of pocket for payments he had to make for health care extended, principally to his wife, for which TRG was obligated to provide reimbursement in part. None of the other policies that Mr. Chambers attempted to obtain worked out to substitute for the TRG obligation for reimbursement for health care claims. Eventually the Chambers were able to obtain health insurance. At present the Chambers have a two-man group policy through Mr. Chambers' business to provide health coverage. Because of the problem with health insurance coverage, Ms. Chambers was required to return to work. Her employment was outside Mr. Chambers' company, as well as within his company. As a result of Ms. Chambers' failure to make payments to Flagler Hospital, where Ms. Chambers had received care, under terms that should have involved TRG providing reimbursement for costs, the bills were turned over to a collection agency compromising the credit standing of the Chambers. For the most part, the credit problems have been resolved. Due Diligence As established by testimony from Linda Davis, Analyst II in Petitioner's Jacksonville Office, there is a means to determine whether an insurance company has the necessary certificate of authority to conduct insurance business in Florida. This is accomplished by resort to the electronic data base maintained by Petitioner. A certificate of authority is an indication that the insurance company has completed the necessary requirements to be licensed or authorized to sell insurance in Florida. As established through Petitioner's Exhibit numbered 39, TRG/USA Health Plans, TRG Marketing L.L.C. was not authorized to do business in Florida. An insurance agent licensed in Florida, to include the time frame envisioned by the Amended Administrative Complaint, would have had access to the data base identifying whether an insurance company had the necessary certificate of authority to conduct insurance business in Florida and could properly have been expected to seek this information before engaging in the sale of products from a company such as TRG. Rather than avail himself of that opportunity, Respondent made some form of inquiry to Petitioner on the subject of TRG, while apparently ignoring the more fundamental consideration of whether TRG had been granted a certificate of authority to conduct its business in Florida, which should have been pursued. Ascertaining the existence or nonexistence of a certificate of authority, constitutes "due diligence" incumbent upon an agent before engaging in the sale of insurance from a prospective insurance company. Respondent's Disciplinary History Petitioner has not taken disciplinary action against Respondent before this case.
Recommendation Upon the consideration of the facts found and the conclusions of law reached, it is RECOMMENDED: That a Final Order be entered finding Respondent in violation of Sections 624.11, 626.611(7) and (8), 626.621(2) and (6), 626.901(1), Florida Statutes (2001); suspending his licenses for nine months; placing Respondent on two-years probation; and requiring attendance at such continuing education classes as deemed appropriate. DONE AND ENTERED this 2nd day of April, 2004, in Tallahassee, Leon County, Florida. S CHARLES C. ADAMS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 2nd day of April, 2004. COPIES FURNISHED: David J. Busch, Esquire Department of Financial Services Division of Legal Services 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0333 Joseph O. Stroud, Jr., Esquire Rogers Towers, P.A. 1301 Riverplace Boulevard, Suite 1500 Jacksonville, Florida 32207 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
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 =================================================================
