The Issue Whether the Respondent committed the acts alleged in the Amended Administrative Complaint filed by the Petitioner on October 6, 1997, and, if so, the penalty which should be imposed.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: The Department of Insurance is the state agency responsible for regulating the business of insurance in the State of Florida. Section 624.307, Florida Statutes. This power extends to the licensing and discipline of insurance agents. Sections 626.291, .611, and .621, Florida Statutes. Howard Irvin Vogel ("Respondent") is, and was at all times material to this action, licensed as a general lines agent (2-20) and a health insurance agent (2-40); Respondent is also currently licensed as a Florida Property and Casualty Joint Underwriting Association representative (0-17). Respondent is, and was at the times material to this action, the president of Federal Auto Ins., Inc., 1/ ("Federal Insurance"), an incorporated general lines insurance agency located in Lake Worth, Florida. He is, and was at the times material to this action, the only officer of the corporation who is a licensed insurance agent. In 1993, 1994, 1995, and 1996, Respondent was a director of the corporation and its designated primary agent. Respondent is, and was at the times material to this action, also the only licensed insurance agent who has the authority to sign checks drawn on the Federal Insurance trust account. At the times material to this action, Federal Insurance employed at least two licensed insurance agents in addition to the Respondent. The Respondent regularly worked full-time in the Federal Insurance office during 1993, 1994, and 1995, and he was aware of the way in which the agents he employed sold insurance. All monies received by the agents were turned over to the agency, and the Respondent approved all refunds and signed all refund checks. The Respondent ran the day-to-day operations of the insurance agency and supervised the agents who worked there. At the times material to this action, it was the practice at Federal Insurance to impose a service charge for the preparation of certificates of insurance 2/ if a customer indicated he or she would need certificates prepared throughout the year. It was also the practice not to charge customers for the preparation of the first three certificates, but the agents employed there had the option, depending on the person and on the amount of the premium, of charging $5 for each certificate prepared in excess of the three free ones or of charging a flat fee of $100 per year. The charge was imposed to cover the costs of preparing the certificates. The agents employed by Federal Insurance were expected to explain the charge to the customer and to make it clear that the $100 was an additional charge and not part of the insurance premium. The fees received for the preparation of certificates of insurance were deposited in Federal Insurance's trust account. Some insurance agencies do not charge for the preparation of certificates of insurance on behalf of their customers. At the times material to this action, Federal Insurance sold automobile towing coverage provided by L.N.V., Inc., a Florida corporation whose directors since its incorporation in 1987 have been Howard and Alicia Vogel. L.N.V., Inc., reimburses its members for the expense of towing an insured vehicle if an accident occurs during the period the customer's automobile insurance policy is in effect. Federal Insurance had, at the times material to this action, a separate application for the towing coverage, which applicants for the coverage were required to sign. The agents employed by Federal Insurance were expected to explain the nature of the coverage and to make it clear to the customer that the charge for the towing coverage was separate from the premium charged for the underlying automobile insurance policy. The membership fees received for the towing coverage were deposited into a separate account for L.N.V., Inc. The Respondent is the only licensed insurance agent authorized to sign checks on this account. Michael Clark On December 19, 1993, Michael J. Clark went to the office of Federal Insurance to purchase a commercial general liability insurance policy and to renew his commercial automobile insurance policy. He met with Lee Vogel, who was a licensed general lines agent employed by Federal Insurance. Lee Vogel quoted Mr. Clark an annual premium of $776 for the renewal of his commercial automobile insurance policy for a vehicle used in his business, Eastern Electric. Mr. Clark applied for the policy, which was written by the Granada Insurance Company ("Granada"); $776 was the correct premium for the coverage Mr. Clark requested. Mr. Clark paid Federal Insurance a down payment of $330 and signed a Premium Finance Agreement and Disclosure Statement in order to obtain financing for the balance of the premium. When Mr. Clark signed the premium finance agreement, the portion identified as the Federal Truth-in-Lending Disclosure Statement had not been completed by Lee Vogel, so the form did not reflect the amount of the down payment. Mr. Clark and Lee Vogel used a worksheet when they were discussing the coverage and the cost of the policy. The worksheet Lee Vogel prepared during these discussions shows that he added $100 to the $776 premium for the commercial automobile insurance policy and stated a total of $876 on the worksheet. Mr. Clark signed the worksheet on which the $100 charge is shown, and he apparently did not question at that time the purpose of the additional $100 charge. Several weeks after he purchased the commercial automobile insurance policy, Mr. Clark received the documents and payment book from the premium finance company. These documents reflected that he had been credited with a down payment of only $230 rather than the $330 down payment Mr. Clark thought he had made on the policy. At the same time he purchased the commercial automobile insurance policy, Mr. Clark purchased a commercial general liability insurance policy. Lee Vogel quoted Mr. Clark a premium of $281 for a policy which would be written by the American Surety and Casualty Insurance Company ("American Surety"). Mr. Clark applied for this policy and paid Federal Insurance $381 as payment in full for the general liability policy. The worksheet prepared by Lee Vogel shows a $100 charge added to the $281 premium quoted to Mr. Clark. Although Mr. Clark claims that Lee Vogel did not explain the $100 charge to him, Mr. Clark did not question Lee Vogel about the additional $100 charge. He signed the worksheet and paid Federal Insurance $381 for the general liability coverage even though he was quoted $281 as the premium for the coverage. Lee Vogel added the $100 charge to the $776 and $281 premiums for the automobile and general liability policies as a service charge to cover the costs of preparing any certificates of insurance Mr. Clark might request during the policy year. According to Lee Vogel, customers are not charged for the preparation of certificates for commercial automobile insurance policies because certificates of insurance are not usually prepared for such policies. If they are, it is in conjunction with certificates of insurance prepared to confirm commercial general liability coverage. At the time he purchased the policy, Mr. Clark requested that four certificates of insurance be prepared, and, on December 20, 1993, Howard Vogel signed four certificates of insurance verifying that Eastern Electric had general liability coverage with American Surety. During the 1993-94 policy year, Federal Insurance prepared a total of seventeen certificates of insurance on behalf of Eastern Electric, which certified that Eastern Electric had general liability coverage with American Surety. Five of the seventeen certificates of insurance confirmed both that Eastern Electric had general liability coverage with American Surety and that Eastern Electric had automobile insurance coverage with Granada Insurance Company. No separate certificates of insurance were prepared by Federal Insurance for the commercial automobile insurance policy written by Granada Insurance Company. Mr. Clark testified that he was not informed of the $100 service charge added to the premiums for the commercial automobile insurance policy and the commercial general liability insurance policy. He was in a hurry when he purchased these policies, and, when Lee Vogel gave him two or three papers to sign, he signed the papers without really reading them. Except for his signature appearing on several of the certificates of insurance prepared by Federal Insurance for Eastern Electric, the Respondent's only direct involvement with Mr. Clark's case was a letter the Respondent wrote to the Department, dated June 20, 1994, in which he complained about the way in which the investigation of Mr. Clark's complaint was being handled. Cheryl Lee Andrews On February 23, 1994, Cheryl Andrews purchased a commercial general liability insurance policy for her husband's lawn care business, Tropic Green Lawn Care, through Federal Insurance. After having spoken with him on the telephone, Ms. Andrews met with Bryan Sanders, a licensed general lines insurance agent employed by Federal Insurance, who quoted Ms. Andrews a premium of $673 for a policy written by American Surety. The wholesale broker in this transaction, with whom Federal Insurance had a contract, was Amelia Underwriters, Inc. Ms. Andrews made a down payment of $271 on the policy, and she was given a receipt which indicated that she had paid a $271 payment on a "GL" policy with "Amelia." When she paid the down payment on the policy, Ms. Andrews also signed a Premium Finance Agreement to finance the remainder of the premium through Del Rio Discount Corp. When Ms. Andrews signed the premium finance agreement, the portion identified as the Federal Truth-in-Lending Disclosure Statement had not been completed by Mr. Sanders; the premium finance agreement contained only the number of payments, the amount of each payment, and the date the first payment was due. Soon after, Ms. Andrews spoke with the Respondent on the telephone and requested a copy of the premium finance agreement with a completed disclosure statement. The Respondent sent her a copy of the agreement by facsimile transmittal, but it was not legible. Ms. Andrews telephoned the Respondent again and requested that he send her a copy by mail. When she did not receive another copy from Federal Insurance, she contacted American Surety, which contacted Amelia Underwriters, and the underwriters provided a completed copy of the Premium Finance Agreement. The down payment identified in the agreement was $171. On the day she purchased the insurance policy, Mr. Sanders asked if she wanted any certificates of insurance. At that time, Ms. Andrews did not know what this was, and Mr. Sanders told her it was proof of insurance. She asked that he prepare one certificate of insurance for Tropic Green Lawn Care on February 23, 1994. A second certificate of insurance was prepared by Federal Insurance for Tropic Green Lawn Care on March 28, 1994. Mr. Sanders did not discuss with Ms. Andrews at any time a charge for preparation of certificates of insurance. When she questioned the Respondent during a telephone conversation about the additional $100 she had paid Federal Insurance, he told her that it was a charge for certificates of insurance and other service charges and that, if she wanted any information, she should ask in writing. She then wrote a letter to the Respondent, dated June 10, 1994, requesting a breakdown of these charges, but she did not receive a response. In a letter dated July 26, 1996, written to the Department, Mr. Sanders confirmed that Federal Insurance charged $100 Ms. Andrews for preparation of certificates of insurance. Tropic Green was reimbursed $100 by Federal Insurance by a check drawn on the Federal Insurance trust account and dated January 8, 1996. Virginia Davidson On August 17, 1994, Virginia Davidson applied for personal automobile insurance through Federal Insurance. She dealt with a woman whose name she does not remember and who has not been identified in these proceedings. The policy was to cover a 1985 Chrysler, and she told the woman that she wanted insurance only for a short time because she intended to sell the car in the near future. At the time of this transaction, Ms. Davidson was in her late sixties. Ms. Davidson was told she needed to buy a one-year policy, and she recalled being quoted a price of $386 for an automobile insurance policy written by Armor Insurance Company ("Armor"). She paid the $386 by check dated August 17, 1994, and made payable to Federal Insurance; she was given a receipt that indicated that she had paid in full the premium on the Armor automobile insurance policy for one year. In fact, the premium for this policy was initially computed as $281 on the Brokerage Auto Application form. Although Ms. Davidson signed the application form on which this quote appeared, her signature appeared only on the reverse of the application form, while the quote appeared on the front. Ms. Davidson does not recall that anyone on August 17, 1994, explained that the $386 quoted to her included a separate $100 charge for towing coverage to be provided by L.N.V., Inc. At the time she purchased the insurance policy, Ms. Davidson was a member of AAA and would not have knowingly purchased towing coverage. Ms. Davidson's signature appears on a separate application form which clearly displayed the terms "Towing Coverage" and "LNV Corp." The "membership fee" for this coverage was shown on the form as $100. Ms. Davidson was asked to sign a number of documents when she applied for the automobile insurance policy, and she does not recall signing the application form for towing coverage. In a notice from Armor dated September 16, 1994, Ms. Davidson was notified that she owed an additional premium of $116 on her automobile insurance policy. The additional premium was due as a result of Armor's investigation of Ms. Davidson's driving history. In a letter to Armor dated October 11, 1994, Ms. Davidson requested that the policy be cancelled and that she receive a refund of unearned premium. Armor sent Federal Insurance a check dated October 31, 1994, in the amount of $163.70, representing the unearned premium on Ms. Davidson's automobile insurance policy. Mr. Vogel signed a check to Ms. Davidson on the Federal Insurance trust account, dated November 11, 1994, for $163.70. Ms. Davidson did not receive this check, and a replacement check was prepared, dated December 5, 1994. Ms. Davidson does not recall receiving this check, and neither of these checks has cleared Federal Insurance's account. The Respondent refused to issue another replacement check unless Ms. Davidson waited six months for the checks to clear the bank or paid Federal Insurance the $25.00 fee charged by the bank to stop payment on the replacement check. During December 1994, the Respondent recalculated the amount of the refund owing Ms. Davidson, including for the first time the agency's unearned commission and a pro rata refund of the $100 fee for the towing coverage. The Respondent issued a check to Ms. Davidson, drawn on the Federal Insurance trust account and dated December 26, 1994, in the amount of $117.20. The check specified that it was for "cancellation in full" of Ms. Davidson's automobile insurance policy. Ms. Davidson did not cash this check because she disputed that it was the full amount of the refund owed to her. Armor subsequently issued a check to Ms. Davidson in the amount of $184.80, which included the $163.70 and an additional amount of unearned premium which Armor had neglected to include in its calculations. Ms. Davidson does not recall receiving this check. All of the checks were sent to Ms. Davidson at her correct address in West Palm Beach, Florida. The Respondent was involved in the transaction involving Ms. Davidson only after she cancelled her automobile insurance policy. The Respondent signed the refund checks issued in her name, and, after Ms. Davidson filed a complaint with the Department, he responded to the Department's inquiry regarding the refund due to her. After having reviewed the files of Mr. Clark, Ms. Andrews, and Ms. Davidson, the Respondent was satisfied with the way the agents employed by Federal Insurance transacted business with these individuals. Summary The evidence is uncontroverted that the employees of Federal Insurance are supervised on a daily basis by and are under the direct control of the Respondent. The evidence presented by the Department is not sufficient to establish with the requisite degree of certainty that Michael Clark was unaware that he was charged $100 in addition to the premiums quoted on the commercial automobile insurance policy and commercial general liability insurance policy he purchased through Federal Insurance. Although he may not have been told the purpose of the extra charge, Mr. Clark was quoted premiums of $776 and $281, respectively, for the insurance policies. The worksheet he signed clearly shows that $100 was added to each of these premiums; in fact, Mr. Clark paid $381 as payment in full for the commercial general liability insurance policy when he knew that the premium for the policy was $281. On the other hand, the evidence presented is sufficient to establish that Lee Vogel deducted a $100 service charge for certificates of insurance from Mr. Clark's down payment of $330 on the commercial automobile insurance policy even though this charge was not imposed on commercial automobile insurance policies because separate certificates of insurance are not prepared for such coverage. The evidence presented by the Department is sufficient to establish that Bryan Sanders did not inform Cheryl Andrews of the $100 service charge added to the premium for the general liability insurance policy she purchased for Tropic Green Lawn Care and to establish that Ms. Andrews could reasonably believe that the entire down payment of $271 would be applied to the insurance premium. However, the evidence is uncontroverted that, when she spoke to the Respondent by telephone, he told her that the charge was for preparation of certificates of insurance and other services. The evidence presented by the Department is sufficient to establish that, even though she signed an application form for towing coverage to be provided by L.N.V. Corp., Ms. Davidson was not told of the purpose of the application, the nature of the coverage, or the $100 fee for the coverage. In fact, the receipt for $386 that she received from Federal Insurance did not make any reference at all to the towing coverage or to L.N.V. Corp. The evidence presented by the Department is, however, not sufficient to establish that the Respondent refused to refund the monies owing to Ms. Davidson; under the circumstances presented, it was not unreasonable for Federal Insurance to refuse to issue a second replacement check. The evidence presented by the Department is sufficient to establish that the Respondent instituted the practice of charging a $100 service fee for the preparation of certificates of insurance for commercial general liability insurance purchased through Federal Insurance. The evidence presented by the Department is not sufficient to establish that Federal Insurance was prohibited by agreement or contract from imposing a service charge for the preparation of certificates of insurance. The evidence presented by the Department is not sufficient to establish that the Respondent instituted a policy at Federal Insurance requiring customers to purchase towing coverage from L.N.V., Inc., as a condition of purchasing an automobile insurance policy or that the Respondent developed a sales scheme whereby the application for and explanation of the towing coverage was hidden. The evidence is sufficient to establish only one instance in which an unidentified person employed at Federal Insurance failed to disclose the particulars of the towing coverage. The evidence presented by the Department is not sufficient to establish a pattern at Federal Insurance of agents failing to disclose the $100 service charge for preparing certificates of insurance, of agents imposing the service charge to policies for which no certificates of insurance are prepared in the normal course of business, or of failing to inform customers of the nature of and charge for ancillary coverage such as towing coverage. Finally, the evidence presented by the Department does not establish that the Respondent or the agents involved in the transactions at issue in this proceeding failed to remit any portion of the premiums owing to the insurance companies for the policies sold to Mr. Clark, Ms. Andrews, or Ms. Davidson. In the case of Mr. Clark and Ms. Andrews, the premiums quoted to them were correct and the premiums set forth on the premium finance agreements were correct; it is irrelevant in this respect that Mr. Clark and Ms. Andrews may have believed that their $330 and $271 down payments were to be applied solely to the premiums owed on the policies. Likewise, the full amount of the premium initially calculated for Ms. Davidson's automobile insurance policy was paid to the insurance company by Federal Insurance.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Insurance enter a final order dismissing all three counts of the Amended Administrative Complaint filed against Howard Irvin Vogel. DONE AND ENTERED this 16th day of September, 1998, in Tallahassee, Leon County, Florida. PATRICIA HART MALONO 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 16th day of September, 1998.
The Issue The issues are whether Respondents offered and sold securities in Florida, in violation of the registration requirements of Section 517.07(1), Florida Statutes; offered and sold securities in Florida while Respondents were unregistered, in violation of Section 517.12(1), Florida Statutes; or committed fraud in the offer, sale, or purchase of securities in Florida, in violation of Section 517.301(1)(a), Florida Statutes. If so, an additional issue is the penalty to be imposed.
Findings Of Fact At all material times, Respondent James A. Torchia (Respondent) held a valid life and health insurance license. Respondent was the president and owner of Respondent Empire Insurance, Inc. (Empire Insurance), a now-dissolved Florida corporation. Empire Insurance was in the insurance business, and Respondent was its sole registered insurance agent. At no material time has Respondent or Empire Insurance held any license or registration to engage in the sale or offer for sale of securities in Florida. At no material time were the investments described below sold and offered for sale by Respondent or Empire Insurance registered as securities in Florida. These cases involve viaticated life insurance policies. A life insurance policy is viaticated when the policy owner, also known as the viator, enters into a viatical settlement agreement. Under the agreement, the viator sells the policy and death benefits to the purchaser for an amount less than the death benefit--the closer the viator is perceived to be to death, the greater the discount from the face amount of the death benefit. The viatical industry emerged to provide dying insureds, prior to death, a means by which to sell their life insurance policies to obtain cash to enjoy during their remaining lives. As this industry matured, brokers and dealers, respectively, arranged for the sale of, and bought and resold, life insurance policies of dying insureds. Prior to the death of the viator, these viaticated life insurance policies, or interests in such policies, may be sold and resold several times. In these cases, viators sold their life insurance policies to Financial Federated Title & Trust, Inc. (FinFed). Having raised money from investors, American Benefit Services (ABS) then paid FinFed, which assigned viaticated policies, or interests in the policies, to various trusts. The trusts held the legal title to the policies, and the trust beneficiaries, who are the investors from whom ABS had obtained the funds to pay FinFed, held equitable title to the policies. Sometimes in these cases, a broker or dealer, such as William Page and Associates, intervened between the viator and FinFed. At some point, though, ABS obtained money from investors to acquire policies, but did not pay the money to FinFed to purchase viaticated life insurance policies. The FinFed and ABS investment program eventually became a Ponzi scheme, in which investor payouts were derived largely, if not exclusively, from the investments of other investors. ABS typically acquired funds through the promotional efforts of insurance agents, such as Respondent and Empire Insurance. Using literature provided by ABS, these agents often sold these investments to insurance clients. As was typical, Respondent and Empire Insurance advertised the types of claims described below by publishing large display ads that ran in Florida newspapers. Among the ABS literature is a Participation Disclosure (Disclosure), which describes the investment. The Disclosure addresses the investor as a "Participant" and the investment as a "Participation." The Disclosure contains a Participation Agreement (Agreement), which provides that the parties agree to the Disclosure and states whether the investor has chosen the Growth Plan or Income Plan, which are described below; a Disbursement Letter of Instruction, which is described below; and a Letter of Instruction to Trust, which is described below. The agent obtains the investor's signature to all three of these documents when the investor delivers his check, payable to the escrow agent, to purchase the investment. The Disclosure states that the investments offer a “High Return”: “Guaranteed Return on Participation 42% at Maturity.” The Disclosure adds that the investments are “Low Risk”: “Secured by a Guaranteed Insurance Industry Receivable”; “Secured by $300,000 State Insurance Guarantee Fund”; “Short Term Participation (Maturity Expectation 36 Months)”; “Principal Liquid After One Year With No Surrender Charge”; “State Regulated Participation”; “All Transactions By Independent Trust & Escrow Agents”; and “If policy fails to mature at 36 months, participant may elect full return of principal plus 15% simple interest.” The Disclosure describes two alternative investments: the Growth Plan and Income Plan. For the Growth Plan, the Disclosure states: “At maturity, Participant receives principal plus 42%, creating maximum growth of funds.” For the Income Plan, the Disclosure states: “If income is desired, participation can be structured with monthly income plans.” Different rates of return for the Growth and Income plans are set forth below. For investors choosing the Income Plan, ABS applied only 70 percent of the investment to the purchase of viaticated life insurance policies. ABS reserved the remaining 30 percent as the source of money to "repay" the investor the income that he was due to receive under the Income Plan, which, as noted below, paid a total yield of 29.6 percent over three years. The Disclosure states that ABS places all investor funds in attorneys’ trust accounts, pursuant to arrangements with two “bonded and insured” “financial escrow agents.” At another point in the document, the Disclosure states that the investor funds are deposited “directly” with a “financial escrow agent,” pursuant to the participant’s Disbursement Letter of Instruction. The Disbursement Letter of Instruction identifies a Florida attorney as the “financial escrow agent,” who receives the investor’s funds and disburses them, “to the order of [FinFed) or to the source of the [viaticated insurance] benefits and/or its designees.” This disbursement takes place only after the attorney receives “[a] copy of the irrevocable, absolute assignment, executed in favor of Participant and recorded with the trust account as indicated on the assignment of [viaticated insurance] benefits, and setting out the ownership percentage of said [viaticated insurance] benefits”; a “medical overview” of the insured indicative of not more than 36 months’ life expectancy; confirmation that the policy is in full force and effect and has been in force beyond the period during which the insurer may contest coverage; and a copy of the shipping airbill confirming that the assignment was sent to the investor. The Disclosure states that the investor will direct a trust company to establish a trust, or a fractional interest in a trust, in the name of the investor. When the life insurance policy matures on the death of the viator, the insurer pays the death benefits to the trust company, which pays these proceeds to the investor, in accordance with his interest in the trust. Accordingly, the Letter of Instruction to Trust directs FinFed, as the trust company, to establish a trust, or a fractional interest in a trust, in the name of the investor. The Letter of Instruction to Trust provides that the viaticated insurance benefits obtained with the investor's investment shall be assigned to this trust, and, at maturity, FinFed shall pay the investor a specified sum upon the death of the viator and the trustee's receipt of the death benefit from the insurer. The Disclosure provides that, at anytime from 12 to 36 months after the execution of the Disclosure, the investor has the option to request ABS to return his investment, without interest. At 36 months, if the viator has not yet died, the investor has the right to receive the return of his investment, plus 15 percent (five percent annually). The Disclosure states that ABS will pay all costs and fees to maintain the policy and that all policies are based on a life expectancy for the viator of no more than 36 months. Also, the Disclosure assures that ABS will invest only in policies that are issued by insurers that are rated "A" or better by A.M. Best "at the time that the Participant's deposit is confirmed." The Disclosure mentions that the trust company will name the investor as an irrevocable assignee of the policy benefits. The irrevocable assignment of policy benefits mentioned in the Disclosure and the Disbursement Letter of Instruction is an anomaly because it does not conform to the documentary scheme described above. After the investor pays the escrow agent and executes the documents described above, FinFed executes the “Irrevocable Absolute Assignment of Viaticated Insurance Benefits.” This assignment is from the trustee, as grantor, to the investor, as grantee, and applies to a specified percentage of a specific life insurance policy, whose death benefit is disclosed on the assignment. The assignment includes the "right to receive any viaticated insurance benefit payable under the Trusts [sic] guaranteed receivables of assigned viaticated insurance benefits from the noted insurance company; [and the] right to assign any and all rights received under this Trust irrevocable absolute assignment." On its face, the assignment assigns the trust corpus-- i.e., the insurance policy or an interest in an insurance policy--to the trust beneficiary. Doing so would dissolve the trust and defeat the purpose of the other documents, which provide for the trust to hold the policy and, upon the death of the viator, to pay the policy proceeds in accordance with the interests of the trust beneficiaries. The assignment bears an ornate border and the corporate seal of FinFed. Probably, FinFed intended the assignment to impress the investors with the "reality" of their investment, as the decorated intangible of an "irrevocable" interest in an actual insurance policy may seem more impressive than the unadorned intangible of a beneficial interest in a trust that holds an insurance policy. Or possibly, the FinFed/ABS principals and professionals elected not to invest much time or effort in the details of the transactional documentation of a Ponzi scheme. What was true then is truer now. Obviously, in those cases in which no policy existed, the investor paid his money before any policy had been selected for him. However, this appears to have been the process contemplated by the ABS literature, even in those cases in which a policy did exist. The Disbursement Letter of Instruction and correspondence from Respondent, Empire Insurance, or Empire Financial Consultant to ABS reveal that FinFed did not assign a policy, or part of a policy, to an investor until after the investor paid for his investment and signed the closing documents. In some cases, Respondent or Empire Insurance requested ABS to obtain for an investor a policy whose insured had special characteristics or a investment plan with a maturity shorter than 36 months. FinFed and ABS undertook other tasks after the investor paid for his investment and signed the closing documents. In addition to matching a viator with an investor, based on the investor's expressed investment objectives, FinFed paid the premiums on the viaticated policies until the viator died and checked on the health of the viator. Also, if the viator did not die within three years and the investor elected to obtain a return of his investment, plus 15 percent, ABS, as a broker, resold the investor's investment to generate the 15 percent return that had been guaranteed to the investor. Similarly, ABS would sell the investment of investors who wanted their money back prior to three years. The escrow agent also assumed an important duty--in retrospect, the most important duty--after the investor paid for his investment and signed the closing documents; the escrow agent was to verify the existence of the viaticated policy. Respondent and Empire Insurance sold beneficial interests in trusts holding viaticated life insurance policies in 50 separate transactions. These investors invested a total of $1.5 million, nearly all of which has been lost. Respondent and Empire Insurance earned commissions of about $120,000 on these sales. Petitioner proved that Respondent and Empire Insurance made the following sales. Net worths appear for those investors for whom Respondent recorded net worths; for most, he just wrote "sufficient" on the form. Unless otherwise indicated, the yield was 42 percent for the Growth Plan. In all cases, investors paid money for their investments. In all cases, FinFed and ABS assigned parts of policies to the trusts, even of investors investing relatively large amounts. On March 21, 1998, Phillip A. Allan, a Florida resident, paid $69,247.53 for the Growth Plan. On March 26, 1998, Monica Bracone, a Florida resident with a reported net worth of $900,000, paid $8000 for the Growth Plan. On April 2, 1998, Alan G. and Judy LeFort, Florida residents with a reported net worth of $200,000, paid $10,000 for the Growth Plan. In a second transaction, on June 8, 1998, the LeForts paid $5000 for the Growth Plan. In the second transaction, the yield is 35 percent, but the Participation Agreement notes a 36-month life expectancy of the viator. The different yields based on life expectancies are set forth below, but, as noted above, the standard yield was 42 percent, and, as noted below, this was based on a 36-month life expectancy, so Respondent miscalculated the investment return or misdocumented the investment on the LeForts' second transaction. On April 29, 1998, Doron and Barbara Sterling, Florida residents with a reported net worth of $250,000, paid $15,000 for the Growth Plan. In a second transaction, on August 14, 1998, the Sterlings paid $100,000 for the Growth Plan. The yield for the second transaction is 35 percent, and the Participation Agreement notes that the Sterlings were seeking a viator with a life expectancy of only 30 months. When transmitting the closing documents for the second Sterling transaction, Respondent, writing ABS on Empire Insurance letterhead, stated in part: This guy has already invested with us (15,000) [sic]. He gave me this application but wants a 30 month term. Since he has invested, he did some research and has asked that he be put on a low T-cell count and the viator to be an IV drug user. I know it is another favor but this guy is a close friend and has the potential to put at least another 500,000 [sic]. If you can not [sic] do it, then I understand. You have done a lot for me and I always try to bring in good quality business. If this inventory is not available, the client has requested that we return the funds . . . In a third transaction, on February 24, 1999, the Sterlings paid $71,973 for the Growth Plan. The yield is only 28 percent, but the Participation Agreement reflects the typical 36-month life expectancy for the viator. Although the investors would not have received this document, Respondent completed an ABS form entitled, "New Business Transmittal," and checked the box, "Life Expectancy 2 years or less (28%). The other boxes are: "Life Expectancy 2 1/2 years or less (35%)" and "Life Expectancy 3 years or less (42%)." On May 4, 1998, Hector Alvero and Idelma Guillen, Florida residents with a reported net worth of $100,000, paid $6000 for the Growth Plan. In a second transaction, on October 29, 1998, Ms. Guillen paid $5000 for the Growth Plan. In a third transaction, on November 30, 1998, Ms. Guillen paid $5000 for the Growth Plan. For this investment, Ms. Guillen requested an "IV drug user," according to Respondent in a letter dated December 1, 1998, on Empire Financial Consultants letterhead. This is the first use of the letterhead of Empire Financial Consultants, not Empire Insurance, and all letters after that date are on the letterhead of Empire Financial Consultants. In a fourth transaction, on January 29, 1999, Ms. Guillen paid $15,000 for the Growth Plan. On April 23, 1998, Bonnie P. Jensen, a Florida resident with a reported net worth of $120,000, paid $65,884.14 for the Growth Plan. Her yield was 35 percent, but the Participation Agreement reflects a 36-month life expectancy. On May 20, 1998, Michael J. Mosack, a Florida resident with a reported net worth of $500,000, paid $70,600 for the Income Plan. He was to receive monthly distributions of $580.10 for three years. The total yield, including monthly distributions, is $20,883.48, which is about 29.6 percent, and the Participation Agreement reflects a 36-month life expectancy. On May 27, 1998, Lewis and Fernande G. Iachance, Florida residents with a reported net worth of $100,000, paid $30,000 for the Growth Plan. On June 3, 1998, Sidney Yospe, a Florida resident with a reported net worth of $1,500,000, paid $30,000 for the Growth Plan. The yield is 35 percent, and the Participation Agreement reflects a 30-month life expectancy. On June 12, 1998, Bernard Aptheker, with a reported net worth of $100,000, paid $10,000 for the Growth Plan. The yield is 35 percent, but the Participation Agreement reflects a 36-month life expectancy. On June 10, 1998, Irene M. and Herman Kutschenreuter, Florida residents with a reported net worth of $200,000, paid $30,000 for the Growth Plan. The yield is 35 percent, but the Participation Agreement reflects a 36-month life expectancy. On June 9, 1998, Daniel and Mary Spinosa, Florida residents with a reported net worth of $300,000, paid $10,000 for the Growth Plan. The yield is 35 percent, but the Participation Agreement reflects a 36-month life expectancy. On June 5, 1998, Pauline J. and Anthony Torchia, Florida residents with a reported net worth of $300,000 and the parents of Respondent, paid $10,000 for the Growth Plan. The yield is 35 percent, but the Participation Agreement reflects a 36-month life expectancy. On June 29, 1998, Christopher D. Bailey, a Florida resident with a reported net worth of $500,000, paid $25,000 for the Growth Plan. The yield is 35 percent, but the Participation Agreement reflects a 36-month life expectancy. In a second transaction on the same day, Mr. Bailey paid $25,000 for the Growth Plan. Petitioner submitted documents concerning a purported purchase by Lauren W. Kramer on July 21, 1998, but they were marked "VOID" and do not appear to be valid. On July 22, 1998, Laura M. and Kenneth D. Braun, Florida residents with a reported net worth of $150,000, paid $25,000 for the Growth Plan, as Respondent completed the Participation Agreement. However, the agreement calls for them to receive $205.42 monthly for 36 months and receive a total yield, including monthly payments, of 29.6 percent, so it appears that the Brauns bought the Income Plan. In a second transaction, also on July 22, 1998, the Brauns paid $25,000 for the Growth Plan. On January 20, 1999, Roy R. Worrall, a Florida resident, paid $100,000 for the Income Plan. The Participation Agreement provides that he will receive monthly payments of $821.66 and a total yield of 29.6 percent. On July 16, 1998, Earl and Rosemary Gilmore, Florida residents with a reported net worth of $250,000, paid $5000 for the Growth Plan. In a second transaction, on February 12, 1999, the Gilmores paid $20,000 for the Growth Plan. The yield is 28 percent, but the Participation Agreement reflects a 36-month life expectancy. The New Business Transmittal to ABS notes a life expectancy of two years or less. On July 14, 1998, David M. Bobrow, a Florida resident with a reported net worth of $700,000 on one form and $70,000 on another form, paid $15,000 for the Growth Plan. The yield is 35 percent, but the Participation Agreement reflects a 36-month life expectancy. In a second transaction, on the same day, Mr. Bobrow paid $15,000 for the Growth Plan. On July 27, 1998, Cecilia and Harold Lopatin, Florida residents with a reported net worth of $300,000, paid $10,000 for the Growth Plan. On July 30, 1998, Ada R. Davis, a Florida resident, paid $30,000 for the Income Plan. Her total yield, including monthly payments of $246.50 for three years, is 29.6 percent. In a second transaction, on the same day, Ms. Davis paid $30,000 for the Income Plan on the same terms as the first purchase. On July 27, 1998, Joseph F. and Adelaide A. O'Keefe, Florida residents with a net worth of $300,000, paid $12,000 for the Growth Plan. On August 5, 1998, Thurley E. Margeson, a Florida resident, paid $50,000 for the Growth Plan. On August 19, 1998, Stephanie Segaria, a Florida resident, paid $20,000 for the Growth Plan. On August 26, 1998, Roy and Glenda Raines, Florida residents, paid $5000 for the Growth Plan. The yield is 35 percent, but the Participation Agreement reflects a 36-month life expectancy. The New Business Transmittal to ABS notes a life expectancy of 30 months or less. In a second transaction, on the same day, the Raineses paid $5000 for the Growth Plan. The yield is 35 percent, but the Participation Agreement reflects a 36-month life expectancy, although, again, the New Business Transmittal notes the life expectancy of 30 months or less. On November 24, 1998, Dan W. Lipford, a Florida resident, paid $50,000 for the Growth Plan in two transactions. In a third transaction, on January 13, 1999, Mr. Lipford paid $30,000 for the Growth Plan. On December 1, 1998, Mary E. Friebes, a Florida resident, paid $30,000 for the Growth Plan. On December 4, 1998, Allan Hidalgo, a Florida resident, paid $25,000 for the Growth Plan. On December 17, 1998, Paul E. and Rose E. Frechette, Florida residents, paid $25,000 for the Income Plan. The yield, including monthly payments of $205.41 for three years, is 29.6 percent. On December 26, 1998, Theodore and Tillie F. Friedman, Florida residents, paid $25,000 for the Growth Plan. On January 19, 1999, Robert S. and Karen M. Devos, Florida residents, paid $10,000 for the Growth Plan. On January 20, 1999, Arthur Hecker, a Florida resident, paid $50,000 for the Income Plan. The yield, including a monthly payment of $410.83 for 36 months, is 29.6 percent. On February 11, 1999, Michael Galotola, a Florida resident, paid $25,000 for the Growth Plan. In a second transaction, on the same day, Michael and Anna Galotola paid $12,500 for the Growth Plan. On November 3, 1998, Lee Chamberlain, a Florida resident, paid $50,000 for the Growth Plan. On December 23, 1998, Herbert L. Pasqual, a Florida resident, paid $200,000 for the Income Plan. The yield, including a monthly payment of $1643.33 for three years, is 29.6 percent. On December 1, 1998, Charles R. and Maryann Schuyler, Florida residents, paid $10,000 for the Growth Plan. Respondent and Empire Insurance were never aware of the fraud being perpetrated by FinFed and ABS at anytime during the 38 transactions mentioned above. Respondent attempted to verify with third parties the existence of the viaticated insurance policies. When ABS presented its program to 30-40 potential agents, including Respondent, ABS presented these persons an opinion letter from ABS's attorney, stating that the investment was not a security, under Florida law. Respondent also contacted Petitioner's predecessor agency and asked if these transactions involving viaticated life insurance policies constituted the sale of securities. An agency employee informed Respondent that these transactions did not constitute the sale of securities.
Recommendation RECOMMENDED that Petitioner enter a final order: Finding James A. Torchia and Empire Insurance, Inc., not guilty of violating Section 517.301(1), Florida Statutes; Finding James A. Torchia guilty of 38 violations of Section 517.07(1), Florida Statutes, and 38 violations of Section 517.12(1), Florida Statutes; Finding Empire Insurance, Inc., guilty of 38 violations of Section 517.07(1), Florida Statutes, and 38 violations of Section 517.12(1), Florida Statutes, except for transactions closed on or after December 1, 1998; Directing James A. Torchia and Empire Insurance, Inc., to cease and desist from further violations of Chapter 517, Florida Statutes; and Imposing an administrative fine in the amount of $120,000 against James A. Torchia. DONE AND ENTERED this 19th day of May, 2003, in Tallahassee, Leon County, Florida. ROBERT E. MEALE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 19th day of May, 2003. COPIES FURNISHED: 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 Fred H. Wilsen Senior Attorney Office of Financial Institutions and Securities Regulation South Tower, Suite S-225 400 West Robinson Street Orlando, Florida 32801-1799 Barry S. Mittelberg Mittelberg & Nicosia, P.A. 8100 North University Drive, Suite 102 Fort Lauderdale, Florida 33321
Findings Of Fact The Respondent, Robert Charles Anderson, currently is eligible for licensure and is licensed in this state as a life and health (debit) agent, life, health and variable annuity contracts agent, general lines property, casualty, surety and miscellaneous agent, and health insurance agent. The Respondent moved to Florida from Michigan in September, 1983. In January, 1984, the Respondent and a partner bought Guaranteed Underwriters, Incorporated, a corporate general lines insurance agency doing business as Security Insurance Agency (Security) in New Port Richey, Florida. The Respondent's background was primarily in the life and health insurance business; his partner's background was primarily in property and casualty insurance. They planned to divide responsibilities for Security's operations along the lines of their respective areas of expertise. However, the partnership dissolved, leaving to the Respondent responsibility for all of the operations of the agency. After the dissolution of the partnership, the Respondent delegated to unlicensed employees most of the day-to-day responsibilities for the property and casualty and workmen's compensation side of the agency's business. The Respondent was personally involved primarily in the day-to-day operations of the health and life insurance side of the business, as well as in selected large commercial accounts. The conduct of Security's business, as described above, went smoothly (there were no charges of any license violations) until two disruptive factors entered into the picture. One was financial in nature; the other was personal. In 1986, Security bought an existing insurance agency (Sunland Insurance Agency) in Holiday, merged it into Security, and attempted to operate it as part of Security's overall business. In 1987, Security bought another, large agency (Village Insurance Agency) and also merged it into Security and attempted to operate it as part of Security's overall business. At this point, the Respondent essentially was attempting to operate three insurance agencies, something he never attempted before. With the purchase of Sunland and Village, in addition to Security, the Respondent incurred significant debt which had to be met for his business to just break even. By approximately 1988, the Respondent owed approximately $150,000 still outstanding on the purchase of Security, $100,000 borrowed to finance the purchase of Village, $43,000 to three different relatives and $3,500 to the NCNB bank on loans made in connection with the business. Payments on these debts, together with payroll, rent and other business expense left Security with a monthly operating budget of almost $12,000. At this expense level, the business was losing money. In calendar year 1989, the business lost between approximately $12,600 and (counting unpaid bills outstanding at the end of the year) $17,900. At the end of 1988, severe personal problems added to the Respondent's financial woes. In December, 1988, the Respondent's wife had to be hospitalized in Tampa for eight weeks for treatment for symptoms of mental illness. During this time, in addition to trying to supervise the operations of Security, the Respondent was required to travel back and forth to Tampa (about an hour drive by car, each way) to visit his wife and also make arrangements for the care of his eighteen month old son (either by himself or by a baby-sitter). As if the Respondent's personal problems were not enough, when his wife was discharged from the hospital (with a diagnosis of a chemical imbalance), she informed him that she wanted a divorce. She took up a separate residence in Tampa where she lived pending the dissolution of the marriage. As a result of the his personal problems, the Respondent delegated more and more responsibility to his unlicensed employees. He would go to the office only for an hour or two a day. Sometimes he was not able to get into the office at all. Judy Nelson (Count V). Judy Nelson, who is self-employed doing business as Pedals 'N' Presents, used Security for her insurance needs since 1986. In January, 1989, she applied through Security for renewal of a special multi-peril (SMP) insurance policy with American Professional Insurance for another year beginning January 21, 1989. On January 10, 1989, she gave Security her check for $485 as partial payment for the coverage. The $485 was deposited into Security's general operating account which Security used to pay the operating expenses of the business. Security never processed Nelson's application or secured the coverage. On or about March 10, 1989, Nelson received notice from American Professional that no application for renewal of coverage or premium had been received and that coverage was being cancelled. Nelson immediately contacted Security regarding the notification, and one of the Respondent's unlicensed employees acknowledged an error on Security's part but assured Nelson that Security would correct the situation and have Nelson's coverage reinstated. Security never got the policy reinstated, and the policy was cancelled on March 21, 1989. On or about April 8, 1989, Nelson's business was burglarized, and Nelson made a claim on her MPS policy. At this point, in handling the claim, the Respondent realized that the policy had been cancelled and that Nelson had no coverage. But, instead of telling her the facts, the Respondent paid the claim himself. Nelson thought the claim was paid under the terms of her SMP policy and still thought she had coverage. Later, Nelson had a question about a signature on her policy and telephoned the Professional American to get her question answered. Professional American told her that she had no coverage. At about the same time, Nelson was contacted by a Department investigator, who asked her not to contact the Respondent yet as he would make arrangements for a refund for her. On or about December 6, 1989, after the Department investigator cleared it, Nelson telephoned the Respondent and asked for a refund. This time, the Respondent acknowledged that Nelson had no coverage and agreed to a refund. The Respondent paid Nelson the refund at the end of December, 1989, or the beginning of January, 1990. Nelson still does business with Security. She has in force workmen's compensation insurance through Security. Fred J. Miller (Count VI). On or about February 24, 1989, Fred J. Miller came into the Security offices to get commercial automobile insurance for the vehicles he uses in his recycling business. He dealt with one of the Respondent's unlicensed employees. Several application and other papers for coverage with Progressive American Insurance Companies were prepared and were signed by Miller. Miller also made a partial payment for the coverage in cash in the amount of $296, for which the employee gave Miller a receipt. As he left the office, the Security employee assured him that he had coverage. A few days later, on or about February 28, 1989, Security contacted Miller and told him an additional $606 was needed to obtain the coverage for which he had applied. Miller returned to Security and gave the employee he was dealing with an additional $606 cash, for which he was given another receipt. It was not proven, and is not clear, whether the cash received from Miller was placed in the Security operating account. Security never submitted Miller's application for insurance. Contrary to Miller's understanding, Miller had no insurance on his vehicles. As of April 6, 1989, Miller had neither a policy (or copy of one) nor an insurance identification card. On or about April 6, 1989, Miller bought a new vehicle and had to contact Security to get an insurance policy number in order to have the vehicle registered in his name. The Security employee speaking to Miller discovered that Miller's undated application still was in the "pending matters" file and told Miller he could not get the policy number at that time. Miller said he had to have the policy number immediately. At that point, the employee brought the problem to the Respondent's attention. The Respondent had the employee tell Miller they would call right back. Security then dated Miller's application April 6, 1989, telephoned Progressive American to secure coverage effective April 6, 1989, and called Miller back with the policy number he needed. Security then processed Miller's application to secure the coverage for a year, through April 6, 1990. Miller has renewed the Progress American coverage through Security and still has his vehicles insured under the policy. Donald E. Wilkins (Count IV). Donald E. Wilkins, President of Apple Paradise Landscaping, Inc., used Security for his general liability and automobile insurance needs. He has no complaint about, and no issue is raised in this proceeding, as to Security's handling of those coverages. (The evidence is that the coverages Wilkins applied for were placed in the normal course of business.) On or about March 9, 1989, Wilkins decided he wanted a workmen's compensation insurance certificate. He went to Security's office, and one of the Respondent's unlicensed employees completed an application for the insurance and for premium financing. Wilkins gave her a $250 check "just for the certificate." The check was deposited into Security's general operating account which Security used to pay the operating expenses of the business. On March 9, 1989, Wilkins also specifically requested that Security furnish to Hawkins Construction of Tarpon Springs, Florida, a certificate of insurance. In response to the request, Security furnished to Hawkins Construction a certificate that Apple Paradise with the "S. Atlantic Council on Workers Compensation." A policy number appears on the certificate, and the certificate states that coverage was effective March 13, 1989, to expire on March 13, 1990. There is no evidence that the Respondent personally was involved in providing this certificate of insurance. The evidence did not prove whether Wilkins ever got any workmen's compensation insurance. The Department proved that Security never processed the premium financing application, and Wilkins testified that he never got a payment book or other request for payment from any premium financing company. But the representative of the National Council on Compensation Insurance gave no testimony on Wilkins or Apple Paradise. Wilkins himself did not appear to have any complaint against the Respondent or Security. Theoharis Tsioukanaras (Count III). Theoharis (Harry) Tsioukanaras owned and operated Harry's Painting and Enterprises, Inc. He had been doing business with the Respondent to meet his business and personal insurance needs since the Respondent first bought Security (and did business with the prior owner for a year before that). He had his business and personal automobile insurance, as well as his workmen's compensation insurance through Security. In the normal course of their business relationship, either Harry would telephone Security when he had insurance needs or Security would telephone Harry when it was time to renew insurance. Harry would then drop by the office to complete the necessary paperwork and pay the premium. When Harry did not have the necessary premium money when it was time to buy or renew insurance, the Respondent regularly loaned Harry premium money and Harry would pay the Respondent back later. Harry usually dealt with the Respondent's unlicensed employees, not with the Respondent directly. On or sometime after July 7, 1989, Harry telephoned Security for proof of insurance on a 1987 Subaru so that he could avoid having to pay for lender insurance on the vehicle at a bank where he was seeking to obtain financing. One of the Respondent's unlicensed employees gave Harry a purported insurance identification card for "Progressive American," listing a purported insurance policy number and purported policy effective dates of July 7, 1989, to January 7, 1990. The lending institution did not accept the card. In fact, no Progressive American policy had issued on the vehicle. At some point, Harry came by the Security office and told the Respondent that he (Harry) was due a $640 refund for automobile insurance renewal premium money on a policy that never issued. By the Respondent's own admission, he checked with his records and his unlicensed employees and confirmed that Harry was owed the money. On September 28, 1989, he gave Harry a check for $640. 1/ Despite the circumstances that resulted in the false Progressive American insurance identification card, in Harry's need to buy Allstate insurance on a vehicle he thought was insured through Security, and in Harry's need for a $640 refund from Security, Harry continues to do his insurance business with the Respondent and Security and also refers friends to the Respondent for insurance needs. John Stuiso (Count I). On or about June 7, 1989, John Stuiso, a self-employed building contractor, applied for both general liability and workmen's compensation insurance through Security. (Stuiso had been insured through Security for the preceding four years with no apparent problems.) Stuiso paid Security $3,250 as partial payment of the premiums on the policies and also applied for premium financing through Security. At least $3,000 was paid by check; the evidence is not clear how the other $250 was paid. The $3,000 check was deposited into Security's general operating account which Security used to pay the operating expenses of the business. It is not clear what happened to the other $250. It was understood between Stuiso and Security that Security would have the applications processed and would inform Stuiso if there was any problem with coverage. Not having heard anything to the contrary, Stuiso believed he had the general liability and workmen's compensation insurance for which he had applied. In fact, Security never processed either application for insurance or either application for premium financing. In late July or early August, 1989, Stuiso requested that Security furnish a certificate of insurance for him to provide to a customer, APCO Building Systems of Oldsmar, Florida. On August 4, 1989, Security issued to APCO a certificate that Stuiso had both general liability insurance with American Professional Insurance Company and workmen's compensation insurance with "South Atlantic Council on Work Comp." Purported policy numbers also appeared on the certificate. When Stuiso never received a payment book for his premium financing, he became concerned about his coverage and was about to approach the Department for assistance when he received a telephone call from a Department investigator who had been investigating the Respondent (unbeknownst to the Respondent.) The investigator told Stuiso that he had no coverage. Stuiso then approached the Respondent and asked for a refund. The Respondent checked his records and asked his unlicensed employees about Stuiso's claim that he had paid for and applied for insurance that never issued. He learned for the first time the facts about Stuiso and immediately wrote Stuiso two refund checks, one for $3,000 and one for $250. Due to the financial problems the Respondent was having, his $3,00 check was returned for insufficient funds. The Respondent tried to borrow the money to cover the $3,000 check from a friend who declined on advice of counsel. Stuiso then went to the police and had the Respondent charged with writing a worthless check. The Respondent was advised of this and turned himself in to the police. He was given a week to make good on the check. The Respondent was able to borrow the money from another friend and paid Stuiso in full. However, his encounter with the police brought home to him the depths to which he had sunk. He decided to commit suicide by monoxide poisoning but changed his mind before it was too late. He telephoned his wife in Tampa to report what he had just done, and she initiated steps to have him committed involuntarily for treatment for mental illness under Florida's Baker Act. He spent four days in the Community Hospital in New Port Richey, Florida, where he was diagnosed as having "adjustment reaction." He was released to the custody of his wife and spent the next week to ten days with her in Tampa. After the Respondent recovered, he decided to do whatever was necessary to save his business and pay off his debts. He laid off office staff and, to take up the slack, himself assumed the responsibilities he had been delegating to his unlicensed employees. He also decided, in light of the Harry's and Stuiso matters, to himself investigate to see if there were any other Security customers who did not have insurance coverage for which they had paid. He found Wanda Mae Riley (Custom Plumbing of Pasco, Inc.). Wanda Mae Riley (Count II). In about August, 1988, the Respondent himself called on Wanda Mae Riley of Custom Plumbing of Pasco County to advise her that the company's general liability and automobile insurance policies for its fleet of four trucks were up for annual renewal on August 24, 1988. The Respondent filled out applications for renewal of the policies and for premium financing and accepted Riley's check in the amount of $3,244 as down payment for the renewal policies. The $3,244 was deposited into Security's general operating account which Security used to pay the operating expenses of the business. The Respondent telephoned American Professional Insurance Company to bind the coverage. He or his office also issued proof of insurance identification cards for Custom Plumbing. But, for reasons he cannot explain (having no recollection), he never processed the applications and the binders expired when the applications were not processed and policies were not issued in the normal course of business. Having had a lapse of memory as to the matter and as to Security's responsibilities to Custom Plumbing, the Respondent did not know and never told Riley or Custom Plumbing that the insurance policies were not renewed and that Custom Plumbing did not have the coverage it thought it did. Later in 1988, Security also arranged for workmen's compensation insurance for Custom Plumbing. The evidence did not prove that there were problems in the way Security obtained this coverage for Custom Plumbing. In approximately April, 1989, Custom Plumbing requested that Security furnish a certificate of insurance for him to provide to the Barnett Bank of Hernando County. On April 21, 1989, Security issued to the bank a certificate that Custom Plumbing had automobile insurance with American Professional Insurance Company. The expired binder number (which perhaps was the same as the policy number of the prior year's policy) appeared on the certificate as the purported policy number. There is no evidence that the Respondent personally was involved in providing this certificate of insurance. When, in approximately late October or early November of 1989, the Respondent discovered that Security had not obtained the coverages for which Custom Plumbing had made down payments in August, 1988, he telephoned Riley to inform her 2/ and tell her that he would refund the down payments Custom Plumbing had made in August, 1988. When the refund was not made promptly, Riley went to a lawyer to have a promissory note drawn for the Respondent's signature. The promissory note reflected the $3,244 the Respondent owed to Custom Plumbing, payable $500 a month. On or about December 9, 1989, the Respondent signed the note, which was paid in full in accordance with the terms of the note. (As previously found in Finding 14, by this time the Respondent also had heard from Nelson.)
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Petitioner, the Department of Insurance and Treasurer, enter a final order: (1) finding the Respondent, Robert Charles Anderson, guilty of the charges contained in Counts I, II, III, V and VI of the Administrative Complaint, as set forth in the Conclusions of Law, above; and (2) suspending the Respondent's licenses and eligibility for licensure for six months. RECOMMENDED this 28th day of May, 1991, in Tallahassee, Florida. J. LAWRENCE JOHNSTON Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of May, 1991.
The Issue The issues are whether Respondent is guilty of various violations of the Insurance Code and, if so, what penalty should be imposed.
Findings Of Fact At all relevant times, Respondent has been licensed as a Life & Variable Annuity Agent (2-14), Life, Health and Variable Annuity Agent (2-15), Life Agent (2-16), Life and Health Agent (2-18), General Lines, Property and Casualty Agent (2-20), and Health Agent (2-40). Respondent holds license number A164221. Petitioner has disciplined Respondent on two prior occasions. By Consent Order filed November 28, 2000, Petitioner imposed an administrative fine of $7500 against Respondent and placed her licenses on probation for two years. The Consent Order arose out of allegations that Respondent failed to place insurance coverage and failed to supervise adequately her employees. By Consent Order filed April 30, 2002, Petitioner imposed an administrative fine of $2000 against Respondent. The Consent Order does not describe the underlying allegations. At all relevant times, Respondent has been a director, officer, and sole owner of AIA. She has owned the corporation since 1993. At all relevant times, Respondent was the only signatory on the AIA bank accounts. Customarily, Respondent markets the insurance and then sends customers to one of the AIA customer service representatives. A high-volume agency with over 15,000 active clients, AIA, which employs 10 persons, has issued about 50,000 policies since November 2001. For most, if not all, of the relevant period, AIA employed Tony Decambre as the primary agent, and customer service representatives performed much of the work in processing insurance applications. Petitioner attempted to prove that Respondent was the primary agent. Rather than produce copies of forms by which Respondent may have designated herself as the primary agent, Petitioner offered only copies of prints of screens of data maintained by Petitioner. The Administrative Law Judge excluded from evidence these data compilations. Respondent testified that Mr. Decambre was the primary agent. Petitioner's investigator testified that Respondent was the primary agent, at least the last time that he had checked. The investigator's testimony failed to establish by clear and convincing evidence that Respondent was the primary agent. On December 28, 2001, Fernando Gomez visited AIA to pay for a workers' compensation insurance policy to be issued by Florida United Businesses Association/Workers Compensation (FUBA). Respondent met with Mr. Gomez, who required the presence of another employee to translate into and from Spanish. As the producer, Respondent signed the application. FUBA bound the coverage on December 31, 2001. Among the three persons present on December 28, only Respondent testified. The application bears the date "December 28, 2001," although this handwriting is lighter than the remainder of the handwriting on the application and could have been written at a date subsequent to the date on which the application was taken. Petitioner contends that Respondent took the application on November 6, 2001, or somehow tried to bind FUBA as of November 6, 2001. The sole evidentiary basis for this contention is Petitioner Exhibit 9, which purports to be a certificate of liability insurance, bearing a date of December 28, 2001, but showing effective dates for general liability and workers' compensation coverage for Mr. Gomez of November 6, 2001. The certificate holder is stated to be Universal Drywall & Plastering, and the producer is stated to be AIA. The workers' compensation insurer is stated to be FUBA. Petitioner Exhibit 9 was admitted solely to prove what Universal Drywall & Plastering sent to FUBA to confirm the existence of Mr. Gomez's workers' compensation coverage. The certificate is false because it confirms workers' compensation insurance as of a date that neither FUBA nor AIA contends is correct. However, the failure to obtain testimony from Mr. Gomez, the AIA employee who translated, or an employee of Universal Drywall & Plastering who could explain how he or she obtained a copy of the certificate precludes a determination that Respondent is in any way responsible for the production or transmission of this false certificate. The certificate suggests that the person responsible for its preparation may not have had Respondent's presumed level of familiarity with FUBA. The person preparing the false certificate used a policy number that is not of a type used by FUBA to identify the workers' compensation policies that it issues. The false certificate bears an expiration date of November 6, 2002. In fact, the actual coverage issued by FUBA ended on April 1, 2002, because all of its workers' compensation policies expire each year on April 1. It appears that Universal Drywall & Plastering presented the false certificate to FUBA on January 2, 2002, so, as of that date, Mr. Gomez had workers' compensation coverage from FUBA. The record also fails to disclose why Mr. Gomez might have desired an earlier effective date. The information might have facilitated a determination of who was responsible for the fraudulent preparation of the certificate. Petitioner has failed to prove the material allegations of Count I. On October 25, 2002, AIA issued an Evidence of Property Insurance to Meryl Levin, showing an effective date of October 25, 2002 for homeowners and flood insurance in the amount of $114,000. The document states that "United" would provide the homeowners insurance at $910 per year and flood insurance at $247 per year. On October 30, 2002, AIA received a check in the amount of $910 from Stephen J. Allocco, P.A., and AIA deposited that check into its noninterest-bearing bank account at Wachovia Bank. On November 8, 2002, United Property & Casualty Insurance Company (United) sent Mr. Levin a notice that he owed $810 for his insurance policy, which bore an effective date of November 8, 2002. The due date is "upon receipt." On January 14, 2003, United canceled the insurance because it never had received the $810. United received a check for $810 on February 26, 2003, but the accompanying package failed to contain a "no loss" statement, which would have assured United that the insured had not suffered a loss between the purported coverage date and the date of receipt of the premium check. Absent such an assurance, United routinely declines to provide coverage because it will not cover losses retroactively. United thus returned the check. Mr. Levin did not testify as to this transaction, nor did anyone from AIA except Respondent, who disclaimed any direct involvement with the matter. There is no evidence of any loss suffered by Mr. Levin, nor is there any evidence of any intentional wrongdoing by Respondent. The determination as to whether Respondent negligently failed to satisfy all applicable duties imposed on her is frustrated by Petitioner's failure to call an expert witness who could have explained office practices in insurance agencies and proved what is reasonable and unreasonable to expect of Respondent. The record does not establish that United sent a copy of its November 8 statement to AIA. Count II portrays a single case in which AIA failed to pay a premium to an insurer for over three months--nothing more. The determination of whether Respondent has demonstrated unfitness for this omission is impossible absent a basis for determining an appropriate minimum standard of agency office practice. Petitioner has failed to prove the material allegations of Count II. On October 9, 2002, Respondent sent a letter to Gerald Kirby bearing the letterhead of AIA stating that "we" have reviewed your homeowner needs and "determined the best possible rate for you." Showing homeowners coverage of $518,000, as well as associated coverages, the letter quotes a total policy premium of $3278. The letter warns that "this quotation is an estimate and is not legally binding." At the bottom of the letter is: "Thanks!!!Joanne." The record reveals no other persons employed at AIA named "Joanne" besides Respondent. On the same date, AIA produced an evidence of property insurance, which shows homeowners and flood insurance with the same effective date of October 11, 2002, in the respective amounts of $518,000 and $250,000, and bearing respective premiums of $3278 and $411 annually. On October 11, 2002, AIA received a check in the amount of $3278 from Capital Abstract & Title and deposited that check into its noninterest-bearing bank account at Wachovia. AIA was to use these funds to purchase homeowners insurance from United, with coverage of $518,000 and an effective date of November 11, 2002 (according to the parties' stipulation, which misstates the year as "2001"). However, the premium for $518,000 of coverage from United was $1890 at the time. The proper amount of premium due for $518,000 of coverage was mooted by the fact that AIA, like all of United's agents at the time, lacked authority to bind United to more than $300,000 coverage without specific approval from a United representative. Such approval required, among other things, documentation of the value of the insured property. AIA sent United a check for $1777, which United received on November 12, 2002. This check was the proper premium for $300,000 of coverage. At the same time, AIA sent paperwork for the issuance of coverage to $587,000, but failed to send the documentation that United required. Thus, United issued only $300,000 of coverage, and Mr. Kirby was due a refund of $1501, which is the difference between the premium that he paid and the cost of the insurance that he received. AIA paid Mr. Kirby $1501 on February 24, 2003. After AIA or a United marketing representative submitted the required documentation, United approved on February 19, 2003, the increase of coverage to $518,000. It is unclear who paid the additional premium--AIA or Mr. Kirby. For the same reasons discussed in Count II, Petitioner has failed to prove the material allegations of Count III. Although AIA's handling of the Kirby transaction was flawed, again, the acts and omissions are not so stark as to eliminate the necessity of expert testimony to establish the minimum standard, against which to measure Respondent's performance of her duties. Mr. Kirby appears to have suffered no loss, and there is no evidence of intentional wrongdoing. Even though, as to this transaction, Respondent clearly had some personal involvement, it is impossible to determine her degree of responsibility for the uneven handling of the insurance transaction and short delay in sending the refund to Mr. Kirby or even whether these two aspects of the transaction demonstrate unfitness to transact insurance business. The remaining counts involve refunds from Pro Premium Finance Company (Pro Premium) to AIA and refunds from AIA to its customers. Pro Premium provides financing to persons purchasing insurance. Several customers of AIA borrowed money from Pro Premium to pay for insurance they were buying through AIA. For various reasons--typically, the cancelation of coverage--Pro Premium refunded portions of the premium to AIA, which subsequently refunded the unearned portion of the commission to the customer. Every two weeks, Pro Premium sends AIA refunds and statements, which clearly identify the insured, date of cancelation, amount of refund, and amount due the insured. The time that elapsed from when AIA received the refunds from Pro Premium to when AIA sent the customers their share of the refunds ranged from two to twelve months. AIA received the refunds from Pro Premium between April 15, 2003, and February 15, 2004, and AIA sent its customers their shares of the refunds between April 5, 2004, and May 12, 2004. The customer refunds are concentrated in a relatively short period of time because AIA discovered all of the unrefunded monies during a self-audit that it conducted during this six-week period. AIA performed the self-audit due to an audit underway at Pro Premium. Except as noted below, Respondent was not personally involved in any of these refund transactions. At the time of all of the Pro Premium transactions described in this recommended order, the policy of AIA was for the customer service representative to write the client within one week of receiving the refund from Pro Premium and ask for directions whether to apply the refund to new or existing insurance or to pay it to the customer. The customer service representatives were supervised by the agency manager, not Respondent. It is unclear what AIA's policy was if the customer did not respond. When AIA paid refunds, its policy at the time was for the agency manager to prepare the refund check, which Respondent would sign. In May 2004, AIA changed its handling of refunds by directing all Pro Premium refunds directly to the bookkeeper, who expedites the preparation of the refund checks, which can now be signed by Respondent or one of two other employees. As to Count IV, on April 15, 2003, Pro Premium sent AIA a check in the amount of $1361.03, which AIA deposited on May 7, 2003, into its noninterest-bearing account at Wachovia. Part of these funds--$117.21--represented unearned commission, which was due the insured, Erikna Guzman. By letter sent within one week of obtaining the Pro Premium refund, AIA informed Ms. Guzman of the refund and asked her to instruct AIA as to whether to apply it to new insurance or send her a refund. Ms. Guzman did not respond. On May 10, 2004, AIA sent Ms. Guzman a check for $117.21. Twelve months elapsed from when AIA received the refund and when it sent Ms. Guzman the money due her. As to Count V, on May 31, 2003, Pro Premium sent AIA a check in the amount of $1538.36, which AIA deposited on June 10, 2003, into its noninterest-bearing account at Wachovia. Part of these funds--$43.83--represented unearned commission, which was due the insured, Shannon Campbell. By letter sent after obtaining the Pro Premium refund, AIA informed Ms. Campbell of the refund and asked her to instruct AIA as to whether to apply it to new insurance or send her a refund. Ms. Campbell did not respond. On April 17, 2004, AIA sent Ms. Campbell a check for $43.83. Ten and one-half months elapsed from when AIA received the refund and when it sent Ms. Campbell the money due her. As to Count VII, on an unspecified date, Pro Premium sent AIA a check in the amount of $720.38, which AIA deposited on July 8, 2003, into its noninterest-bearing account at Wachovia. Part of these funds--$347.35--represented unearned commission, which was due the insured, Marie Philippe. By letter sent within one week of obtaining the Pro Premium refund, AIA informed Ms. Philippe of the refund and asked her to instruct AIA as to whether to apply it to new insurance or send her a refund. Ms. Philippe did not respond. On April 5, 2004, AIA sent Ms. Philippe a check for $347.35. At least nine months elapsed from when AIA received the refund and when it sent Ms. Philippe the money due her. As to Count VIII, on June 30, 2003, Pro Premium sent AIA a check in the amount of $1729.80, which AIA deposited on July 8, 2003, into its noninterest-bearing account at Wachovia. Part of these funds--$380.40--represented unearned commission, which was due the insured, Fernando Garcia. By letter sent within one week of obtaining the Pro Premium refund, AIA informed Mr. Garcia of the refund and asked him to instruct AIA as to whether to apply it to new insurance or send her a refund. The first letter was returned by the postal service as undeliverable. Mr. Garcia had sold his house and moved. However, on April 7, 2004, AIA sent Mr. Garcia a check for $380.40. Nine months elapsed from when AIA received the refund and when it sent Mr. Garcia the money due him. As to Count IX, on August 31, 2003, Pro Premium sent AIA a check in the amount of $1552.84, which AIA deposited on September 9, 2003, into its noninterest-bearing account at Wachovia. Part of these funds--$102.07--represented unearned commission, which was due the insured, Girline Reid. By letter sent within one week of obtaining the Pro Premium refund, AIA informed Ms. Reid of the refund and asked her to instruct AIA as to whether to apply it to new insurance or send her a refund. Respondent testified that Ms. Reid instructed AIA to apply the refund to insurance issued to her husband, which AIA did. However, Respondent did not testify when AIA applied the refund to the account of Ms. Reid's husband. On May 7, 2004, AIA sent Ms. Reid a check for $102.07. Eight months elapsed from when AIA received the refund and when it sent Ms. Reid the money due her. As to Count X, on August 31, 2003, Pro Premium sent AIA a check in the amount of $1552.84, which AIA deposited on September 9, 2003, into its noninterest-bearing account at Wachovia. Part of these funds--$169.06--represented unearned commission, which was due the insured, Guillermo Diaz, who is a significant customer of AIA. Respondent spoke with him shortly after AIA received the refund, and he instructed her to apply the refund to other insurance issued to him. Again, Respondent did not testify when Mr. Diaz instructed her to apply the refund to other insurance, but, given his importance as a repeat customer, he probably spoke with her shortly after AIA received the refund. However, on April 17, 2004, AIA sent Mr. Diaz a check for $169.06, to which he may not have been entitled. Eight and one-half months elapsed from when AIA received the refund and when it sent Mr. Diaz the refund check. As to Count XI, on November 30, 2003, Pro Premium sent AIA a check in the amount of $4994.25, which AIA deposited on December 9, 2003, into its noninterest-bearing account at Wachovia. Part of these funds--$143.18--represented unearned commission, which was due the insured, Bernardo Archibald. By letter sent within one week of obtaining the Pro Premium refund, AIA informed Mr. Archibald of the refund and asked him to instruct AIA as to whether to apply it to new insurance or send her a refund. Respondent testified that Mr. Archibald directed AIA to keep the money to apply to insurance for which he owed additional premium because he had not yet obtained a four-point inspection (heating, wiring, roofing, and plumbing) of an older home, so as to be entitled to a reduced premium. However, Respondent did not testify when AIA received this direction from Mr. Archibald, although only five months elapsed from AIA's receipt of the refund from Pro Premium to its issuance, on May 7, 2004, of a check to Mr. Archibald for $143.18. As to Count XII, on an unspecified date, Pro Premium sent AIA a check in the amount of $3881.67, which AIA deposited on January 13, 2004, into its noninterest-bearing account at Wachovia. Part of these funds--$488.83--represented unearned commission, which was due the insured, Danette Piscopo. By letter sent within one week of obtaining the Pro Premium refund, AIA informed Ms. Piscopo of the refund and asked her to instruct AIA as to whether to apply it to new insurance or send her a refund. Respondent testified that AIA sent a refund check, but Ms. Piscopo never cashed it. However, Respondent did not testify when it sent the earlier check, although only about three months elapsed from AIA's receipt of the refund from Pro Premium to its issuance on April 15, 2004, of a check to Ms. Piscopo for $488.83. As to Count XIII, on December 31, 2003, Pro Premium sent AIA a check in the amount of $1988.58, which AIA deposited on January 13, 2004, into its noninterest-bearing account at Wachovia. Part of these funds--$294.60--represented unearned commission, which was due the insured, Allam Masief. Respondent testified that AIA mistakenly issued two policies to Mr. Masief for the same coverage from two insurers and mistakenly paid Pro Premium twice, even though Mr. Masief paid only one premium. Both policies were canceled. Mr. Masief asked AIA to reinstate one policy, but it was unable to do so. Respondent did not testify when these discussions with Mr. Masief took place, but only four and one-half months elapsed from AIA's receipt of the refund from Pro Premium and to its issuance, on May 12, 2004, of a check to Mr. Masief for $294.60. As to Count XIV, on January 31, 2004, Pro Premium sent AIA a check in the amount of $3260.03, which AIA deposited on February 10, 2004, into its noninterest-bearing account at Wachovia. Part of these funds--$886.74--represented unearned commission, which was due the insured, Geraldine DeStefanis. By letter sent within one week of obtaining the Pro Premium refund, AIA informed Ms. DeStefanis of the refund and asked her to instruct AIA as to whether to apply it to new insurance or send her a refund. Respondent testified that Ms. DeStefanis "probably" asked AIA to try to reinstate the canceled policy, but AIA was unable to do so. On May 7, 2004, AIA sent Ms. DeStefanis a check for $886.74. Three months elapsed from when AIA received the refund and when it sent Ms. DeStefanis the money due her. As to Count XV, on an unspecified date, Pro Premium sent AIA a check in the amount of $4750.53, which AIA deposited on March 9, 2004, into its noninterest-bearing account at Wachovia. Part of these funds--$343.38--represented unearned commission, which was due the insured, Leslie Ramrattan. By letter sent within one week of obtaining the Pro Premium refund, AIA informed Ms. Ramrattan of the refund and asked her to instruct AIA as to whether to apply it to new insurance or send her a refund. Respondent testified that Ms. Ramrattan asked AIA to try to reinstate the policy, but AIA was unable to do so. On May 7, 2004, AIA sent Ms. Ramrattan a check for $343.38. About two months elapsed from when AIA received the refund and when it sent Ms. Ramrattan the money due her. Petitioner has failed to prove the material allegations of Counts IV-V and VII-XV, with one exception each as to Counts VI, V, and VII. In general, there is no evidence of any intentional wrongdoing by anyone at AIA, nor is there evidence that Respondent should have known of the failure of her staff to promptly refund the monies due their insureds. In several of these transactions in which AIA held the customers' refunds for relatively long periods of time, the record demonstrates that this was in accordance with the customers' directions or otherwise justified. For the shorter periods-- five months or less--the record provides no basis for determining that Respondent should have known of this failure within this relatively short period of time. In several counts, AIA failed to meet its obligation, under Florida Administrative Code Rule 69O-196.010(2)(b), which is cited below, to refund or apply the unearned commissions within 15 days of receipt of the refund and statement from Pro Premium. These are Counts IV, V, VII, XIV, and XV. It is impossible to determine if AIA violated this rule in Count VIII, where the insured had moved; Counts IX-XI, where the insureds told AIA to apply the refunds to new or other insurance and presumably AIA did so, perhaps within the required 15 days; and Count XIII, where AIA appears to have paid for one policy out of its own funds and the insured may have received a windfall. As to Counts IV, V, VII, XIV, and XV, the question is whether Respondent is professionally responsible for the violations by AIA. These counts fall into two groups. In Counts IV, V, and VII, AIA wrongfully retained the refunds for long periods--12 months, 10 and one-half months, and at least nine months, respectively. In Counts XIV and XV, AIA wrongfully retained the refunds much shorter periods--less than three months and less than two months, respectively. Perhaps expert testimony could have established that Respondent should have detected, within a period of less than 90 days, the wrongfully retained funds, but, absent such testimony, an inference to this effect is impossible, especially when the standard is clear and convincing evidence. However, expert testimony is unnecessary to establish Respondent's professional responsibility for failing to detect this situation for 9-12 months. Given the long durations of time, the clarity of the Pro Premium's refund statements, the relatively small number of employees, Respondent's integral involvement in the daily operations of AIA as the only person authorized to sign checks, and the importance of restoring funds of customers to customers promptly, it is a reasonable inference that Respondent should have known that AIA staff had wrongfully failed to send these refunds to its customers for 9-12 months. Any suggestion by Respondent that the absence of a response from these customers justified retaining these moneys fails to account for the fact that AIA later sent the refund checks to the customers, even though they had still not contacted AIA, according to the record. Thus, for Counts IV, V, and VII, Petitioner has proved by clear and convincing evidence that Respondent has demonstrated her unfitness to transact insurance business.
Recommendation It is RECOMMENDED that the Department of Financial Services enter a final order dismissing Counts I-III and VIII-XV of the Administrative Complaint; finding Respondent guilty of three violations (Counts IV, V, and VII) of demonstrating unfitness to engage in the insurance business, in violation of Section 626.611(7), Florida Statutes; and suspending her insurance licenses for 30 days. DONE AND ENTERED this 15th day of November, 2006, in Tallahassee, Leon County, Florida. S ROBERT E. MEALE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of November, 2006. COPIES FURNISHED: Honorable Tom Gallagher Chief Financial Officer Department of Financial Sevices The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Carlos G. Muñiz, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307 Robert Alan Fox Department of Financial Services Division of Legal Services 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0333 Thompkins W. White White & Chang, P.A. 1650 Summit Lake Drive, Suite 1013 Tallahassee, Florida 32317
Findings Of Fact At all times material hereto Respondent was licensed as an Ordinary Life and General Lines Agent (Exhibit 1) and was the agent for Dixie Insurance Company at the Bartow office. As such, he had the authority to write policies binding the insurer. At all times relevant hereto, Respondent was president and principal stockholder of Friendly Insurance Companies of Bartow, Winter Haven, Lake Wales and Haines City. The corporate records (Exhibit 3 for Polk County) show this to be the same as Friendly Auto Insurance of Lake Wales, Inc. Respondent was the agent for Dixie Insurance Company only at the Bartow office. Dixie Insurance Company qualifies agents, not offices, to sell their policies. Respondent had no authority to act as agent for Dixie Insurance at any of these offices other than the Bartow office as the insurance company has but one agent per office. To support the allegations in count 34 of the Administrative Complaint, Edward Bland testified, and Exhibits 21 through 23 were admitted. Bland applied for automobile insurance at Friendly Auto Insurance at the Winter Haven office, which he paid for by check in the amount of $728 (Exhibit 23) as full payment for the one year premium. Subsequent thereto, a Premium Finance Agreement was prepared on which Bland's signature was forged showing $546 of the premium to be financed. This finance agreement was signed by T. R. Shaw as agent. Upon learning that the finance agreement had been issued on his coverage, Bland contacted the Winter Haven office manager, and after a few weeks of "run around" contacted the Department of Insurance and "got his money back." Bland never saw Shaw or Respondent. Rafael Gomez, M.D. purchased automobile insurance on his three cars from Friendly Auto Insurance of Winter Haven in December 1985 for which he paid $3452.71 for the annual premium. Subsequently thereto, he received a call from the Barnett Bank, which had financed one of the cars, to tell him that the bank needed evidence of insurance on the financed auto. Dr. Gomez contacted Ruth Kent, the office manager at the Winter Haven office, who assured him she would supply the bank with the necessary documentation. When the bank contacted Dr. Gomez later to again demand proof of insurance, Gomez went to the Winter Haven office and demanded to see his file. He made copies of certain documents which he took to the bank. Dr. Gomez subsequently learned that a finance agreement had been entered into on his behalf, but without his knowledge or consent, and that the address shown on the agreement under his name was that of Ruth Kent. Although when accosted by Dr. Gomez with this information, Ms. Kent denied such an intentional act, this would have allowed her to hold the finance coupons and get all information supplied by the finance company to the borrower without Dr. Gomez learning that the policy for which he had paid in full was subsequently financed. After learning of the subterfuge, Dr. Gomez contacted the Department of Insurance. Ruth Judd was office manager at the Friendly Insurance Agency of Haines City for a period of time ending in 1987 when she was terminated by Respondent. Ms. Judd contends she was only the office manager, and Respondent was the boss of the office and hired all employees. During the time she worked in the office, Ms. Judd testified several different people served as the licensed agent for the office, but they spent little time in the office with Donald Leroy Flentke, towards the end of his tenure, coming in only for his weekly paychecks. No evidence was presented from which a determination could be made that for a specific period of time any of the four offices were not being supervised by a licensed agent. Ms. Judd testified she was aware of one policy for which the insured had paid the premium in full being submitted for a premium finance agreement with forged documents. She also was aware that monthly financing payments were made by the Haines City office on some three or four other premium finance agreements. Ms. Judd testified on March 2, 1988, that she was presently unemployed. Respondent called one witness that testified and produced documentary evidence (Exhibits 24 through 26) that on March 2, 1988, this witness purchased insurance from Ms. Judd at New Horizons and was required to buy an accidental death policy in order to obtain PIP coverage. Exhibit 7 shows that an automobile insurance policy was issued to Jackie Bryan, the policy was sold through Friendly Insurance of Winter Haven, Inc., that the premium was financed, the borrower owed an additional $142.66 on the finance agreement, and the policy expired 2-26-86. Respondent acknowledged that his signature appears on the premium finance application. Some 5000 policies are sold by Respondent's agencies per year, and Respondent has no independent recollection of that finance agreement. Dixie Insurance Company issued a policy to Johnny Davis which was also financed through Envoy, but this application was signed by Shaw. Although Dixie Insurance Company had their own premium finance organization and, if the premium is financed, preferred to do the financing, Respondent testified that occasionally, if a client did not want to finance their premium through Dixie, the agency would go through another premium finance company such as Envoy. Exhibits 9, 10, 11 and 12 show premium finance agreements were contracted for on behalf of Raymond Scott, Mark Turner, Kathy Smith and Cathy Phillips, but no auto insurance policies were issued by Dixie Insurance Company to these individuals. Only one of these finance agreements (Exhibit 12) purports to be prepared at the Bartow office, and two of the drafts (Exhibits 9 and 12) purport to be signed by Respondent. Respondent testified he neither signed those drafts nor authorized someone else to sign for him. The forgery on both Exhibits 9 and 12 appear to have been perpetrated by the same person. Cathy Phillips, a friend of Ruth Kent, testified without contradiction that the signature purporting to be hers on Exhibit 12 was forged, that she never entered into a premium finance agreement with Envoy Finance Corporation, and that she had never seen Exhibit 14 until presented to her by the Petitioner's attorney. Ms. Phillips did receive a past-due notice on one occasion and called Ruth Kent who told her not to worry about it, that everything was taken care of. Subsequently, Ms. Phillips' husband wrote a letter to Envoy Finance Corporation denying any knowledge of any insurance policy written by Friendly Insurance of Bartow. Considerable testimony was submitted regarding the activities of Chuck Evans who was, at one time, employed by Respondent at the Winter Haven agency as a non-licensed employee with authority to write checks on the Trust Account. While the statements made by Evans to Department of Insurance officials contributed to the initiation of the investigation of Respondent's agencies, none of this testimony was relevant to the charges here at issue.
The Issue The issue is whether the Respondent, James Edward Hickerson, violated the provisions of Chapters 624, 626 and 627, Florida Statutes, by commission or omission of acts as alleged specifically in the Administrative Complaint. The entry of this order was ; delayed by late filing of the transcript and post hearing briefs, the filing time of which was extended by order dated May 19, 1983. Petitioner submitted post hearing proposed findings of fact in the form of a proposed recommended order. To the extent the proposed findings of fact have not been included in the factual findings in this order, they are specifically rejected as being irrelevant, not being based upon the most credible evidence, or not being a finding of fact.
Findings Of Fact General Findings At all times relative to the Administrative Complaint, the Respondent, James Edward Hickerson, was President of the Hickerson Insurance Agency, Inc., located in Winter Haven, Florida, and held licenses as a surplus lines-property casualty and surety surplus lines, ordinary-combination life (including disability insurance) , general lines-property, casualty, surety and miscellaneous, and disability insurance agent issued by the Insurance Commissioner. The Respondent sold Hickerson Insurance Agency, Inc. , to James Hurst, Jr., as of March 1, 1982. Pursuant to their contract for sale, the Respondent remained liable for all business written prior to March 1, 1982, and the conduct of the business affairs of said agency prior to that date. Count I On January 29, 1982, Patricia Ann Haller applied for a bond as a notary at Hickerson Insurance Agency, Inc.(hereinafter, the Hickerson Agency). Haller paid the Hickerson Agency a total of $61 for a notary seal and as premium on said bond. When Haller did not receive the bond and seal, she called the Hickerson Agency and was advised by a secretary that her application had been lost. She received a letter presumably forwarding a new application but which did not contain an enclosed application. When Haller again called the Hickerson Agency, she was advised to come to the agency and sign a new application. Haller went to the agency and signed a second application in February 1982. When she did not receive the bond and seal, after March 1, 1982, she recontacted the agency and at that time spoke with James Hurst, Jr., the new owner. A search of the office records by James Hurst, Jr. and the office staff revealed no record of the Haller transaction with the Hickerson Agency. The company to which application was made for the bond had no record of receiving the application for Haller's bond. Haller advised James Hurst, Jr., that she no longer wanted the bond. Haller never received the bond or a refund of the money she paid to the Hickerson Agency. Under the contract for purchase of the Hickerson Agency, the Respondent received all premiums and was responsible for all money collected on transactions prior to March 1, 1982. The Respondent was responsible for providing Haller's bond and her premiums. Counts II, III, IV, V and VI The Hickerson Agency billed Southern Mortgage Company of Florida, Inc., in the amount of $86 on December 14, 1981, for the renewal of fire insurance in behalf of Pearly Mae Williams. (See Petitioner's Exhibit 12.) The Hickerson Agency billed United Companies Financial Corporation in the amount of $193 on or before February 17, 1982, for the renewal of homeowner's insurance in behalf of Annie N. Bonney. (See Petitioner's Exhibit 15.) The Hickerson Agency billed United Companies Life Insurance Company in the amount of $9 on February 8, 1982, for homeowner's insurance in behalf of Charles or Della M. Byrd. (See Petitioner'S Exhibit 18.) The Hickerson Agency received a check in the amount of $85 from United Companies, Inc., on December 23, 1981, for the payment of fire insurance for Pearly M. Williams. (See Petitioner's Exhibit 13.) United Companies Financial Corporation paid the Hickerson Agency $193 on January 25, 1982, for fire insurance in behalf of Annie M. Bonney. (See Petitioner's Exhibit 16.) United Companies Financial Corporation paid the Hickerson Agency $9 on February 17, 1982, for fire insurance in behalf of Charles Edward Byrd. (See Petitioner's Exhibit 19.) Under the contract agreement between the Hickerson Agency and Independent Fire Insurance Company, the premiums on insurance placed with Independent Fire Insurance Company were due the 15th of the month following the effective date of the insurance coverage. (See Petitioner's Exhibit 11.) The insurance for Pearly Mae Williams was renewed on January 31, 1982. (See Petitioner's Exhibit 9.) The premium was due and owing and to be paid by the Hickerson Agency on February 15, 1982. Independent Fire Insurance Company renewed the fire insurance for Annie N. Bonney on February 17, 1982. (See Petitioner's Exhibit 14.) The premium was due and owing and to be paid by the Hickerson Agency on March 15, 1982. Independent Fire Insurance Company renewed the insurance of Charles or Della M. Byrd on February 22, 1982. (See Petitioner's Exhibit 17.) The premium was due and owing and to be paid by the Hickerson Agency on March 15, 1982. (See Petitioner's Exhibit 17.) Independent Fire Insurance Company renewed the insurance of Curtis Smith on January 26, 1982, and, pursuant to the Hickerson Agency's agreement with said company, the premium for this insurance was to be paid by the Hickerson Agency on February 15, 1952. (See Petitioner's Exhibit 20.) Independent Fire Insurance Company renewed the insurance of Edna T. Tipper on December 14, 1951, and, pursuant to the Hickerson Agency's agreement with said company, the premium for this insurance was due from the Hickerson Agency on January 15, 1952. (See Petitioner's Exhibit 21.) Regarding the insurance of Curtis Smith, there is no evidence that the Hickerson Agency received payment from the insured or the insured's mortgagee. Concerning Edna T. Tipper, there is no evidence that the Hickerson Agency received payment for said insurance from the insured or the insured's mortgagee. A statement of account similar to Petitioner's Exhibit numbered 22, the statement for February 1952, was provided to the Hickerson Agency each month. As of February 25, 1952, premiums were owed for the insurance in effect on Pearly Mae Williams, Edna T. Tipper, Curtis Smith, Charles Byrd and Annie N. Bonney by the Hickerson Agency. (See Petitioner's Exhibit 22.) On July 14, 1952, Independent Fire Insurance Company advised the Respondent at his home address by certified mail that his account with the company was in arrears in the amount of $531.30 and made demand for payment no later than August 3, 1952. (See Petitioner's Exhibit 22.) On July 19, 1952, the Respondent tendered payment to Independent Fire Insurance Company with his check numbered 2343 in the amount of $531.30. (See Petitioner's Exhibit 24.) A letter from Independent Fire Insurance Company reflects that said company has been paid the premiums due on Williams, Tipper, Smith, Byrd and Bonney. (See Petitioner's Exhibit 25.) The Respondent received payments from Williams (Count II), Bonney (Count III) and Byrd (Count IV) with which he was to pay the premiums due on insurance for them. The Respondent did not pay the premiums for these insureds when due, although he had received the money with which to do so. Count VII Jackie Ricks Colson first insured her 1979 Toyota with the Hickerson Agency in March 1979. In March 1980, she renewed the insurance on her car and added her husband's 1978 Pontiac Transam to the policy. In March 1981, having received notice that her automobile insurance required renewal, Mrs. Colson paid $260 as a down payment to the Hickerson Agency and executed a finance agreement to finance the remainder of the premium with Capital Premium Plan. By financing the premium, Capital Premium Plan paid the Hickerson Agency the premium, and Mrs. Colson made payments as required under the financing agreement to Capital Premium Plan. Mrs. Colson made the payments as required from March 1981 through December 31, 1981, at which time she had paid off all but $3.60 of the borrowed amount, which Capital Premium Plan charged off. Although requested many times to provide a copy of the policy by Mr. and Mrs. Colson, the Hickerson Agency did not do so. As a result thereof, the bank financing Mr. Colson's Transam insured that car and charged Mr. Colson for the insurance. The Colsons have never received a policy of insurance on their cars from the Hickerson Agency. The records of the Hickerson Agency do not reflect that any insurance was in effect between March 17, 1981, and September 1981 on the Toyota and November 1981 on the Transam. The Colsons' Toyota was insured on September 28, 1981, for a period of one year with Dixie Insurance Company for a premium charge of $495. (See Petitioner's Exhibit 28.) Their Pontiac Transam was added to said policy by endorsement effective November 27, 1981. (See Petitioner's Exhibit 29.) On September 30, 1981, Mrs. Colson was involved in an auto accident in the Toyota, which suffered major damage. Mrs. Colson was unable to get her car from the garage until December 1981, because the insurance company would not pay for the repairs. Mr. Colson also had difficulty with delay in payment for insured damages when the top of the Transam was damaged. The Respondent accepted a premium from Mrs. Colson but did not provide automobile insurance as requested between March 17, 1981, and September 28, 1981, on the Toyota and November 27, 1981, on the Transam. The Respondent did not provide the Colsons with copies of their policies after repeated requests. Count VIII The records of Capital Premium Plan (Petitioner's Exhibit 33) reflect the Respondent owed Capital Premium Plan $1,306.01 as the result of cancelled policies which required the Respondent to return unearned premium amounts to Capital Premium Plan. A statement for these accounts was presented in June 1982. The record reflects that in late 1982 the Respondent paid $356.01 of the money originally owed. At the date of hearing, the Respondent owed Capital Premium Plan $950 in unearned premiums. The Respondent raised no valid defense to the claim by Capital Premium Plan. Count IX Pursuant to his agreement with Underwriters Insurance Company, the Respondent was required to pay said company premiums for policies sold issued by the company. (See Petitioner's Exhibit 34.) As of September 1981, the Respondent's accounts with Underwriters Insurance Company were not current. The company's representative called upon the Respondent and made demand for the money owed by the Respondent to the company. The Respondent gave the company's representative a check in full payment of the amount then due. This check was dishonored by the bank upon its presentation due to insufficient funds. As a result thereof, Underwriters Insurance Company cancelled its underwriting agreement with the Respondent. The Respondent owed Underwriters Insurance Company approximately $6,000 as of the date of the hearing. The Respondent asserted no reasonable defense to the company's claims. Count X On February 16, 1979, automobile and health insurance was purchased for Grecian Pool Service by Frank Weller, the company's president. Neither Grecian nor Weller received a copy of the insurance policies from the Hickerson Agency. One of Grecian's vehicles was involved in an accident. Michigan Mutual, the insurer of the other vehicle, attempted to collect $228 for damages it had paid but which were the responsibility of Grecian's insurer. Michigan Mutual contacted the Hickerson Agency many times in an effort to obtain payment from Grecian's insurer but was unsuccessful. Michigan Mutual contacted the Department of Insurance, and an agent of the Department contacted the Respondent, who stated that a check had been sent to Michigan Mutual. The Department's agent contacted Michigan Mutual, which denied receipt of the check. The Department's agent then asked the Respondent to provide the Department with a copy of the front and back of the cancelled check. In response, an employee of the Hickerson Agency advised the Department's agent that it had no information concerning the accident and requested the Department to provide more information in order that it could respond to the Department's request. The Respondent failed to provide a timely response to Michigan Mutual of claim information as requested. The Respondent failed to provide the Department with records and information upon request. The Respondent failed to provide the insured with a copy of the insurance policy. Count XI and XIII W. F. Jones and James Earl Jones, who are brothers, both tendered premiums to the Hickerson Agency for the purchase of insurance on tractor- trailer trucks which they respectively owned. The daughter of W. F. Jones paid the Hickerson Agency $2,678 in September 1981 for insurance on two trucks owned by W. F. Jones. This payment was made in four checks each for $669.50 to be negotiated one each week for four weeks commencing on September 2, 1981. (See Petitioner's Exhibit 52.) On September 4, 1981, Shelley, Middlebrooks and O'Leary (hereinafter, SMO), general agent for Carolina Casualty, issued a binder on insurance for W. F. Jones. The quoted down payment for this policy was $2,678, and the premium on the ten-day binder issued by SMO was $928. The Hickerson Agency remitted to SMO the amount of $557.95. This was $267.25 less than the required binder premium. SMO immediately notified the Hickerson Agency that additional money was due. When the money was not forthcoming, SMO sent the Hickerson Agency a 14-day notice of cancellation. This extended the coverage of the binder until October 6, 1981. The Hickerson Agency did not forward any additional amount, and the insurance was cancelled on October 6, 1981. The amount received from the Hickerson Agency was less than the earned premium for the coverage from September 4, 1981, until October 6, 1981. In November 1981, the Hickerson Agency sent SMO a check for $257.25, the amount left owing on the earned premium. In February 1982, after many requests by W. F. Jones and his wife for the insurance policy and inquiries from them to the Hickerson Agency about their monthly payments, Jones received notice from the company financing his trucks that the trucks were not insured by the Hickerson Agency as he had thought. W. F. Jones checked with the Hickerson Agency, which was unable to produce a policy of insurance or other evidence of insurance. W. F. Jones demanded his money back, and the Respondent wrote Jones a check for the money that Jones had paid. When Mrs. W. F. Jones took the Respondent's check for deposit, her bank advised her after checking with Respondent's bank that there were insufficient funds in Respondent's account to cover the check. Because W. F. Jones had left on a trip, Mrs. Jones took the check to the Hickerson Agency and requested insurance. On February 5, 1982, Huffman and Associates bound coverage on W. F. Jones's two trucks with Canal Insurance Company. Huffman and Associates received $2,345 with a balance of $6,097, which was financed through a premium finance company. The Canal Insurance Company policy number for W. F. Jones was AC29 67 99. No evidence was presented that the two trucks belonging to W. F. Jones were insured between October 6, 1981, and February 5, 1982, although the Hickerson Agency had received payment for the down payment in the amount of $2,678. James Earl Jones applied for insurance on his truck with the Hickerson Agency on or about July 29, 1981. Mrs. James Earl Jones wrote three checks to the Hickerson Agency on said date to be negotiated as indicated: July 29, 1981- -$500 for immediate negotiation; $474--hold until August 5, 1981; $474--hold until August 19, 1981. The balance of the premium was financed with Capital Premium Plan with a monthly payment of $305.45. Monthly payments were made by James Earl Jones to the Respondent or to Capital Premium Plan until April 5, 1982. At that time, Capital Premium Plan cancelled the insurance due to late payments by the insured. When notified of the cancellation of the insurance by Capital Premium Plan, Mrs. James Earl Jones contacted Canal Insurance Company in care of New South Underwriters, which was listed as the insurer by Capital Premium Plan. Mrs. Jones was advised by New South Underwriters that they had no record of insurance on the Jones's truck with Canal Insurance Company. Mrs. James Earl Jones called the Hickerson Agency and asked for the policy number on the truck. The Respondent called Mrs. Jones and gave the policy number for the insurance on the truck as AC29 67 99, the policy number of W. F. Jones. (See paragraph 38 above.) When Mrs. James Earl Jones rechecked, she found that the policy was that of W. F. Jones, whereupon she called James Earl Jones, who went directly to the Hickerson Agency and spoke with the Respondent. James Earl Jones demanded of the Respondent some proof of insurance. The Respondent gave him a copy of the first page of W. F. Jones's policy. When James Earl Jones pointed out the error and demanded proof of his insured status, the Respondent wrote him a check for $2,990.50, a refund of the down payment and payments which James Earl Jones had made to Capital Premium Plan through that date. The records of Canal Insurance Company do not reflect insurance issued to James Earl Jones between July 1981 and March 1982. James Earl Jones was insured by Canal Insurance Company in April 1982 through an agency in Tampa not related in any way to the transaction with the Respondent. The records of Capital Premium Plan reflect that money was borrowed for insurance to be placed with Canal Insurance Company through New South Underwriters. Capital Premium Plan made money available to the Respondent for the premiums as indicated. The Hickerson Agency did not have records or produce records indicating that James Earl Jones was insured by the Hickerson Agency between July 1981 and March 1982, when the Respondent refunded Jones's premiums. Count XII In September 1981, Hugh Shaw of Ridge Printing purchased workmen's compensation insurance from the Respondent and paid for said insurance with two checks, each for $426.50. Shaw was contacted in May 1982 by officials of the Department of Commerce and advised that he had no workmen's compensation insurance. Shaw referred the officials to the Respondent. Shaw never received a policy of insurance from the Respondent for insurance purchased in September 1981. A search of the records of Mr. Hurst's agency revealed no insurance placed by the agency for Shaw. No evidence was introduced by the Respondent that Shaw was insured against workmen's compensation loss. No evidence was received that any portion of the premiums paid by Shaw were returned to him. Count IV (In addition to this count, many of the other counts in this Administrative Complaint allege that records related to various insureds were not present at the Hickerson Agency, and that the Respondent failed to maintain records as required by law. The findings made relative to this count are applicable to similar allegations contained throughout the Administrative Complaint and constitute the findings of fact relative to those allegations.) The Respondent sold his insurance agency to James Hurst, Jr., effective March 1, 1982. Testimony was received that some of the records alleged to have been missing later were present prior to that date. Evidence was received that many records were not present at the agency after that date. No evidence was received that the Respondent was responsible for removal of the records. Pursuant to their contract, James Hurst, Jr., was responsible for the office after March 1, 1982, and the Respondent is not vicariously liable for missing records after that date. No evidence was presented as to any specific record at issue in these charges that was discovered to be missing prior to March 1, 1982. Count XV On October 2, 1981, Harold Scott purchased insurance on a camper from the Respondent. On that date, Scott gave the Respondent a check for $123 and signed a premium financing agreement for the balance of $287. Scott never received a copy of the insurance policy. No evidence was introduced by the Respondent that Scott was insured. In September 1982, the Respondent paid to Scott the down payment and other money that Scott. had paid on his insurance. Count XVI On April 7, 1981, Joseph Simmons purchased workmen's compensation coverage and a bond from the Respondent. Simmons paid $798 as a down payment and executed a premium financing agreement with Sesco Premium Plan. Simmons never received a copy of the policy or a payment book. Sesco Premium Plan never financed an insurance policy for Joseph Simmons of Winter Haven, Florida. (See Petitioner's Exhibit 64.) No evidence was introduced by the Respondent that Simmons was insured against workmen's compensation claims after April 7, 1981. The Respondent accepted a premium for insurance from Simmons and did not provide the requested coverage.
Recommendation While violations of Section 626.621, Florida Statutes, permit the Department discretion in disciplining a licensee, violations by the Respondent of Section 626.611, Florida Statutes, as found above, mandate that the Department must discipline him. Considering the number and the severity of the violations, it is recommended that the Department of Insurance and Treasurer revoke each and every license held by the Respondent, James Edward Hickerson. DONE and RECOMMENDED this 17th day of June, 1983, in Tallahassee, Leon County, Florida. STEPHEN F. DEAN, 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 17th day of June, 1983. COPIES FURNISHED: Curtis A. Billingsley, Esquire Department of Insurance Larson Building Tallahassee, Florida 32301 Douglas H. Smith, Esquire Post Office Box 1145 Lake Alfred, Florida 33850 Marvin B. Wood, Esquire 2600 Industrial Park Drive Lakeland, Florida 33801 Tom Pobjecky State Attorney's Office Post Office Box 1309 Bartow, Florida 33838 The Honorable William Gunter State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32301 =================================================================
The Issue The issue presented is whether Respondent, a licensed insurance agent, is guilty of violating the statutes regulating the conduct of an insurance agent, and if so, what disciplinary action should be taken against him, if any.
Findings Of Fact At all times material hereto, Respondent has been eligible for licensure and licensed as a life and health insurance agent and as a dental health care contract salesman. For many years, Respondent had also been licensed to solicit general lines -- property, casualty, surety, and miscellaneous lines -- insurance in this state. Respondent was unaware that this license expired on March 24, 1987. At all times material hereto, Respondent was, however, eligible for licensure as a general lines agent. At all times material hereto, Respondent was one of the officers of Johnson's Model City Insurance Agency #1, Inc., a Florida corporation. That corporation was involuntarily dissolved on November 4, 1988. On December 30, 1986, Respondent telephoned Petitioner to discuss the propriety of an insurance agent charging a consulting fee. Following that telephonic conversation, an attorney for Petitioner directed correspondence to Respondent confirming that telephone conversation, advising that a consulting fee could legally be charged under certain circumstances. Those circumstances included the use of a separate consulting contract between the agent and the insured so that the insured would fully understand that he or she was entering into a separate contract and paying a separate consideration in advance of the performance of consulting services. Additionally, the services rendered must be other than those normally provided by an insurance agent. Further, if a separate consulting contract were effectuated, an agent could set up a separate consulting corporation to enter into such contracts. Hartford Insurance Company sells automobile insurance in the State of Florida by use of a toll-free telephone number. People who know the telephone number can call Hartford directly, obtain a quote for automobile insurance, and purchase a policy directly from Hartford. Hartford has no insurance agents in the State of Florida and pays no commissions to insurance agents in Florida for the obtaining of automobile insurance customers. A person can obtain a quote in writing from the Hartford in advance of purchasing a policy. Sometimes, the quotation card and the policy are issued and mailed simultaneously by Hartford to its new insureds. On September 20, 1987, Patricia Moss telephoned J. M. C. Insurance Consultants pursuant to an ad in the telephone yellow pages. She inquired about obtaining automobile insurance to replace her current policy which would expire on September 22, 1987. She spoke with an employee named Betty who advised her that she could obtain replacement insurance at a cost of $927. Since the cost quoted to her was substantially lower than the prices she had been quoted by the other agencies she had consulted, Moss went to the offices of J. M. C. on September 21, 1987. Betty presented Moss with a number of documents to sign. She signed a Power of Attorney appointing Johnson's Model City Insurance, Inc., doing business as JMC Insurance Consultants as her attorney-in-fact to obtain insurance for her, specifically ratifying and confirming actions taken on her behalf by J. L. Johnson- consultant. She also executed an Agreement with Consultant specifying the services that JMC Insurance Consultants would perform on her behalf. She signed a further statement which provided that: "I understand that JMC Insurance is acting as Consultants for my insurance placement and is entitled to any and all consultation fees." She also signed a document written in boldfaced type which states: IMPORTANT NOTICE THIS LETTER IS TO INFORM YOU THAT JMC INSURANCE CONSULTANTS ARE NOT AGENTS NOR DO WE REPRESENT HARTFORD INSURANCE COMPANY IN ANY WAY WHATSOEVER. WE REPRESENT "YOU" THE CLIENT AND WE ACT IN YOUR BEHALF WITH THE RIGHT THAT YOU GIVE US THROUGH A POWER OF ATTORNEY. WE ENDEAVOR TO PLACE YOUR AUTO INSURANCE FOR YOU ON YOUR BEHALF. WE ARE YOUR CONSULTANT. IF YOU HAVE A PROBLEM PLEASE CALL US WE ARE HERE TO HELP AND ACT IN YOUR BEHALF. CALL US FIRST. LET US HANDLE IT. CLIENT. I HAVE READ AND I UNDERSTAND. Moss gave JMC Consultants a check in the amount of $262.50 for which she was given a receipt which carried the specific notation that the money she had paid was for an insurance consultant's fee. She was also given a small card entitled Insurance Identification Card on which Betty filled in information showing that she would be insured by Hartford effective on the following day and specifically describing the coverage provided, the automobile insured, and the name and address of Moss. Within a week she received directly from the Hartford an insurance policy for the benefits which she sought. The policy itself reflected that the premium for the policy was $632 and that she would be receiving a bill from Hartford for that amount. She telephoned Betty, demanding a refund of her $262.50, which demand was refused. Betty explained to her that the amount was for the consultant's fee for obtaining the low- cost coverage for Moss. Hartford's direct marketing program does allow people to purchase insurance on someone else's behalf utilizing a Power of Attorney. Although Hartford's records do not reflect a Power of Attorney from Moss to J. M. C. Consultants or Respondent, Hartford's records regarding their policyholder Moss are not accurate. For example, they erroneously reflect that they quoted a rate to Moss on September 15, a week before they received any contact on her behalf. Although Moss testified that Betty told her the $262.50 was the down payment on her insurance premium, her testimony is not credible in view of the numerous documents that she signed stating that she fully understood that Respondent was not an agent for Hartford, that Respondent would be acting on her behalf pursuant to the Power of Attorney and Consultant's Agreement which she had signed, and the other documents reflecting that the $262.50 was a consultant's fee which she was paying to Respondent to act on her behalf. Her testimony that she did not understand is refuted by the documents she signed saying that she did. There is no allegation that Moss, a retired registered nurse, was unable to read. Rather, it is concluded that Moss voluntarily chose to pay the Hartford premium plus Respondent's consulting fee since the total price for the two charges was still substantially less than she could have obtained insurance for from other sources. Allstate Insurance Company is an insurer which sells insurance policies through their agents in the State of Florida. It also has a division which participates in Florida's Joint Underwriting Association (hereinafter "FJUA"), a program through which high-risk drivers who cannot obtain insurance in the regular voluntary insurance market can obtain automobile insurance. Prior to the time that his general lines agent license expired, Respondent participated in that program and was assigned to write insurance for Allstate for policyholders participating in the program. The Producers Contract entered into between Respondent and the FJUA, which assigned him to Allstate Insurance Company, provided that it would automatically terminate if an agent's general lines license expired. On July 22, 1988, James Tillie came to the office of J. M. C. to procure automobile insurance for the van that he used in his business. After meeting with Respondent, Tillie gave Respondent a check in the amount of $204 as a down payment on an automobile insurance policy. The check was endorsed and deposited into the business bank account of J. M. C. Respondent gave James Tillie an automobile insurance binder which reflected that his insurance policy was to be issued through Allstate Insurance Company. Under the terms of Respondent's contract with the FJUA, Respondent was required to submit James Tillie's application and premium to Allstate within 24 hours. The FJUA application acts as a binder. Once the application is completed and the premium is paid to the agent, the insured has automatic coverage for 30 days during which time the carrier, Allstate in this case, can act on the application. There is no evidence as to when Respondent forwarded James Tillie's application to Allstate; however, Allstate has no record of ever receiving the application. Respondent did tell James Tillie that within a couple of months he would receive from Allstate his policy and instructions for payment of the balance of his premium. After a month or two had elapsed, James Tillie became concerned since he had not yet received his insurance policy. He contacted Respondent who assured him that he did have insurance coverage. Shortly thereafter, James Tillie received in the mail from Respondent a card entitled Insurance Identification Card. On that card information had been filled in showing a policy number, the effective date, the insurance company as Allstate Insurance Company, a description of the insured vehicle, and the name and address of James Tillie. This is not an official Allstate identification card, and no one purported it to be such. An official Allstate Insurance card is issued by Allstate as part of the policy issued by it. On September 23, 1988, Sina Tillie, James' mother, visited J. M. C. for the purpose of purchasing automobile insurance for her new automobile. Sina Tillie is an elderly person who had never before owned an automobile or possessed a driver's license. She wished to purchase insurance on a brand- new automobile. Sina Tillie gave Respondent $1,828 in cash as full payment of the policy's annual premium. Respondent gave her an insurance binder which reflected that her insurance was placed with Allstate. Allstate has no record of receiving Sina Tillie's application and premium from Respondent. Subsequently, Sina Tillie became concerned when she had not yet received her insurance policy. She asked her daughter to contact Respondent. Respondent advised her daughter not to worry. He then mailed to Sina Tillie an Insurance Identification Card similar to the one which he had provided to James Tillie reflecting James' coverage. He also telephoned Sina Tillie to assure her that if anything happened, all she would need to do would be to show the card saying that she was covered and to contact him. Since neither he nor his mother had received a policy from Allstate, James Tillie called Allstate. He did not know that there were, in effect, two Allstates. The Allstate office which he contacted was a regular Allstate office which markets insurance to customers who call or come in, and not an office affiliated with the FJUA program. The person with whom he spoke told him that neither he nor his mother were insured by Allstate and that the policy numbers reflected on the Insurance Identification Cards given by Respondent to James and his mother were not Allstate policy numbers, but rather were binder numbers. James Tillie then contacted Respondent who consistently maintained that both James and Sina were insured. Respondent contacted Allstate regarding James' and Sina's policies. James Tillie came to the office of J. M. C. and met with Respondent. He advised Respondent that he and his mother had obtained insurance elsewhere and requested refunds of the premiums that he and his mother had paid. Respondent told Tillie that he could not refund the premiums since both James and his mother were insured in exchange for those premiums. Respondent eventually told James Tillie that he would refund the premiums if the Tillies would sign releases. James Tillie maintained that he would sign releases only after he had received the refund of the premiums. The meeting ended in stalemate. James Tillie contacted Petitioner, and Petitioner contacted Respondent. Respondent maintained that he would refund the premiums in exchange for a release. Petitioner forwarded a copy of Respondent's letter to James Tillie. Respondent eventually made arrangements with James and his mother to refund the premiums in monthly payments since he did not have the money to refund the premiums in full. By the time of the final hearing in this cause, Respondent had only refunded the total amount of $600 to the Tillies. At the time that Respondent's general lines agent license with Integrity Insurance Company was cancelled on March 24, 1987, he believed that he was being re-licensed by Fortune Insurance Company. However, he never received a license for or from Fortune and never checked to ascertain why.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered finding Respondent guilty of statutory violations as set forth in this Recommended Order and suspending Respondent's licensure and eligibility for licensure for a period of 60 days from the date of the Final Order entered in this cause. DONE and ENTERED this 13th day of June, 1990, at Tallahassee, Florida. LINDA M. RIGOT, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 13th day of June, 1990. APPENDIX TO RECOMMENDED ORDER Petitioner's proposed findings of fact numbered 1-3, 7-9, 14-19, 21-26, and 28-32 have been adopted either verbatim or in substance in this Recommended Order. Petitioner's proposed findings of fact numbered 4-6, 10, 11, 13, 20, and 27 have been rejected as not being supported by the weight of the credible evidence in this cause. Petitioner's proposed finding of fact number 12 has been rejected as being unnecessary for determination of the issues in this cause. COPIES FURNISHED: James A. Bossart, Esquire Department of Insurance and Treasurer Division of Legal Services 412 Larson Building Tallahassee, Florida 32399-0300 Johnny L. Johnson 17120 Northwest 27th Avenue Opa Locka, Florida 33056 Honorable Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Don Dowdell, General Counsel Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, Florida 32399-0300 =================================================================
The Issue The issues are whether Respondent is guilty of any violations of the Insurance Code, including Chapter 626, Florida Statutes, and, if so, what penalty should be imposed.
Findings Of Fact At all material times, Respondent has been licensed as a general lines insurance agent, holding license number A129688. At all material times, Respondent has been the sole owner and director of America Security Insurance Agency, Inc., formerly known as America Auto Security Insurance Agency, Inc. (America Security). On April 1, 2000, Dionne Jacques purchased a motor vehicle from Sawgrass Ford in Fort Lauderdale. She did not own a vehicle at the time and testified that she purchased a model that was selected for her by someone at the dealership. In closing on the purchase, Ms. Jacques dealt extensively with a dealer employee named Herbert McKenzie. Ms. Jacques financed the motor vehicle purchase with Ford Credit. In the course of completing the required paperwork at the dealership, Mr. McKenzie referred Ms. Jacques to American Security for motor vehicle insurance. Mr. McKenzie mentioned that he dealt with someone named "AJ" at the insurance agency. According to Ms. Jacques, Mr. McKenzie informed Ms. Jacques that one year's insurance would cost $468 or $468.99. Mr. McKenzie did not testify, but Respondent testified that he spoke with Ms. Jacques on the telephone and explained the relevant features of the policies that were available to her. Although it is unclear who quoted the premium to Ms. Jacques, Petitioner has failed to prove by clear and convincing evidence that Mr. McKenzie did so. Ms. Jacques agreed to purchase the insurance and produced a credit card for the amount due. The testimony of Ms. Jacques suggests that she allowed Mr. McKenzie to charge her credit card for the insurance premium. However, the more definitive testimony of Respondent, which is credited, is that he took her credit card information over the telephone and arranged for the card debit. In return, according to Ms. Jacques, Mr. McKenzie gave her a document that she believed would document her coverage until she received an insurance policy in the mail in about 30 days. It is impossible to determine on this record that Mr. McKenzie attempted to bind coverage on behalf of the insurer. At no time prior to the purchase of the insurance did Respondent, Mr. McKenzie, or anyone else disclose to Ms. Jacques that she was purchasing other ancillary products besides insurance. Likewise, no one informed her that she was financing part of the annual insurance premium. For unclear reasons, Respondent did not obtain insurance coverage for Ms. Jacques until May 2000. At that time, he took the $468 that she had charged and, without her knowledge, applied only $143 of this sum toward the policy premium. Without Ms. Jacques' knowledge, Respondent, or someone at his direction, signed Ms. Jacques' name to a premium finance agreement, evidencing an unpaid premium balance of $504. At the same time, also without Ms. Jacques' knowledge, Respondent used $300 of the initial $468 that Ms. Jacques paid to purchase ancillary coverage that she had not agreed to purchase. This ancillary coverage included towing, supplemental medical coverage, replacement rental car, and emergency cash. These coverages supplemented a $647 personal injury protection policy containing no personal liability or uninsured motorist coverage. At no time has American Security designated a primary agent. By Immediate Final Order entered March 12, 1991, the Florida Department of Insurance, now known as Petitioner, ordered Respondent to cease and desist from the unlicensed sale of insurance. However, Respondent has made substantial restitution to Ms. Jacques, who suffered no significant financial injury as a result of Respondent's misdealings.
Recommendation It is RECOMMENDED that the Department of Financial Services enter a final order suspending Respondent's license for one year. DONE AND ENTERED this 18th day of November, 2004, in Tallahassee, Leon County, Florida. S ROBERT E. MEALE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 18th day of November, 2004. COPIES FURNISHED: Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Pete Dunbar, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Gregg S. Marr Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0333 Charles P. Randall Charles P. Randall, P.A. Bank of America Tower, Suite 500 150 East Palmetto Park Road Boca Raton, Florida 33432-4832
