The Issue The issue in this case is whether the Respondent, William Robert Pearson, should be disciplined for alleged statutory and rule violations for his role in several insurance transactions.
Findings Of Fact The Respondent is licensed in Florida as a life including variable annuity agent (2-14), life including variable annuity and health agent (2-15), life agent (2-16), life and health agent (2-18), and health agent (2-40), regulated by the DFS's Division of Insurance Agent and Agency Services. He was so licensed at all times pertinent to this case. He was first licensed in 1988 and has been disciplined once, in September 2002, when he was given a Letter of Guidance for misrepresenting to a Pinellas Park resident that an annuity he sold her would generate interest in excess of 6.8 percent, when the guaranteed rate was three percent for the first year. During the transactions alleged in the Amended Administrative Complaint, the Respondent also was registered with OFR's Division of Securities as a Financial Industry Regulatory Authority (FINRA) broker representative associated with Transamerica Financial Advisors, Inc. (Transamerica). On August 21, 2012, based on some of the same facts alleged in this case, OFR charged the Respondent with failing to observe high standards of commercial honor and just and equitable principles of trade because he: participated in the liquidation of variable and fixed annuities on behalf of several elderly customers referred by insurance agents not licensed as FINRA broker representatives; executed the liquidations recommended to the customers by insurance agent Richard Carter; failed to appropriately record the transactions on the books and records of Transamerica; failed to review the transactions, or have them reviewed by Transamerica, as to suitability; and provided Agent Carter with blank Transamerica letterhead to be used to facilitate the transactions. A Stipulation and Consent Agreement was entered on December 18, 2012, in which the Respondent admitted the OFR charges and agreed to never seek a license or registration as a dealer, investment advisor, or associated person under the Florida Securities and Investor Protection Act, chapter 517, Florida Statutes. A Final Order incorporating the settlement agreement was entered on January 11, 2013. (This Final Order is the basis for Count IX, which was added to the charges in this case, as well as for one of the Respondent's affirmative defenses.) Count I-–Geraldine Busing Geraldine Busing was born on December 1, 1930. She has a high school education. Her husband of 44 years died in 2001. When alive, he handled the family finances. Mrs. Busing's income is from a pension of $728 a month and social security payments of $1,090 a month. In addition, she had substantial investments in two Schwab accounts. During the market decline of 2007-2008, Mrs. Busing became dissatisfied with the performance of her Schwab accounts. An insurance agent named Richard Carter recommended that she invest in annuities, which would reduce her taxes. (In her deposition, testimony was elicited from Mrs. Busing that Agent Carter told her that the Respondent would do her taxes for free for the rest of her life. It is not likely that he made such a representation, and there is no evidence that the Respondent knew about such a representation.) Mrs. Busing followed Agent Carter's recommendation. Agent Carter did not have a FINRA license and approached the Respondent, who worked for Transamerica, to facilitate the liquidation of Mrs. Busing's Schwab accounts, so she could follow Agent Carter's recommendations. The Respondent agreed. The Petitioner alleged that the Respondent provided blank Transamerica forms to Agent Carter and that Agent Carter "shuffled" the forms together with an EquiTrust Life Insurance Company (EquiTrust) annuity application and suitability forms and requested Mrs. Busing's signatures (although, it is alleged, one or more of the signatures on the Transamerica forms were not hers.) It is alleged that, unbeknownst to Mrs. Busing, Agent Carter gave the Respondent these forms, as well as a copy of her Schwab account statements, so he could liquidate her accounts, which totaled $627,000 at the time, "dump" the proceeds into a Transamerica account, and then "funnel" the liquidated assets into two EquiTrust annuities. It is alleged that Mrs. Busing became aware of these transactions in September 2010 after discussions with her accountant. Mrs. Busing testified that she has never met the Respondent and does not know him. She testified that she gave all of her Schwab account information to Agent Carter and did not expect him to share it with the Respondent. She testified that Agent Carter had her hurriedly sign a stack of papers without giving her a chance to review them. She said she was surprised when her stock broker, Barry Tallman, called to tell her that her Schwab accounts had been liquidated and used to open a Transamerica account. She denied ever receiving or signing the Schwab bank check dated July 7, 2010, used to open the Transamerica accounts; denied ever providing the Respondent and Transamerica with information for her customer account information (CAI) form used to open the Transamerica accounts; and denied that several of the Geraldine Busing signatures on the Transamerica documents used for the transactions were her signatures. She admitted to signing a Transamerica check dated August 13, 2010, which was used to purchase the EquiTrust policies. The Respondent testified that he telephoned Mrs. Busing at Agent Carter's request. He testified that she told him she wanted to implement Agent Carter's recommendation to liquidate the Schwab accounts and purchase annuities. He testified that he told her his services were not required because her current broker (Mr. Tallman) could handle it for her, unless she just wanted to avoid confronting her current broker. He said she wanted the Respondent to handle it, and he replied essentially that he would do whatever she and Agent Carter wanted him to do for her. The Respondent testified that he then mailed Mrs. Busing forms she had to fill out, sign, and return to him. He testified that he talked to her briefly by telephone about 15 to 20 times to answer questions she had about the forms. When she told him she received a Schwab check in the amount of about $150,000 and asked if she should mail it to him, he cautioned her that it would be better not to mail it and offered to drive to her house to get the check, which he did and returned immediately to Transamerica to open a Transamerica account with it. He testified that the Transamerica funds were used to purchase EquiTrust annuities at the direction of Agent Carter and Mrs. Busing. The evidence was not clear and convincing that Mrs. Busing's version of the facts is true and that the Respondent's version is untrue. To the contrary, Mrs. Busing's memory did not seem to be very good, and she seemed confused during her testimony. The evidence was not clear and convincing that the Respondent made any investment or insurance recommendations or misrepresentations to Mrs. Busing. The Petitioner's own witnesses (DFS and OFR investigators, Karen Ortega and Mercedes Bujans) testified that the Respondent never acted as Mrs. Busing's insurance agent. It was not proven by clear and convincing evidence that Mrs. Busing incurred tax and commission charges as a result of her Schwab account being liquidated, other than Transamerica's standard "ticket charge" for the transactions, which the Respondent admitted. There was no evidence that the Respondent received any remuneration on the EquiTrust annuity sales. Those commissions went to Agent Carter. The Petitioner contended in its proposed recommended order that the Respondent listed Mrs. Busing's annual income to be between $25,000 and $50,000, her investment objective as growth and income, and her investment time horizon as long-term. (Busing Deposition Exhibit 87). There was no testimony to put the exhibit in context or explain it. On its face, Busing deposition Exhibit 87 was a request from Transamerica to the client to confirm certain information. The form had the Respondent's name printed on it, but it was not signed by either the Respondent or Mrs. Busing, and the evidence did not prove who completed the form. (The CAI form contained similar information and had both their signatures.) The Petitioner contends that the information on the confirmation request was "absurd," because it listed Mrs. Busing's annual income as between $25,000 and $50,000, when her taxable income was $11,108 for 2009 and $8,251 for 2010. There was evidence that her total annual income was about $48,000 for 2007, $32,600 for 2008, $22,358 for 2009, and $19,001 for 2010, with the decline due to the decline in the stock market. The evidence was not clear and convincing that the income information on that form or the CAI form was absurd. The investment objective and investment time horizon on the forms were questionable, but the evidence was not clear and convincing that these were misrepresentations by the Respondent. The Transamerica account was a Pershing money market account used to facilitate the purchase of annuities. The evidence was that a separate suitability analysis would be required by the insurance company offering the annuity. The evidence was not clear that the information in the forms signed by the Respondent was used for the purchase of EquiTrust annuities on behalf of Mrs. Busing. Those purchases were recommended and executed by Agent Carter. The evidence was not clear and convincing that switching Mrs. Busing's investments from Schwab to EquiTrust annuities was not suitable for Mrs. Busing or in her best interest. No expert witness testified to that effect. Counts II through IV–-The Kesishes In 2010, William Kesish and his wife, Josefa, owned several annuities. Mr. Kesish had managed their business affairs before he developed Parkinson's disease and dementia in his old age. After that, Mrs. Kesish cared for him and took over the family's finances by default. Mr. Kesish died on November 26, 2010. Mrs. Kesish was born in Spain in 1937. English is her second language. In 2010, she had difficulty conversing and reading in English and was unable to write in English. After her husband became mentally disabled, she used their bank account to provide for their needs, but she had no investment acumen beyond knowing generally that it was better to make more money from their investments than to make less or to lose money. She was recovering from cancer treatment in 2010 and was physically frail. On May 25, 2010, Paula Rego, a professional guardian, met with an attorney who believed the Kesishes were being exploited and in need of a guardian. Ms. Rego reviewed documentation provided by the attorney and, in June 2010, agreed to Mrs. Kesish's voluntary request to become the guardian of the Kesishes' property. On July 8, 2010, Ms. Rego became aware of the Respondent's involvement in the Kesishes' financial business. She telephoned the Respondent to explain her guardianship role and faxed him on July 15, 2010, to direct him to cancel any investment transactions that were underway. The Petitioner presented the testimony of Ms. Rego to explain her review of the documentation she collected in her research to attempt to piece together the financial transactions involving the Kesishes. She also testified as to the surrender charges and, to some extent, the tax liabilities that resulted from them. She also related statements made by Mrs. Kesish to her and, to some extent, to the DFS and OFR investigators, Karen Ortega and Mercedes Bujans, who also related some of the statements Mrs. Kesish made to them. The Petitioner also introduced an affidavit prepared by Ms. Ortega and signed by Mrs. Kesish on March 31, 2011. All of Mrs. Kesish's statements were hearsay. The hearsay cannot itself support a finding of fact.3/ In general, the hearsay demonstrated that Mrs. Kesish did not have a clear recollection of her interactions with the Respondent at the time of her statements. Agent Carter introduced the Respondent to Mrs. Kesish in March 2010. The Petitioner alleged essentially that Agent Carter schemed and collaborated with the Respondent to exploit the Kesishes by tricking them into financial and insurance transactions that would not be in their best interest, but would generate commissions and fees for them. It was alleged that, as with Mrs. Busing, the Respondent's FINRA licensure was required to buy and sell securities in furtherance of the scheme. The Respondent testified that Agent Carter told him about his clients, the Kesishes, and that he went to meet Mrs. Kesish in person because he had difficulty communicating with her over the telephone due to her hard-to-understand Spanish accent and limited proficiency in spoken English. He testified that she told him she wanted to get out of the stock market and was unhappy with her current stockbroker, Doreen Scott. (That part of the Respondent's testimony was corroborated by Ms. Rego, who concurred that Mrs. Kesish did not like dealing with Ms. Scott because she talked down to her.) The Respondent testified that he went to Mrs. Kesish's house, asked if he could be of assistance to her, and discussed her financial situation with her. He testified that he then returned to his Transamerica office and mailed forms for her to fill out and sign.4/ Similar to his dealings with Mrs. Busing, the Respondent testified that he spoke to Mrs. Kesish several times by telephone to answer questions about the forms. It is reasonable to infer that the Respondent knew Agent Carter would be helping her. The Respondent testified that when the completed forms were returned to him by mail, he telephoned Mrs. Kesish to verify the information on the forms and, in some cases, get information that was omitted to add it to the forms. The Petitioner attempted to prove that the Respondent knew or should have known Mrs. Kesish was mentally disabled and incapable of voluntarily instructing the Respondent to effectuate financial transactions on her behalf. Mrs. Kesish lacked knowledge in investing and was susceptible to being misled and exploited, but it was not proven that Mrs. Kesish was mentally incapacitated or unable to consent to Agent Carter's recommendations or instruct the Respondent. Ms. Rego herself did not find it necessary to initiate involuntary proceedings to establish a plenary guardianship of Mrs. Kesish's person and property until October 2013. (Count II) One of the Kesishes' investments was a Genworth Life and Annuity Insurance Company (Genworth) variable annuity (G-58), which they bought on October 31, 2008, for $86,084.89. It was designed to begin paying monthly income on October 31, 2022. It provided a waiver of surrender charges if either Kesish was hospitalized, admitted to a nursing facility, or died. As of March 31, 2010, G-58 had a contract value of $102,954.90. Mrs. Kesish signed a form on letterhead of the Respondent and Transamerica that expressed her desire for the Respondent to be their insurance agent on G-58. On May 27, 2010, the Respondent used an automated account transfer (ACAT) to liquidate G-58 and transfer the funds to a Transamerica brokerage account he opened for the Kesishes on the same date. The Respondent did not independently determine whether the liquidation was suitable or in the Kesishes' best interest. He relied on Agent Carter to do this. The Respondent and the Kesishes signed the CAI form to open the brokerage account. The surrender of G-58 took effect on June 14, 2010. As a result of the liquidation, the Kesishes were assessed a surrender charge of $4,576.91 and federal tax was withheld, and the net proceeds from the liquidation were $90,314.19. On June 29, 2010, the funds in Mrs. Kesish's Transamerica account were added to an EquiTrust policy Agent Carter had sold her (E-92F). The Respondent testified that this was done at the direction of Agent Carter and Mrs. Kesish. The Respondent did not act as the Kesishes' EquiTrust agent and received no commissions. The Petitioner alleged and proposed a finding that the liquidation of G-58 allowed Agent Carter to represent to EquiTrust that the Kesishes had no other annuities and that the addition to E-92F was not replacing another annuity, which allowed Agent Carter to avoid having Genworth attempt to "conserve" G-58 (i.e., question the Kesishes as to whether they wanted to reverse the liquidation within the grace period for doing so). The evidence cited in support of the allegation and proposed finding is documentation of the initial purchase of E-92F in April 2010, not the addition in June 2010. There was no clear and convincing evidence that actions taken by the Respondent resulted in Agent Carter circumventing the replacement notice requirement, or that the Respondent should be held responsible for what Agent Carter did or did not do regarding the EquiTrust annuity. According to the Respondent, he made no investment recommendations to Mrs. Kesish, and all such recommendations were made by Agent Carter. He testified that he only took action in accordance with the wishes of Mrs. Kesish, who was being advised by Agent Carter. He denied that his purpose was to generate commissions or fees for himself or for Agent Carter, or to enable Agent Carter to conceal the replacement of the Genworth annuity. It was not proven by clear and convincing evidence that the Respondent's testimony was false. The Petitioner's proposed recommended order cites the testimony of Tarek Richey regarding his concerns about the Respondent's use of an ACAT to liquidate annuities, transfer of the proceeds to Pershing accounts at Transamerica, and use of those funds to purchase other annuities. Mr. Richey is a FINRA- licensed securities broker at Questar Capital Corporation, who employed and supervised the Respondent for about a month in early 2011, after he left Transamerica in December 2010. While supervising the Respondent, Mr. Richey was advised of OFR's investigation of the Respondent and reviewed the Respondent's documentation on the subject of OFR's investigation. One of Mr. Richey's concerns from his review of the Respondent's documentation was the use of ACAT, which would not guarantee that the client is aware of resulting surrender charges and tax consequences. He also was concerned that ACAT could have been used to bypass and avoid the use of forms required to analyze the suitability of annuities purchased for the Kesishes (and other clients). While he expressed these concerns, Mr. Richey had no personal knowledge and did not testify that the Kesishes (or the other clients) actually were unaware of surrender charges and tax consequences, or that liquidation was not suitable or in their best interest. Another of Mr. Richey's concerns was that the use of ACAT could result in the replacement of annuities without completing the required forms that would provide notice to the insurance company that its annuity was in the process of being replaced and give it an opportunity to conserve its annuity. Mr. Richey did not know that the use of ACAT actually resulted in the bypass of the replacement policy notice requirements for the Kesishes and other clients. He also did not testify that the Respondent should be held responsible for what Agent Carter did or did not do regarding replacement notices. Ms. Rego testified (based in part on discussions with a financial planner who did not testify) that she did not think the Genworth and EquiTrust transactions were not in the best interest of the Kesishes, mainly because of the Genworth surrender charge and tax consequences. There was no other expert testimony on the subject, and the evidence was not clear and convincing that those transactions were unsuitable or not in their best interest. (Count III) The Kesishes owned a Riversource Life Insurance Company (Riversource) annuity (R-30) that they bought on October 5, 2006. The contract had declining withdrawal charge rates that held at eight percent for the first four years. It had a death benefit rider. On March 23, 2010, a letter on the Respondent's Transamerica letterhead, written in English and signed by Mrs. Kesish, directed Riversource to list the Respondent as the Kesishes' financial advisor. On April 23, 2010, Mrs. Kesish signed a form directing Riversource to liquidate R-30. She also signed a form saying she knew there would be surrender charges. On April 26, 2010, Riversource sent the Kesishes a check for $26,430.07 (which was net after $2,454.30 in surrender charges). The testimony from Ms. Rego as to whether the liquidation of the Riversource annuity was contrary to the Kesishes' best interest, unsuitable, or in violation of suitability form or replacement notice requirements, was similar to her testimony with respect to the Genworth liquidation. There was no other expert or other clear and convincing evidence. (Count IV) The Kesishes also had Great American Life Insurance Company (Great American) annuities in the amounts of approximately $560,854 (GA-25) and $28,785 (GA-00), which were purchased in January 2010. GA-25 was owned by the Kesishes' trust, with Mrs. Kesish as trustee; GA-00 was owned by Mr. Kesish. By June 4, 2010, they had contract values of $580,854.71 and $29,970.46, respectively. On June 18, 2010, Agent Carter took Mrs. Kesish to lunch. A letter dated June 18, 2010, signed by Mrs. Kesish for her and her husband, written in English on the Respondent's Transamerica letterhead, directed the transfer of GA-25 to a Transamerica Pershing account (TA-25). An ACAT form dated June 20, 2010, signed by Mrs. Kesish and the Respondent, directed the liquidation of Mr. Kesish's GA-00 and the transfer of the proceeds to the Kesishes' Transamerica Pershing account. This transaction took effect on July 7, 2010.5/ After becoming involved through Attorney Hook, Ms. Rego had numerous discussions with Mrs. Kesish and with Agent Carter regarding the Kesishes' investments. Agent Carter attempted to explain and justify his actions to Ms. Rego and blame other insurance agents who he claimed had essentially stolen his clients by tricking them into replacing Allianz Life Insurance Company of North America (Allianz) annuities sold to them by him with GA-25 and GA-00. Ms. Rego's research notes evidence her understanding that the Great American sales to the Kesishes were unsuitable. During Ms. Rego's discussions and research throughout June 2010, the Respondent's name did not come up, and Ms. Rego was unaware of the Respondent having anything to do with the Kesishes. When she learned about the Respondent's role on July 8, 2010, she attempted to contact him. On July 15, 2010, she faxed the Respondent to instruct him to stop acting on behalf of the Kesishes. There is no clear and convincing evidence that the Respondent did not follow Ms. Rego's instructions.6/ On July 17, 2010, Great American sent Mr. Kesish a conservation letter urging him not to surrender GA-00. Ms. Rego then contacted Great American and had the surrender of GA-25 and GA-00 stopped. Had the transactions not been stopped, the Kesishes $60,000 in surrender charges would have been imposed. There was no other expert testimony or other clear and convincing evidence that the liquidation of the Great American annuities was contrary to the Kesishes' best interest, unsuitable, or in violation of suitability form or replacement notice requirements. Counts V through VI–-Edith Paz Edith Paz was born on January 20, 1926, and lives in Sun City Center. She has a high school diploma and held various jobs, from retailing to making plates in a dental office. Mrs. Paz married a GI returning from World War II. Her husband was successful in business before his retirement. Meanwhile, Mrs. Paz founded a successful real estate business and invested in the stock market. Mr. Paz died in 1999. In 2001, Mrs. Paz created a revocable trust with herself as trustee. When Mrs. Paz retired, she moved to Sun City Center. She did some investing, but was dissatisfied with her investments and her financial representative at the time. About that time, she met Glenn Cummings, an insurance agent who was a less experienced associate of Agent Carter and also not FINRA- licensed. After several conversations, Agent Cummings gained her trust and advised her to liquidate and consolidate her assets before deciding what other financial products to purchase. He referred her to the Respondent for that purpose. Agent Cummings and Mrs. Paz testified that he referred Mrs. Paz to the Respondent on the advice of Agent Carter to save "exit fees" on liquidating her investments. The evidence was not clear as to how the Respondent would be able to do this. The Respondent testified to his understanding that Mrs. Paz wanted to get out of the stock market and switch to more stable investments and that she had a bad relationship with her stockbroker. The Respondent's testimony is consistent with Mrs. Paz's actual losses in the stock market and her testimony that she listened to and followed the advice of Agent Cummings because she was dissatisfied with her prior financial advisor, a Mr. Shrago. Mrs. Paz testified that she spoke to the Respondent just once, briefly. That conflicts with the testimony of the Respondent and Agent Cummings. Their testimony was that there were several telephone conversations after the initial contact. They related that the Respondent mailed Mrs. Paz the forms that needed to be filled out, that Agent Cummings was with Mrs. Paz when she filled out the forms, and that both spoke to the Respondent several times during the process. According to Agent Cummings, this happened on July 29, 2010, when he visited Mrs. Paz to show her illustrations regarding the annuities he was recommending. While there, he helped her complete the forms the Respondent had sent to have her investments liquidated and consolidated into a Transamerica Pershing account. There also was conflict in the testimony as to whether anyone explained investment options and consequences to Mrs. Paz. She testified that no one gave her any explanation. Agent Cummings testified that he explained everything in detail to Mrs. Paz and that she also talked to the insurance agents who represented the companies whose annuities she would be surrendering. He testified that Mrs. Paz knew exactly what she was doing. The Respondent testified that he had no involvement in those explanations. He testified that he simply made sure he understood what Mrs. Paz wanted him to do for her. (Count V) In May 2007, Mrs. Paz purchased a Jackson National Life Insurance Company (Jackson National or JNL) annuity (JNL-42A) on the advice of Mr. Shrago. The initial premium was $100,000, and it was issued with a five-percent bonus. As of May 25, 2007, it had an account balance of $105,017.01 and was receiving an annual rate of return of 7.75 percent. On July 12, 2010, Mrs. Paz signed a letter directing Jackson National to make the Respondent, who held an appointment to represent Jackson National, her agent-of-record on JNL-42A. The change took effect on July 15, 2010. On July 29, 2010, Jackson National faxed the Respondent a statement of account for JNL-42A, listing the balance as $108,253.48 (which reflected a prior withdrawal of $2,500 by Mrs. Paz). The statement disclosed the surrender charges in effect. After her discussions with Agent Cummings, Mrs. Paz signed forms requesting that JNL-42A be liquidated and the proceeds rolled over into a Great American Life Insurance Company (Great American or GA) annuity (GA-61). The Respondent facilitated the rollover. As a result of the rollover, Mrs. Paz incurred surrender charges of $4,871.41 and a partial recapture of the initial bonus in the amount of $2,706.34, for a total loss of $7,577.75. The Petitioner alleged, and Mrs. Paz testified, that the Respondent never discussed with her that there would be surrender charges. The Respondent did not disagree, but explained that he understood Agent Cummings already had done so and that he just made sure he was following Mrs. Paz's wishes. Concurring, Agent Cummings testified that he did explain the surrender charges to Mrs. Paz. The Petitioner alleged that the Respondent's actions "insulated M[r]s. P[az] from comparative financial counseling by her then current Jackson National insurance agent Gary Mahan." This was not proven by clear and convincing evidence. To the contrary, there was evidence that it was Mrs. Paz's choice to change agents, that Mr. Mahan knew about the change, and that he had no objection to the Respondent taking over for him as agent of record on the policy. The Petitioner also alleged that the Respondent "provided [Agent Cummings] with the Transamerica brokerage application, transfer forms and letter of instructions to transfer JNL 42A" to the Respondent as account representative. It was not proven that these documents were not mailed to Mrs. Paz in accordance with the Respondent's testimony. There was no expert testimony or other clear and convincing evidence that the liquidation of Mrs. Paz's Jackson National annuity and purchase of a Great American annuity was contrary to her best interest, unsuitable, or in violation of suitability form or replacement notice requirements. Mrs. Paz testified that Agent Cummings initially told her she would have to pay the Respondent $1,500 as a fee for his services with respect to JNL-42a and later told her the fee would be $2,600. Agent Cummings testified that the Respondent told her what his fee would be during the telephone conversation on July 29, 2010. Regardless who told Mrs. Paz what the Respondent's fee would be, or what she was told it would be, Mrs. Paz made out a $2,607.28 check to Agent Cummings' company, Big Financial, on July 29, 2010. On August 2, 2010, Big Financial gave the Respondent a check made out to the Respondent for $2,530, with the notation "Paz." (It is not clear from the evidence why the Big Financial check was made out for $2,530. When the DFS investigator questioned the discrepancy, Agent Cummings reimbursed Mrs. Paz $77.28.) The Respondent deposited the check the next day. The Allianz compliance guide prohibited agents from charging an additional fee for services that customarily are associated with insurance products. The Great American compliance guide prohibited fraudulent acts. By accepting the check from Big Financial, the Respondent received a fee from Mrs. Paz that was not authorized. (Count VI) Prior to meeting Agent Cummings or the Respondent, Mrs. Paz had investment accounts with Wedbush (WB-37) and Wells Fargo. There were two Wells Fargo accounts, an IRA (WF-15), and a trust account (WF-70). As of June 30, 2010, the Wedbush account (WB-37) had a balance of $349,438.11. The Wells Fargo IRA account (WF-15) had a net value of $51,737.11 prior to June 30, 2010. The Wells Fargo trust account (WF-70) had a balance of $332,798.76 prior to June 2010. The Respondent and Mrs. Paz communicated in the same manner they did for the Jackson National transaction. Mrs. Paz signed forms that enabled the Respondent to transfer the funds in the Wedbush and Wells Fargo accounts into two Transamerica brokerage accounts (TA-02) and (TA-86) using ACAT. Some of the forms referred to the Respondent as Mrs. Paz's "investment professional," but the sole purpose of the Respondent's involvement was to use Transamerica as a funnel to transfer funds from one investment to another. By August 11, 2010, the funds in the TA-02 account were used to purchase an Allianz annuity sold by Agent Cummings in the amount of $335,589.65. The funds in the TA-86 account were used to purchase a Great American annuity (GA-60) sold by Agent Cummings in the amount of $45,769.38. There was no expert testimony or other clear and convincing evidence that the liquidation of Mrs. Paz's Wedbush and Wells Fargo accounts and purchase of an Allianz annuity was contrary to her best interest, unsuitable, or in violation of suitability form or replacement notice requirements. Counts VII and VIII-–The Penwardens Wayne Penwarden was born on December 4, 1943. His wife, Sandra, was born on October 10, 1939. They inherited some money and decided to invest it. As of August 31, 2009, they had Morgan Stanley investment accounts that totaled close to half a million dollars. They also had an annuity with ING USA Annuity and Life Insurance Company (ING) purchased for $150,000 on April 24, 2008. Agent Carter became acquainted with the Penwardens and introduced them to the Respondent. The Amended Administrative Complaint alleged that the Respondent provided required forms to Agent Carter for him to get the Penwardens signatures and, then, used funds from their Transamerica accounts to fund the purchase of Allianz annuities, which was deceitful and against the wishes of the Penwardens. The Petitioner's proposed recommended order proposed no such findings, and there was no clear and convincing evidence that the Respondent was guilty of those acts, that he said or did anything to deceive or mislead or withhold information from them, or took any action regarding them without their full knowledge and consent. (Count VII) On September 30, 2009, the Penwardens signed a change of agent request to make the Respondent their new ING insurance agent. They also signed CAI forms to open Transamerica brokerage accounts and transfer the funds from the Morgan Stanley investment accounts into them, using ACAT. The funds in the Transamerica accounts were then used to purchase Allianz's indexed annuities sold to the Penwardens by Agent Carter. On September 23 and October 16, 2009, the Penwardens purchased two Allianz MasterDex X annuities (MD-47) and (MD-24), respectively, with initial premium payments of $141,269.40 for MD-47 and $373,979.59, plus a premium bonus of $37,397.96, for MD-24. On June 17, 2010, acting on instructions from Agent Carter on behalf of the Penwardens, the Respondent liquidated the ING annuity. On June 30, 2010, the Penwardens added the $115,281.47 proceeds from the liquidation of the ING annuity to MD-47. The Petitioner proposed a finding that the surrender of the ING annuity cost $6,000 in surrender charges, which is true. The Petitioner omits from its proposed finding that the Penwardens received a premium bonus on the Allianz policy that more than offset the ING surrender charge. There was no expert testimony or other clear and convincing evidence that the liquidation of the Penwardens' Morgan Stanley accounts and ING annuity and purchase of Allianz annuities was contrary to their best interests, unsuitable, or in violation of suitability form or replacement notice requirements. (Count VIII) The Penwardens became dissatisfied with Agent Carter, and on November 9, 2010, signed a letter drafted by the Respondent on Transamerica letterhead to substitute him for Agent Carter as their sole financial advisor. On November 12, 2010, the Respondent was notified by Allianz that he would receive no commissions as servicing agent on policies sold to the Penwardens by another agent. On or about November 22, 2010, $37,408.54 was transferred from the Allianz MD-47 annuity into a new Nationwide Life and Annuity Insurance Company (Nationwide or NW) annuity (NW-08). The Respondent also effected a partial Internal Revenue Code, section 1035, exchange from the MD-47 annuity to a new annuity purchased from Nationwide (NW-09) for $23,746.19. On November 7, 2011, the Respondent faxed a request to transfer funds from the MD-24 annuity to fund a North American Company for Life and Health Insurance (North American or NA) annuity (NA-68). The Petitioner proposed a finding that the Respondent undertook these transactions on November 22, 2010, and on November 7, 2011, in order to benefit himself alone by generating commissions to replace the servicing agent commissions he was not getting on the Allianz policies. This was not proven by clear and convincing evidence. To the contrary, the Respondent explained that the transactions were done for the Penwardens' benefit after discussions regarding the benefits of diversifying out of the Allianz annuity into other annuities, which was accomplished cost-free. There was no clear and convincing evidence that these transactions were contrary to the Penwardens' best financial interest or that they were done solely to benefit the Respondent. There was no expert testimony or other clear and convincing evidence that the partial transfers from the Penwardens' Allianz annuities to other Nationwide and North American annuities were contrary to their best interest, unsuitable, or in violation of suitability form or replacement notice requirements. In early December 2011, Mr. Penwarden replaced the Respondent with another insurance agent. The Petitioner alleged that the Respondent went to the Penwardens home to harangue them for two hours about their decision to switch agents. The only evidence on this allegation was the deposition testimony of Mr. Penwarden and the testimony of the Respondent. Mr. Penwarden's testimony as to what occurred was vague. The Respondent agreed that he was disappointed that the Penwardens were switching agents, but testified that he went to the home to retrieve the policies he sold to the Penwardens, which would have to be returned to the insurance companies to cancel at no cost during the "free-look" period. He testified that he waited for an hour or more while Mr. Penwarden tried to find the policies in his home. The evidence was not clear and convincing, and the Petitioner did not propose a finding as to this allegation. Count IX and Related Affirmative Defenses Count IX is based on the Final Order entered in OFR's securities case against the Respondent as an additional ground for discipline under section 626.621(13), Florida Statutes. The Respondent cites it in his affirmative defenses of res judicata and collateral estoppel on Counts I through VIII. See Finding 2, supra. The Respondent also argues that the additional charge is barred by the ex post facto clause of the Florida constitution and due process clauses of the United States and Florida constitutions. As to the due process argument, the Respondent admitted the OFR Final Order in his answer to the original charges. He also had ample opportunity to demonstrate prejudice from the added charge, which he could not, and to present legal arguments, which he did. As to ex post facto, section 626.621(13) was added to the Florida Statutes, effective June 1, 2011. See Ch. 175, §§ 47 and 53, Laws of Fla. (2010). That was before the Respondent entered into the Stipulation and Consent Agreement that formed the basis for the OFR Final Order. Disciplinary guidelines for section 626.621(13) were added to the Florida Administrative Code on March 24, 2014. Fla. Admin. Code R. 69B-231.090(13). As to the collateral estoppel defense, the Respondent testified that he entered into the settlement with OFR because he was under heightened supervision by his employer due to securities violations, and he did not think any employer wanted to provide the required supervision (which he referred to as "baby-sitting.") The Respondent did not testify that he relied on the OFR Final Order to bar charges by DFS or that he believed the OFR Final Order would bar DFS charges.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Agent and Agency Services, enter a final order finding the Respondent guilty of violating section 626.611(7) and rule 69B-215.210 under Count V, and section 626.621(13) under Count IX, dismissing the other charges, and suspending the Respondent's insurance licenses for 12 months. DONE AND ENTERED this 15th day of October, 2014, in Tallahassee, Leon County, Florida. S J. LAWRENCE JOHNSTON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of October, 2014.
The Issue The issue for determination is whether Respondent committed the offenses set forth in the administrative complaint and, if so, what action should be taken.
Findings Of Fact At all times material hereto, Maria Amelia Pou (Respondent) was licensed as a general lines insurance agent. Pursuant to Chapter 626, Florida Statutes, the Department of Insurance (Petitioner) has jurisdiction over Respondent’s insurance license and appointments. At all times material hereto, Respondent was an officer of General Insurance Group, Inc. (GIG), located in Hialeah, Florida. GIG is a Florida incorporated general lines insurance agency. At all times material hereto, Respondent was an officer of Victoria Insurance Agency, later changed to General Insurance Group II, both hereinafter referred to as GIG II, located at 4583 NW 7th Street, Miami, Florida 33126. GIG II is a Florida incorporated general lines insurance agency. Respondent was, and is, personally and fully liable and accountable for the wrongful acts, misconduct, or violations of any provision of the Florida Insurance Code that she knew or should have known were committed by any person, over whom she had direct supervision and control, acting on behalf of GIG II. Respondent was, and is, personally and fully liable and accountable for wrongful acts, misconduct, or violations of any provision of the Florida Insurance Code that she committed. At all times material hereto, Respondent maintained an escrow account, with account no. 008-1027286, at Republic National Bank of Miami in Miami, Florida. Respondent had joint signatory authority over the escrow account. Premiums, returned premiums, and other funds belonging to insureds, insurers, and others received in transactions under Respondent's license are trust funds held by Respondent in a fiduciary capacity. On November 22, 1994, Carlos Vidal and his wife, Teresa Vidal, purchased a new vehicle from Ocean Mazda, a Mazda dealership located on Lejeune Road, Miami, Florida. Before leaving the dealership with his new vehicle, Mr. Vidal attempted to obtain insurance coverage for the vehicle from his insurance company, State Farm. However, when he went to State Farm's office, no one was present and it appeared to be closed. Mr. Vidal returned to the dealership and informed the dealer's salesperson, Mr. Munoz, of his problem. The salesperson called several insurance companies without success before reaching GIG II. Mr. Munoz engaged in all communication over the telephone with GIG II. Neither Mr. Vidal nor Mrs. Vidal spoke with GIG II. Mr. Munoz obtained a quote of $997 from GIG II for the annual premium for the insurance coverage on the vehicle and informed Mr. Vidal of the cost. Mr. Vidal requested his wife to complete a check to GIG in the quoted amount. She complied. The check was given to and accepted by Mr. Munoz. GIG II faxed an insurance binder to Mr. Munoz. He gave the binder to Mr. Vidal. The binder indicated that the insurance was to be issued by Clarendon National Insurance Company. Having obtained the insurance binder, Mr. and Mrs. Vidal left the dealership with their new vehicle. Although the premium was paid in full, GIG II completed an insurance premium finance contract (finance contract) to finance the premium with World Premium Finance Company (WPF), dated November 22, 1994, for Mr. Vidal. Ninety-five percent of Respondent's premiums are premium financed. The finance contract reflects the alleged signatures of Mr. and Mrs. Vidal. However, neither Mr. Vidal nor Mrs. Vidal signed the finance contract. An inference is drawn and a finding is made that GIG II signed the names of Mr. and Mrs. Vidal on the finance contract. Respondent signed the finance contract as the broker or agent. Also, the finance contract reflects GIG II as the agent and the insured as both GIG II and Mr. and Mrs. Vidal, with only GIG II's address as the address for both GIG II and the Vidals. Further, the finance contract reflects a premium of $907, cash down payment of $273, and three monthly payments of $225.18. The monies totaled $948.54 for the finance contract price. The $997 check was deposited into GIG II's escrow account. At all times material hereto, the money remained in the escrow account. GIG II completed an application for the insurance coverage, dated November 22, 1994, with Associated Insurance Brokers, Inc. (AIB) to be issued by Clarendon National Insurance Company. The application reflected a total policy premium of $907. Respondent signed the application as brokering agent. Also, the application reflects the alleged signatures of Mr. and Mrs. Vidal. However, neither Mr. Vidal nor Mrs. Vidal signed the application. An inference is drawn and a finding is made that GIG II signed Mr. and Mrs. Vidal's names to the application. Approximately, two to three days after November 22, 1994, Mr. Vidal brought the vehicle to GIG II for pictures to be taken of it for insurance purposes. A Florida Motor Vehicle Preinsurance Inspection Report, dated November 22, 1994, reflects the alleged signature of Mr. Vidal. To the contrary, Mr. Vidal did not sign the Report. Regarding the premium for the insurance, Respondent utilized computer software to compute the premium. The software requires a vehicle's VIN number. Respondent's software was not current due to her not having received, at the time of the transaction, the updated software which would reflect a recent rate increase. The total premium by the software was lower than the premium should have been. It is customary in the insurance industry to use the computer software used by Respondent for the insurance premiums. Also, it is not unusual for a delay to occur for the updated software to be received by an insurance company after a rate increase is approved and effective. In the insurance industry, it is not unusual for a miscalculation of a premium to occur. No gross miscalculation occurred in this instance which would cause the miscalculation to be unusual and suspect. Due to the miscalculation of the premium, by letter dated January 12, 1995, AIB notified Mr. Vidal that an additional $120 was due on the premium. Further, the letter provided that he had three options: (1) pay the $120 by February 10, 1995; or (2) cancel the insurance policy by February 26, 1995, and demand return of unearned premiums; or (3) take no action and the insurance policy would be cancelled by February 26, 1995. Mr. Vidal decided to cancel the insurance policy. On January 30, 1995, Mr. Vidal went to GIG II and executed a Cancellation Request Form cancelling his insurance. Respondent's signature appears on the Form as the agent. At some point in time, the cancellation form was forwarded by GIG II to AIB. By notice dated February 6, 1995, WPF notified Mr. Vidal, among other things, that he had ten days to pay his monthly installment ($225.18) due on February 1, 1995, 1 plus a late charge of $10, totaling $235.18 and that, if he failed to pay, his insurance would be cancelled. The address for Mr. Vidal on the notice was GIG II's address. By notice dated February 16, 1995, WPF notified Mr. and Mrs. Vidal, among other things, that their insurance policy was cancelled due to nonpayment of the monthly installment. The address for Mr. and Mrs. Vidal on the notice was GIG II's address. By letter dated February 14, 1995, to AIB, Mr. Vidal notified AIB that he had chosen to cancel his insurance policy and had executed a cancellation form on January 27, 1995, 2 and demanded a refund of the unearned premiums. Further, Mr. Vidal indicated in the letter that he had neither heard from AIB or received a refund and that he was notifying it of his cancellation and demand for a refund. As a result of the cancellation by Mr. Vidal, AIB issued WPF a check dated February 22, 1995, in the amount of $549.67. Subsequently, on or about March 1, 1995, WPF issued GIG II a check in the amount of $79.31 Even after Mr. Vidal cancelled the insurance coverage and Respondent had received a refund from WPF, Respondent failed to adjust her conduct to conform with the Vidals' situation which was that the insureds, the Vidals, had paid the quoted premium in full. Not having received a refund, on April 17, 1995, approximately two and one-half months after signing the cancellation form, Mr. Vidal filed a request for assistance with Petitioner. By check dated July 10, 1995, more than five months after Mr. Vidal signed the cancellation form, Respondent issued Mr. Vidal a refund in the amount of $239.33 for insurance coverage that he had in effect for a little over two months. The refund check was issued from GIG II's escrow account. The refund monies included $49 which represented the difference between what the Vidals paid for the coverage ($997) and the finance contract price ($948.54). Consequently, Mr. Vidal was assessed the interest charged on a finance contract which never should have existed in his situation as the quoted premium was paid in full. In a premium finance situation in which a refund is due an insured, it is customary in the insurance industry for a three-step process to take place: (1) the insurance company issues a check to the premium finance company for the refund and forwards the check to the premium finance company which may take at least 30 days; (2) the premium finance company issues a check to the agent for the refund and forwards the check to the agent which may take at least another 30 days; and (3) the agent issues a check to the insured for the refund and sends the check to the insured. The same refund procedure was followed in this situation but with less time involved for steps (1) and (2). Moreover, in this instance, an important factor which makes this situation different is that Respondent had in her escrow account the full premium paid by the insureds, the Vidals. After receiving Mr. Vidal's request for assistance, Petitioner conducted an investigation. At first, Petitioner determined that no violation of the Insurance Code had occurred and Petitioner closed its file. However, subsequently, Petitioner re-opened its investigation which led to the filing of the administrative complaint against Respondent. After filing of the administrative complaint and more than one year after Respondent refunded the $239.33 to Mr. Vidal, Respondent acknowledged that more monies were due Mr. Vidal. Having reviewed the computations with Petitioner, Respondent refunded the additional monies to Mr. Vidal. An individual who is not licensed by Petitioner may qualify for a license by experience. Petitioner prescribes the activities in which an unlicensed person may engage. Over the years, Respondent has had unlicensed employees who were attempting to qualify for licensure by experience. Respondent identified two unlicensed employees, Maria Cancio and Maritza Inclant, who provided premium quotes to customers. Approximately ten percent of Ms. Cancio's time was devoted to providing premium quotes. However, more than ten percent of Ms. Martiza's time was devoted to providing premium quotes. Petitioner presented no evidence as to the time periods, i.e., six months or twelve months to which the percentages were applicable.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Insurance and Treasurer enter a final order Finding in Count I that Maria Amelia Pou violated Subsections 626.561(1), 626.611(4), (5), (7), (10) and (13), 626.621(2) and (12), and 626.9541(1)(k)1 and (o) 1 and 2; Dismissing Count II; and Suspending the license of Maria Amelia Pou for nine months. DONE AND ENTERED this 15th day of April, 1997, in Tallahassee, Florida. ERROL H. POWELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 15th day of April 1997.
Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, documentary evidence received and the entire record filed herein, I hereby make the following relevant factual findings: During times material, Respondent was licensed and/or qualified for licensure as a General lines (2-20), Ordinary Life, and Health Insurance (2-18) Agent in Florida (Petitioner's Exhibit 1). During times material to the allegations herein, 1/ Respondent was an officer and director of White Insurance Agency, Inc. (White Insurance). (Petitioner's Exhibit 2). On June 20, representatives of Great Wall Chinese Restaurant (Great Wall) entered into a premium finance agreement with Crown Premium Finance, Inc., (Crown), through White Insurance, which indicated the insurance coverage for Great Wall would be provided and issued through Service Insurance Company and Corporate Group Services. (Petitioner's Exhibit 3, sub. "a"). On June 20, Respondent signed the premium finance agreement as broker- agent. (Petitioner's Exhibit 3, sub "a"). On June 22, pursuant to the premium finance agreement, Crown issued a check made payable to White Insurance in the amount of eight hundred ninety-four dollars ($894.00) which was subsequently deposited into Respondent's bank account. (Petitioner's 3, sub B). On July 13, a representative of Service Insurance Company notified Crown that they had not received the full annual premium for Great Wall and a binder charge of $81.00 was sent to White Insurance. (Petitioner's Exhibit 3 sub C). On July 13, representatives of Service Insurance Company notified Respondent that coverage was bound for Great Wall's risk for only 33 days and a charge of $81.00 was sent to White Insurance. (Petitioner's Exhibit 3, sub D). On July 13, representatives of Service Insurance Company mailed a cancellation notice to Great Wall and Crown indicating an $81.00 charge as due and owing. (Petitioner's Exhibit 3, sub) On September 14, Crown sent a standard cancellation notice to both Corporate Group Services and Service Insurance Company. (Petitioner's Exhibit 3, sub H & I). On November 8, representatives of Corporate Group Services notified Crown that an application for insurance was received but was rejected and returned to the agent's (Respondent) office. (Petitioner's Exhibit 3, sub F). Neither Service Insurance Company nor Corporate Group Services issued a policy for the consumer, Great Wall. Respondent refuses to return the premium monies received for the Great Wall coverage to Crown. Respondent owes Crown for the premium monies submitted by Crown. COUNT II On July 8, representatives of Chateau Madrid, Inc., a restaurant, entered into a premium finance agreement with Crown, through Respondent, which indicated the insurance coverage would be issued through Casualty Indemnity Exchange. (Petitioner's Exhibit 4, sub A). On July 8, Respondent signed the premium finance agreement as broker/agent. On July 25, pursuant to the premium finance agreement, Crown issued a check made payable to Respondent in the amount of three thousand five hundred eight dollars (3,508.00). The check was deposited into White Insurance's bank account. (Petitioner's Exhibit 4, sub b). On August 30, Crown sent a standard cancellation notice to both Chateau Madrid and Casualty Indemnity Exchange and their managing general agents, Program Underwriters. (Petitioner's Exhibit 4, sub D). As a result of the standard cancellation notice, the policy was reduced to a short-term policy which was effective July 15 and expired September 13, 1983. On March 13, 1984, Program Underwriters notified Crown that they had not received a premium payment concerning this particular policy and that neither Respondent nor White Insurance was an authorized agent for Casualty Indemnity Exchange. (Petitioner's Exhibit 4, sub e). Respondent never returned the premium monies he received to Crown. Respondent owes Crown for the premium monies he received from Crown. COUNT III On September 16, a representative of Tennis Trainer, Inc. requested that Respondent secure a multi-peril insurance policy for Tennis Trainer. Respondent secured a binder for Tennis Trainer indicating the insurance would be issued through Service Insurance Company. On September 16, Respondent signed the binder as an authorized representative. (Petitioner's Exhibit 13, sub b). On September 16, Respondent was not authorized to represent Service Insurance Company. (Petitioner's Exhibits 12 and 13, sub a and b). On September 15, Jeffrey Rider, Vice President of Tennis Trainer issued a check in the amount of three hundred five dollars ($305.00) to White Insurance representing the downpayment necessary to secure the agreed business insurance coverage. Thereafter, Respondent, took no measures to secure insurance for Tennis Trainer other than issuing the binder. Respondent has failed to submit the premium to secure the agreed upon insurance coverage on behalf of Tennis Trainer. Additionally, Respondent refused to return the premium payments to Tennis Trainer despite its demand (from Respondent) to do so. Tennis Trainer has directly forwarded the remainder of the premium to Service Insurance to secure the multi-peril coverage. Service Insurance Company is owed a balance due of approximately $305.00 from Respondent. COUNT VI On May 5, Donald Powers entered into a premium finance agreement with Crown, through White Insurance. Pursuant to the agreement, the insurance coverage would be provided through Progressive American Insurance (Progressive). On May 9, Crown issued a check made payable to White Insurance in the amount of two hundred ninety-nine dollars ($299.00) which was subsequently deposited into Respondent's bank account. On October 1, the consumer, Donald Powers, requested that the policy be cancelled. On October 25, Crown sent a standard cancellation notice to both the consumer and Progressive. On October 19, Progressive notified both Crown and White Insurance that the gross unearned premium of two hundred twenty-six dollars ($226.00) was applied to the Agent's (White Insurance) monthly statement and Crown must therefore collect this amount from the Agent. Progressive American never received any premium payments from Respondent concerning the subject policy. On November 25, 1986, Progressive notified Petitioner that the policy was originally accepted on May 7, 1983 at an annual premium of four hundred sixty dollars ($460.00) and was cancelled on October 1, 1983, with Two Hundred twenty-six Dollars ($226.00) credited to Respondent's statement. Progressive never received any premium payment for this policy. Respondent has failed to return to Crown the returned premium credit received on behalf of the Donald Powers' policy. COUNT VII On November 28, Russell Lung entered into a premium finance agreement with Crown through White Insurance. The insurance coverage for Lung was to be provided and issued through Interstate Underwriters. On November 29, pursuant to the premium finance agreement with Russell Lung, Crown issued a check made payable to White Insurance in the amount of one hundred sixty-seven dollars (167.00) which was subsequently deposited into a bank account controlled by Respondent. On February 14, 1984, Crown sent a standard cancellation notice to both the consumer and Interstate Underwriters. The policy for Russell Lung was cancelled before its normal expiration date and the unearned premium was credited to Respondent's account. Respondent has not returned to Crown the unearned premium credit received for Lung's policy. COUNT VIII On December 6, representatives of Thomson's Lawn Care (Thomson) entered a premium finance agreement with Crown, through White Insurance, which indicated the insurance coverage would be provided through Northeast Insurance and Southern Underwriters as managing general agents. On December 8, pursuant to the premium finance agreement, Crown issued a check made payable to White Insurance in the amount of one hundred fifty-one dollars ($151.00) which was subsequently deposited into a bank account controlled by Respondent. On January 25, 1984, Crown sent a standard cancellation notice to both the consumer and Northeast Insurance Company/Southern Underwriters. On February 8, 1984, Southern Underwriters notified Crown that they were never paid by White Insurance for Thomson's insurance. On October 16, 1984, Crown was notified by representatives of Thomson's that immediately after making the down payment to White Insurance, Thomson notified White Insurance that the policy should be cancelled immediately since Thomson never operated as a business. (Petitioner's Exhibit 7, sub e). Crown received the returned premium payment from Southern Underwriters even though the original payment to White Insurance by Crown was never forwarded to Southern Underwriters. Respondent refuses to return the unearned premium payment to Crown. COUNT IX On October 15, representatives of Comfort Inn entered a premium finance agreement with Crown, through White Insurance, which indicated the insurance coverage would be provided through Protective National Insurance Company and Interstate Fire and Casualty Company. On November 4, pursuant to the premium finance agreement, Crown issued a check made payable to White Insurance in the amount of one thousand six hundred sixty dollars ($1,660.00) which was subsequently deposited into a bank account controlled by Respondent. On March 1, 1984, Crown sent a standard cancellation notice to both Comfort Inn and the Insurance Companies involved. On February 6, 1984, Comfort Inn's counsel, James W. Martin, forwarded a letter to the insurance companies involved and simultaneously notified Crown that White failed to remit funds to the insurance companies involved and as a result, the policy was cancelled and subsequently reinstated only after his client, Comfort Inn paid the premium directly to the respective insurers. (Petitioner's Exhibit 8, sub e). On February 23, 1984, Irwin Lonschien of Crown responded to attorney Martin's letter and advised that the one thousand six hundred sixty dollars premium payment was forwarded to White Insurance pursuant to the premium finance agreement on November 4, 1983. On July 23, 1984, William Edwards, a representative of Comfort Inn, wrote a letter to Dan Martinez of Eagle Underwriters advising that Comfort Inn had paid a premium to White Insurance and Comfort Inn no longer desired White Insurance to represent them in insurance matters. Respondent, has not returned premiums received from Crown and is therefore indebted to Crown in the amount of one thousand six hundred sixty dollars. COUNT X On April 14, representatives of Royal Palm Motel entered into a premium finance agreement with Crown, through White Insurance which indicated insurance coverage would be provided through Casualty Indemnity- Exchange. On April 18, pursuant to the premium finance agreement, Crown issued a check made payable to White Insurance in the amount of nine hundred seventy- seven dollars ($977.00) which was subsequently deposited into a bank account controlled by Respondent. COUNT XI On March 16, 1982, representatives of Flip's of West Broward entered a premium finance agreement with Crown, through White Insurance which indicated the insurance coverage would be provided through Service Insurance Company. On March 19, 1982, pursuant to the premium finance agreement, Crown issued a check made payable to White in the amount of six hundred forty-eight dollars ($648.00) which was subsequently deposited in a bank account controlled by Respondent. Sometime between March 1982 and June 20, 1982, White Insurance forwarded a premium payment for this coverage to Service Insurance Company. On June 20, 1982, Crown sent a standard cancellation to the consumer and Service Insurance indicating the policy was to be cancelled. By letter dated January 7, Service Insurance notified White Insurance that the policy had been cancelled and the returned premium for the policy was credited to the account of White Insurance. Respondent, as agent/director of White Insurance has failed and refused to return to Crown the returned premiums received for Flip's of West Broward. COUNT XII On November 7, Paula Wilcoxon entered a premium finance agreement with Crown, through White Insurance, indicating the insurance coverage would be issued through Universal Casualty. On November 8, pursuant to the premium finance agreement, Crown issued a check made payable to White Insurance in the amount of two hundred ninety-five dollars ($295.00) which was subsequently deposited into a bank account controlled by Respondent. On December 15, Crown notified the consumer and Universal Casualty, by standard cancellation notice, that the policy was being cancelled. Respondent has refused and continues to refuse to return the unearned premium to Crown.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Petitioner, Department of Insurance and Treasurer, enter a Final Order revoking all licenses and qualifications for licensure of Respondent, Kenneth Everett White, as an insurance agent in the State of Florida. RECOMMENDED this 20th day of March, 1987, in Tallahassee, Florida. JAMES E. BRADWELL 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 20th day of March, 1987.
Findings Of Fact Respondent holds a property and casualty insurance license, life and health insurance license, and life insurance license for the State of Florida. She has held her property and casualty license for about 20 years. In 1976, she was employed as an agent for the Orlando office of Commonwealth insurance agency, which she purchased in 1977 or 1978. She continues to own the Commonwealth agency, which is the agency involved in this case. Respondent has never previously been disciplined. In 1979 or 1980, Respondent was appointed to the board of directors of the Local Independent Agents Association, Central Florida chapter. She has continuously served on the board of directors of the organization ever since. She served as president of the association until September, 1991, when her term expired. During her tenure as president, the local association won the Walter H. Bennett award as the best local association in the country. Since May, 1986, Commonwealth had carried the insurance for the owner of the subject premises, which is a 12,000 square foot commercial block building located at 923 West Church Street in Orlando. In July, 1987, the insurer refused to renew the policy on the grounds of the age of the building. Ruth Blint of Commonwealth assured the owner that she would place the insurance with another insurer. Mrs. Blint is a longtime employee of the agency and is in charge of commercial accounts of this type. Mrs. Blint was a dependable, competent employee on whom Respondent reasonably relied. Mrs. Blint contacted Dana Roehrig and Associates Inc. (Dana Roehrig), which is an insurance wholesaler. Commonwealth had done considerable business with Dana Roehrig in the past. Dealing with a number of property and casualty agents, Dana Roehrig secures insurers for the business solicited by the agents. Dana Roehrig itself is not an insurance agent. In this case, Dana Roehrig served as the issuing agent and agreed to issue the policy on behalf of American Empire Surplus Lines. The annual premium would be $5027, excluding taxes and fees. This premium was for the above- described premises, as well as another building located next door. The policy was issued effective July 21, 1987. It shows that the producing agency is Commonwealth and the producer is Dana Roehrig. The policy was countersigned on August 12, 1987, by a representative of the insurer. On July 21, 1987, the insured gave Mrs. Blint a check in the amount of $1000 payable to Commonwealth. This represented a downpayment on the premium for the American Empire policy. The check was deposited in Commonwealth's checking account and evidently forwarded to Dana Roehrig. On July 31, 1987, Dana Roehrig issued its monthly statement to Commonwealth. The statement, which involves only the subject policy, reflects a balance due of $3700.86. The gross premium is $5027. The commission amount of $502.70 is shown beside the gross commission. Below the gross premium is a $25 policy fee, $151.56 in state tax, and a deduction entered July 31, 1987, for $1000, which represents the premium downpayment. When the commission is deducted from the other entries, the balance is, as indicated, $3700.86. The bottom of the statement reads: "Payment is due in our office by August 14, 1987." No further payments were made by the insured or Commonwealth in August. The August 31, 1987, statement is identical to the July statement except that the bottom reads: "Payment is due in our office by September 14, 1987." On September 2, 1987, the insured gave Commonwealth a check for $2885.16. This payment appears to have been in connection with the insured's decision to delete the coverage on the adjoining building, which is not otherwise related to this case. An endorsement to the policy reflects that, in consideration of a returned premium of $1126 and sales tax of $33.78, all coverages are deleted for the adjoining building. The September 30 statement shows the $3700.86 balance brought forward from the preceding statement and deductions for the returned premium and sales tax totalling $1159.78. After reducing the credit to adjust for the unearned commission of $112.60 (which was part of the original commission of $502.70 for which Commonwealth had already received credit), the net deduction arising from the deleted coverage was $1047.18. Thus, the remaining balance for the subject property was $2653.68. In addition to showing the net sum due of $944.59 on an unrelated policy, the September 30 statement contained the usual notation that payment was due by the 12th of the following month. However, the statement contained a new line showing the aging of the receivable and showing, incorrectly, that $3700.86 was due for more than 90 days. As noted above, the remaining balance was $2653.68, which was first invoiced 90 days previously. Because it has not been paid the remaining balance on the subject policy, Dana Roehrig issued a notice of cancellation sometime during the period of October 16-19, 1987. The notice, which was sent to the insured and Commonwealth, advised that the policy "is hereby cancelled" effective 12:01 a.m. October 29, 1987. It was the policy of Dana Roehrig to send such notices about ten days in advance with two or three days added for mailing. One purpose of the notice is to allow the insured and agency to make the payment before the deadline and avoid cancellation of the policy. However, the policy of Dana Roehrig is not to reinstate policies if payments are received after the effective date of cancellation. Upon receiving the notice of cancellation, the insured immediately contacted Mrs. Blint. She assured him not to be concerned and that all would be taken care of. She told him that the property was still insured. The insured reasonably relied upon this information. The next time that the insured became involved was when the building's ceiling collapsed in June, 1988. He called Mrs. Blint to report the loss. After an adjuster investigated the claim, the insured heard nothing for months. He tried to reach Respondent, but she did not return his calls. Only after hiring an attorney did the insured learn that the cancellation in October, 1987, had taken effect and the property was uninsured. Notwithstanding the cancellation of the policy, the October 31 statement was identical to the September 30 statement except that payment was due by November 12, rather than October 12, and the aging information had been deleted. By check dated November 12, 1987, Commonwealth remitted to Dana Roehrig $3598.27, which was the total amount due on the October 30 statement. Dana Roehrig deposited the check and it cleared. The November 30 statement reflected zero balances due on the subject policy, as well as on the unrelated policy. However, the last entry shows the name of the subject insured and a credit to Commonwealth of $2717 plus sales tax of $81.51 minus a commission readjustment of $271.70 for a net credit of $2526.81. The record does not explain why the net credit does not equal $2653.68, which was the net amount due. It would appear that Dana Roehrig retained the difference of $125.87 plus the downpayment of $1000 for a total of $1125.87. It is possible that this amount is intended to represent the earned premium. Endorsement #1 on the policy states that the minimum earned premium, in the event of cancellation, was $1257. By check dated December 23, 1987, Dana Roehrig issued Commonwealth a check in the amount of $2526.81. The December 31 statement reflected the payment and showed a zero balance due. The record is otherwise silent as to what transpired following the issuance of the notice of cancellation. Neither Mrs. Blint nor Dana Roehrig representatives from Orlando testified. The only direct evidence pertaining to the period between December 31, 1987, and the claim the following summer is a memorandum from a Dana Roehrig representative to Mrs. Blint dated March 24, 1988. The memorandum references the insured and states in its entirety: Per our conversation of today, attached please find the copy of the cancellation notice & also a copy of the cancellation endorsement on the above captioned, which was cancelled effective 10/29/87. If you should have any questions, please call. Regardless of the ambiguity created by the monthly statements, which were not well coordinated with the cancellation procedure, Mrs. Blint was aware in late March, 1988, that there was a problem with the policy. She should have advised the insured, who presumably could have procured other insurance. Regardless whether the June, 1988, claim would have been covered, the ensuing litigation would not have involved coverage questions arising out of the cancellation of the policy if Mrs. Blint had communicated the problem to the insured when she received the March memorandum. Following the discovery that the policy had in fact been cancelled, the insured demanded that Respondent return the previously paid premiums. Based on advice of counsel, Respondent refused to do so until a representative of Petitioner demanded that she return the premiums. At that time, she obtained a cashiers check payable to the insured, dated June 1, 1990, and in the amount of $2526.81. Although this equals the check that Dana Roehrig returned to Commonwealth in December, 1987, the insured actually paid Commonwealth $1000 down and $2885.16 for a total of $3885.16. This discrepancy appears not to have been noticed as neither Petitioner nor the insured has evidently made further demands upon Respondent for return of premiums paid. The insured ultimately commenced a legal action against Commonwealth, Dana Roehrig, and American Empire. At the time of the hearing, the litigation remains pending.
Recommendation Based on the foregoing, it is hereby recommended that the Department of Insurance and Treasurer enter a final order finding Respondent guilty of violating Sections 626.561(1) and, thus, 626.621(2), Florida Statutes, and, pursuant to Sections 626.681(1) and 626.691, Florida Statutes, imposing an administrative fine of $1002.70, and placing her insurance licenses on probation for a period of one year from the date of the final order. If Respondent fails to pay the entire fine within 30 days of the date of the final order, the final order should provide, pursuant to Section 626.681(3), Florida Statutes, that the probation is automatically replaced by a one-year suspension. RECOMMENDED this 5th day of February, 1992, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 5th day of February, 1992. COPIES FURNISHED: Hon. Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, FL 32399-0300 Bill O'Neil, General Counsel Department of Insurance The Capitol, Plaza Level Tallahassee, FL 32399-0300 James A. Bossart Division of Legal Affairs Department of Insurance 412 Larson Building Tallahassee, FL 32399-0300 Thomas F. Woods Gatlin, Woods, et al. 1709-D Mahan Drive Tallahassee, FL 32308
The Issue The issue for determination is whether Respondent committed the offenses set forth in the administrative complaint, and, if so, what action should be taken.
Findings Of Fact At all times material hereto, Peter Gregory Santisteban (Respondent) was licensed as a general lines agent by the State of Florida. At all times material hereto, Southern Associates Insurance Agency (Southern Associates) was a licensed general lines insurance agency by the State of Florida. Southern Associates was incorporated. At all times material hereto, Respondent was the owner, sole stockholder, president, and corporate director of Southern Associates. At all times material hereto, Respondent had sole responsibility for the financial affairs of Southern Associates and had sole signatory authority on Southern Associates’ checking account. AAPCO is a premium finance company. At all times material hereto, Respondent and AAPCO had an arrangement in which policies written by Respondent, which needed financing, would be financed by AAPCO. The arrangement between Respondent and AAPCO was executed as follows: Respondent maintained AAPCO drafts and had signatory authority on APPCO drafts. If a client needed financing, Respondent would receive a down payment from the client on the insurance premium. The down payment was approximately thirty-three percent of the premium. Respondent would receive a commission of approximately fifteen percent. His commission would be taken from the down payment. Respondent would execute an APPCO draft payable to the insurance company for the total premium less his commission. Respondent would forward the down payment less his commission (net) to AAPCO, the premium finance company. In or around 1990 or 1991, the execution of the arrangement changed in that, instead of writing a check to AAPCO for each insured’s net, Respondent would use transmittal forms which permitted Respondent to write one check for the net of multiple insureds. On or about March 25, 1994, Respondent issued check number 1503 from the account of Southern Associates payable to AAPCO in the amount of $1,215.14 for payment of multiple nets due to AAPCO. The check was deposited in the account of AAPCO but was returned for insufficient funds. On or about May 26, 1994, Respondent issued check number 1517 from the account of Southern Associates payable to AAPCO in the amount of $2,706.73 for payment of multiple nets due to AAPCO. The check was deposited in the account of AAPCO but was returned due to the account being closed. On or about July 13, 1994, AAPCO made demand for Respondent to pay the moneys due it. Respondent did not and has not paid AAPCO the moneys due. The total amount owed by Respondent to AAPCO is $3,921.87. Respondent attempted to reach an agreement with AAPCO wherein he would make monthly payments until the moneys due had been paid in full. AAPCO rejected Respondent’s offer and instead requested that Respondent make a lump sum payment of $2,000 and pay the remainder in monthly installments. Due to financial difficulty, Respondent was unable to agree to AAPCO’s payment option.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Insurance and Treasurer enter a final order Suspending the license of Peter Gregory Santisteban, as a general lines agent, for nine months; and Conditioning the reinstatement of his license after the expiration of the suspension upon his payment of $3,921.87 to AAPCO. DONE AND ENTERED this 28th day of February, 1997, in Tallahassee, Florida. ERROL H. POWELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 28th day of February, 1997. COPIES FURNISHED: Bob Prentiss, Esquire Division of Legal Services 612 Larson Building Tallahassee, Florida 32399-0300 Miguel San Pedro, Esquire 825 Southeast Bayshore Drive Suite 1541 Miami, Florida 33131 Bill Nelson State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Daniel Y. Sumner General Counsel The Capitol, LL-26 Tallahassee, Florida 32399-3100
The Issue Whether the Petitioner application for licensure as a resident life, variable annuity and health agent should be granted or denied.
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 is the state agency responsible for issuing licenses "authorizing a person to be appointed to transact insurance or adjust claims for the kind, line, or class of insurance identified in the document." §§ 626.015(9) and 626.112(1)(a), Fla. Stat. Prior to December 4, 2002, Mr. Porras was licensed in Florida as an insurance agent. He was also part-owner of The Garpo Group, Inc. ("Garpo Group"), an insurance agency. On October 18, 2002, the Department (formerly the Department of Insurance) and Mr. Porras entered into a Settlement Stipulation for Consent Order ("Settlement Stipulation") as a result of an investigation by the Department that resulted in allegations of wrongdoing on the part of Mr. Porras. In the Settlement Stipulation, Mr. Porras agreed to surrender his agent's licenses to the Department. Mr. Porras did not admit in the Settlement Stipulation that he committed the acts alleged by the Department. A Consent Order was entered on December 4, 2002. The Consent Order incorporated the terms of the Settlement Stipulation and provided that the surrender of Mr. Porras's licenses "shall have the same force and effect as a revocation pursuant to Section 626.641, Florida Statutes"; that Mr. Porras "shall not engage or attempt or profess to engage in any transaction or business for which a license or appointment is required under the insurance code or directly or indirectly own, control, or be employed in any manner by any insurance agent or agency . . . ."; and that Mr. Porras "shall not have the right to apply to the Department for another license under the Insurance Code within two (2) years of the effective date of revocation." Neither the Settlement Stipulation nor the Consent Order included a deadline by which Mr. Porras was required to divest himself of his ownership interest in the Garpo Group. On April 24, 2003, a Purchase and Sale Agreement ("Agreement") was executed whereby Mr. Porras, Eduardo Garcia, Mayda Garcia, and Luis Garcia, who were identified as the principals of the Garpo Group, agreed to sell the Garpo Group to Jose Peña and Peter Rivero. The Agreement included a purchase price of $50,000.00, payable in an initial deposit of $20,000.00, with the remaining balance to be paid "in monthly installments of no less than $500.00 (Five Hundred Dollars), and no more than $2,500.00 (Two Thousand Five Hundred Dollars)." A Special Condition of the Agreement provided that Mayda Garcia, "Shareholder/Registered Agent/General Agent/Director," and Luis Garcia, "Shareholder/Director," would "remain in Corporation in their current capacity until final payment for sale of business is paid." Mr. Porras retained an interest in the monthly payments to be made by Mr. Peña and Mr. Rivero for the purchase of the business. In accordance with the terms of the Consent Order, Mr. Porras surrendered his license and did not subsequently engage in the transaction or solicitation of insurance. Mr. Porras did not exercise any control over the Garpo Group after entry of the Consent Order. Mr. Porras worked for the Garpo Group as a bookkeeper from May 2004 through October 2004.3 He was paid $175.00 per week, and his duties included reconciling the Garpo Group's bank accounts, entering deposits in the system, and cutting checks on the Garpo Group accounts.4 It can be reasonably inferred from the evidence presented by Mr. Porras regarding his understanding of the terms of the Consent Order that Mr. Porras was aware when he accepted employment with the Garpo Group that the terms of the Settlement Stipulation and of the Consent Order prohibited him from any involvement in the business of the Garpo Group, including employment "in any manner."
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED the Department of Financial Services enter a final order finding that Lorenzo Alejandro Porras violated the terms of a Consent Order entered by the Department of Financial Services and denying his application for licensure as a resident life, variable annuity, and health agent, pursuant to Section 626.611(13), Florida Statutes. DONE AND ENTERED this 29th day of March, 2006, in Tallahassee, Leon County, Florida. S PATRICIA M. HART 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 29th day of March, 2006.
The Issue Whether Highlands has standing to challenge the Department's Emergency Rule 4ER93-20, Florida Administrative Code, and if so, whether Sections 2(d) and 6(a) should be invalidated because they constitute invalid exercise of delegated legislative authority?
Findings Of Fact The Moratorium Statute During Special Session B of 1993 the Florida Legislature passed HB 89- B. The Governor signed the bill into law on June 8, 1993. Now codified as Section 1 of Chapter 93-401, Laws of Florida, the law, in pertinent part, provides as follows: Section 1. Moratorium on cancellation and nonrenewal of residential property coverages.-- * * * (3) MORATORIUM IMPOSED.--Effective May 19, 1993, no insurer authorized to transact insurance in this state shall, until the expiration of this section pursuant to subsection (6), cancel or nonrenew any personal lines property insurance policy in this state, or issue any notice of cancellation or nonrenewal, on the basis of risk of hurricane claims. All cancellations or nonrenewals must be substantiated by underwriting rules filed with and accepted for use by the Depart- ment of Insurance, unless inconsistent with the provisions of this section. The Department of Insurance is hereby granted all necessary power to carry out the provisions of this section. Pursuant to the Moratorium Statute, on an emergency basis, the Department promulgated Emergency Rule 20. The Challenged Sections The sections of Emergency Rule 20 Highlands seeks to have invalidated are 2(d) and 6(a): 4ER93-20 Procedures For Applying for Moratorium Exemption and Required Insurer Corrective Action on Previous Notices of Cancellation or Nonrenewal. * * * (2) General Provisions. * * * (d) House Bill 89-B, as enacted at the May 1993 Special Legaislative (sic) Session, revoked all prior approvals issued by the Department, of insurer plans for programs of onrenewals and cancellations, where the non- renewal or cancellation was not effective as of May 19, 1993, notwithstanding that the notice of nonrenewl or cancellation was issued before May 19, 1993. * * * (6) Required Action On Prior Notices of Cancellation. (a) Any insurer which, prior to May 19, 1993, shall have issued any notice of cancellation or nonrenewal, whether approved by the Department or not, upon the basis of risk of hurricane claims, which cancellation or non- renewal was not yet effective as of May 19, 1993, shall revoke said notice and shall not cancel or nonrenew such policy, or if same has been cancelled or non-renewed subsequent to May 19, 1993, shall immediately reinstate coverage without lapse as if there had been no cancellation or nonrenewal. The insurer shall also, by no later than June 10, 1993, mail by first class mail to every policy holder and agent who was sent such notice or whose policy was so cancelled or non-renewed, written advice that the previous notice is withdrawn, and that the coverage will not be cancelled or nonrenewed, or that the coverage is rein- stated, as the case may be. In the event that the renewal premium has not been received because the insured was operating under the impression that the coverage was not renewable, or a premium is due because the insurer has already refunded the unearned premium, the insurer shall allow the insured a reasonable period after receipt of an invoice from the insurer, in which to forward the required premium, and the insurer shall provide coverage during that reasonable period. Insurance and the parties Insurance is defined in Florida as "a contract whereby one undertakes to indemnify another or pay or allow a specified amount or a determinable benefit upon determinable contingencies." Section 624.02, Florida Statutes. A highly regulated business activity, insurance is regulated primarily at the state level. The Department of Insurance, among other powers and duties, enforces the provisions of the Florida Insurance Code against insurers, including Highlands, defined by the Code as, "those persons engaged as indemnitor, surety or contractor in the business of providing insurance." Section 624.02, Florida Statutes. Highlands Insurance Company, domiciled in Texas, is a stock insurance company admitted to transact insurance in Florida as a foreign insurer. After many years of transacting insurance in Florida, Highlands was issued a "new permanent Certificate of Authority" from the Department by letter dated November 22, 1991. The certificate authorized Highlands to write "Homeowner Multi Peril" and "Commercial Multi Peril" lines of business as well as numerous other lines. Pursuant to its Certificate of Authority the standard homeowner's policy issued in Florida by Highlands allowed for cancellation by the homeowner at any time through notice to the company. It allowed for cancellation by Highlands under limited circumstances. And it allowed for non- renewal by written notice within a certain number of days before the policy's expiration date. Reinsurance From the early 1960s through June 30, 1993, Highlands wrote its Florida property and casualty insurance, through a reinsurance facility ("SU Reinsurance Facility") made available by Southern Underwriters, Inc. ("Southern"). Under the terms of the SU Reinsurance Facility, 93.5 percent of homeowners and commercial risks insured by Highlands are reinsured to a large group of reinsurers. Highlands retains only 6.5 percent of its homeowners and commercial lines risks. The SU Reinsurance Facility consists of two principal reinsurance agreements, which, in the aggregate, reinsure 93.5 percent of the liabilities of the homeowners and commercial lines insurance written in Florida by Highlands and its wholly owned subsidiary, Highlands Underwriters Insurance Company ("HUIC"). One agreement is the Quota Share agreement, the other is the Obligatory Surplus agreement. For each homeowners or commercial policy, the risks are ceded pro-rata under the two agreements, 25 percent to the Quota Share and 75 percent to the Obligatory Surplus. Highlands and HUIC retain 16 percent and 5.5 percent, respectively of the 25 percent of total risk attributable to the Quota Share agreement for a total of 5.375 percent of total risk. Highlands retains 1.5 percent of the 75 percent of total risk attributable to the Obligatory Surplus agreement or 1.125 percent of total risk. Highlands exposure to total risk, therefore, is 6.5 percent. The total risk for each policy attributable to Quota Share is 19.625 percent and to Obligatory Surplus 73.875 percent which equals, together, 93.5 percent of total risk. Hurricane Andrew and Claims against Highlands Hurricane Andrew struck Florida on August 24, 1992. The most costly civil disaster in the history of the United States, it caused over 16 billion dollars ($16,000,000,000) in insured losses, alone. As a result of the hurricane, Highlands incurred claims totalling approximately 337.3 million dollars ($337,300,000) under its homeowner and commercial lines policies. Highlands' 6.5 percent share of the losses on these claims was 21.9 million dollars ($21,900,000). The reinsurers' 93.5 percent share of the losses on the claims was 315.4 million dollars ($315,400,000). Highland's 1992 year-end policyholder surplus was 255.4 million dollars ($255,400,000). Thus, the claims incurred by Highlands as the result of Andrew exceeded its 1992 surplus by more than 80 million dollars ($80,000,000). Quota Share Reinsurance Cancellation By letter dated January 15, 1993, Highlands was formally notified that its reinsurers had terminated the Quota Share Facility for policies to be written or renewed on and after July 1, 1993. Highlands was unable to secure reinsurance to replace the terminated reinsurance. Highlands Response to Reinsurance Loss Based on the loss of the Quota Share reinsurance, Highlands notified the Department by letter dated January 22, 1993 (one week after the date of the letter by which Highlands received formal notice of the termination of the Quota Share reinsurance) that it would cease to write "Dwelling and Homeowner's insurance effective May 1, 1993 and after," Pet.'s Ex. 4., that is, that it would "discontinue" the writing of the "Multi Peril Homeowner's" line of insurance, one of the many lines authorized by the Certificate of Authority as shown on the certificate face. The January 22 "Discontinuance" letter was sent, in the words of Highlands' Vice-President for Reinsurance Jose Ferrer, because, "the magnitude of our involvement in Florida especially with Hurricane Andrew was such that we were losing our reinsurance protection, we had to take immediate action to protect our company." (Tr. 36) On January 22, 1993, discontinuance by an insurer from transacting any line of insurance in Florida was governed by Section 624.430, Florida Statutes and Emergency Rule 4ER92-11. Section 624.430, F.S., bears the catchline "Withdrawal of insurer or discontinuance of writing certain classes of insurance." With regard to the action taken by the January 22 letter, (notice of discontinuance of a line), the statute provides, in pertinent part: Any insurer desiring to ... discontinue the writing of any one or multiple kinds or lines of insurance in this state shall give 90 days' notice in writing to the department setting forth its reasons for such action. Rule 4ER92-11, (the "Withdrawal" Rule) entitled "Withdrawal of Insurers From the State," includes discontinuances of any line of property insurance as well as the complete cessation of writing any insurance business in an expansive definition of withdrawal: ... to cease substantially all writing of new or renewal business in this state, or to cease writing substantially all new or renewal business in any line of property insurance in this state; or in either of the two preceding instances, to cut back on new or renewal writings so substantially as to have the effects of a withdrawal. Section (2)(b), 18 Fla. Admin. Weekly 7318 (Nov. 25, 1992). The Withdrawal Rule goes on to interpret Section 624.430 as "authorizing the Department to evaluate the sufficiency of the reasons" for withdrawal (or as in the case of Highlands for discontinuance of one or more lines) and to "impose reasonable terms and conditions regarding withdrawal [including discontinuance] as are necessary to prevent or reasonably ameliorate such adverse consequences." Id. Section 3(c). At no time after Highlands' Notice was received by the Department and before May 1, 1993 did the Department provide a written response, request a meeting, impose conditions upon discontinuance, or otherwise object to or deny Highlands' Notice. In addition to mailing a notice that it would cease to write Homeowner's and Dwelling lines effective May 1, 1993, Highlands began sending out non-renewal notices. Some were sent after May 19, 1993, the effective date of the Moratorium Statute. Highlands began sending non-renewal notices because of the loss of reinsurance and because of its position that the moratorium did not apply to Highlands. It did not matter to Highlands whether Andrew had occurred or not. If the reinsurance had been cancelled without a hurricane, Highlands would have taken exactly the same steps. On the other hand, if the reinsurance had remained in place in the wake of Andrew, Highlands would be writing the same lines and policies it did before Andrew. Mr. Ferrer believed the reinsurance was cancelled, not because of the risk of future hurricane loss, but "as the result of the massive loss from Hurricane Andrew." (Tr. 51) While the obvious inference to be drawn from his belief is that the reinsurer fears the risk of future hurricane loss, that is not the only inference that could be drawn. Massive losses could render a reinsurer incapable of providing any reinsurance to any party under any circumstances, regardless of the risk of future hurricane claims. Nonetheless, Mr. Ferrer testified that if there were no risk of future hurricane loss to homeowners, Highland would continue to write policies it is now refusing to renew: Q ... If there were no risk of hurricane loss, would you write the business? A Yes, if we can include wind on all policies. HEARING OFFICER MALONEY: Could you repeat that answer ... ? A The answer is, if there is no windstorm ability, hurricane ability, we will have no problem writing the policies. (Tr. 54) Thus, Highlands began sending 45-day notices of nonrenewals to its homeowners policy holders, on the basis of its position that it had withdrawn the line in Florida and because it had lost its reinsurance. But Highlands is also not renewing policies which expire during the moratorium because of risk of future hurricane loss. Insurance Crisis in the Aftermath of Andrew The immensity of Andrew's impact to insurers doing business in Florida created an extremely serious situation for the Florida property insurance market. The Legislature described the situation this way: Hurricane Andrew ... has reinforced the need of consumers to have reliable homeowner's insurance coverage; however, the enormous monetary impact to insurers of Hurricane Andrew claims has prompted insurers to propose substantial cancellation or non- renewal of their homeowner's policyholders. ... [T]he massive cancellations and non- renewals announced, proposed, or contemplated by certain insurers constitute a significant danger to the public health, safety and welfare, especially in the context of a new hurricane season, and destabilize the insurance market. (Ch. 93-401, Laws of Florida, Section 1., Pet.'s Ex. 15). Between Hurricane Andrew and May 1993, the Department received notices from 38 insurers seeking to withdraw from homeowners insurance or reduce their exposure for homeowners insurance in the state. Twenty of these insurers filed notices of total withdrawal from the homeowners line. Eighteen sought to impose restrictions on new or renewal homeowners' business. Together the 38 insurers comprise approximately 40 percent of the Florida homeowners market. Of the 18 insurers seeking to impose restrictions, the greatest single source of impact on the Florida market came from the changes proposed by Allstate Insurance Company. Allstate proposed to nonrenew 300,000 homeowners policies in certain coastal counties. The Department scheduled two days of public hearing on Allstate's notice of intent to restrict writings. The first was scheduled to take place in Clearwater on May 17. The second, held in Plantation on May 18, was attended by "[p]robably close to a thousand [people] -- in excess of 500 hundred anyway. There was a lot of people." (Testimony of Witness Kummer, Tr. 148). Complaints from citizens were received expressing that "it was inappropriate for Allstate to be able to cancel their policies and that something should be done to assist in that." Id. at 150. The Department's Response On May 19, 1993, the Department promulgated Emergency Rule 4ER93-18, imposing a moratorium on the cancellation and nonrenewal of personal lines policies including homeowners, as follows: (3)90 Day Moratorium Imposed. As of the effective date of this rule, no insurer authorized to transact insurance in this state shall, for a period of 90 days, cancel or non- renew any personal lines property insurance policy in this state, or issue any notice of cancellation or nonrenewal, on the basis of risk of hurricane claims. All cancellations or nonrewals (sic) must be substantiated by underwriting rules established and in effect on August 23, 1992. The State's Response to the Insurance Crisis a. The Governor's Proclamation and Call for a Special Session. On May 25, 1993, Governor Chiles issued a Proclamation. Addressed "To the Honorable Members of the Florida Senate and Florida House of Representatives," it contains the following pertinent "Whereas" clauses: WHEREAS, the damage resulting from Hurricane Andrew has prompted the insurance industry in Florida to propose substantial cancellation or nonrenewals of homeowner insurance policies, and WHEREAS, it is appropriate to provide a moratorium period to protect Florida's home- owners while a study is conducted to assess the effect of these extraordinary events on the insurance industry which occurred as a result of Hurricane Andrew, and WHEREAS, a study of the commercial viability and competitiveness of the property insurance and re-insurance industry in Florida would provide the Governor and the Legislature with the information needed to assess whether current regulatory statutes should be amended, and WHEREAS, certain additional statutory amend- ments are required to make necessary insurance coverage available to provide fundamental protection to the citizens of this state, and WHEREAS, it is appropriate to amend the pro- clamation of May 13, 1993, to add to the matters considered by the Florida Legislature convened in special session, the implementa- tion of a moratorium on personal lines property insurance cancellations or non- renewals, ... (Pet.'s Ex. 24). The Proclamation convenes the Legislature for the purpose of considering: (a) Legislation to implement and, if necessary extend for [a] period not to exceed 90 additional days, the emergency rule promulgated by the Insurance Commissioner, 4ER93-18. 1993 Special Session B Pursuant to the Governor's May 25, 1993 Proclamation and a May 13, 1993 Proclamation, the 1993 Florida Legislature was called into special session, Special Session B. Finding the public necessity for an orderly property insurance market to be overwhelming, the 1993 Legislature imposed, "for a limited time," a moratorium on cancellation or nonrenewal of personal lines residential property insurance policies, beginning May 19, 1993. Id. The moratorium applies to personal lines residential property insurance. It does not apply to commercial coverages or passenger auto coverages, whether commercial or private. The Legislature allowed an exception from the moratorium for those insurers which "affirmatively demonstrate to the department that the proposed cancellation or nonrenewal is necessary for the insurer to avoid an unreasonable risk of insolvency." Section 1(4), Ch. 93-401, Laws of Florida. If the department determines that the exception affects more than 1 percent of any class of business within the personal lines residential property market, then the department may set a schedule for nonrenewals, cancellation or withdrawal that avoids market disruption. Presumably, the moratorium will cover the 1993 hurricane season. The section of Ch. 93-401, Laws of Florida, that imposes the moratorium is repealed on November 14, 1993. Promulgation of Emergency Rule 20 On June 4, 1993, the Department promulgated Emergency Rule 20, effective the same date. According to the testimony of Hugo John Kummer, Deputy Insurance Commissioner, Emergency Rule 20 embodies three aims: first, to set a procedure for applying for a moratorium exemption allowed by the Moratorium Statute, [set forth in the rule outside Sections 2(d) and 6(a)]; second, to require a notice to update consumers who had received notices of cancellation or nonrenewal with the information that the earlier notices had been rendered temporarily ineffective under the moratorium, [Section 6(a)], and; third, to inform insurers who had entered consent orders with the Department governing the method with which the insurers were with- drawing from the State or restricting coverage, that the approvals by the Department found in the consent orders were overridden by the Moratorium Statute, [Section 2(d)]. (Tr. 136) On this last point, Mr. Kummer's testimony is consistent with the testimony of Douglas Shropshire, Director of the Department's Division of Insurer Regulation, one of two drafters of Emergency Rule 20 and the drafter of Section 2(d). Mr. Shropshire testified that the rule "simply reiterates the statute and provides the procedures for implementing [the Moratorium Statute]." Resp.'s Ex. 11, p. 25. With regard to Section 2(d), Mr. Shropshire testified as follows: Q Now, could you please direct your attention specifically to just the words, "Revoked all prior approvals issued by the Department," and explain how this implements the statute. A It simply repeats what the statute provides. It, basically, reiterates the statute. That moratorium statute, 89-B, essentially freezes all cancellation or nonrenewal action during the pendency of the 89-B moratorium. Q What would be the status of the moratorium, subsequent to November 14th, 1993, as you understand it? A Assuming that no other legislation is enacted that affects the subject at the special session, then prior approvals would be, again, effective, and companies could again being (sic) acting -- they could, basically, pick up where they had left off when the moratorium began. Q All right. What, if any, additional restrictions does the language place upon insurers above the requirements of the statute? A Absolutely, none. It is apparent, therefore, that if the Department's silence in response to Highlands' January 22, 1993 "Discontinuance" Letter constituted an "Approval," it was not the intent of the Department through the promulgation of Section 2(d) of Emergency Rule 20 to revoke that approval. The goal of the Department in promulgating the section was simply to inform parties to Consent Orders that any Department approval contained in the Consent Order had been revoked. Moreover, the Department's intent in using the term "revoke" was not "revoke" in the legal sense of rendered null and void and forever ineffective but more akin to "suspend" in a temporal sense. It was the Department's intent that any prior approval by the Department of a withdrawal or imposition of restrictions by an insurer was simply suspended by the Moratorium Statute temporarily, that is, for the life of moratorium - until November 14, 1993. Likewise, if the Department's silence following the January 22 Discontinuance Letter constituted an "approval," it would be the Department's intent that Section 2(d) would have no effect other than suspending the approval until the repeal of the Moratorium Statute on November 14, 1993. The import of the Department's intent in promulgating Emergency Rule 20 is dependent on whether the rule is ambiguous or plain on its face as concluded below in this order's Conclusions of Law.
Findings Of Fact At all times pertinent to this proceeding Respondent, HOWARD P. HAUSER, was eligible for licensure and licensed in this state by the Florida Department of Insurance as a Life and Health Insurance Agent; General Lines Insurance Agent - Property, Casualty, Surety, and Miscellaneous Lines; and Legal Expense Insurance Agent. At all times pertinent hereto, Respondent was the registered agent and an officer or director of Hauser and Associates Insurance Agency, Incorporated of 7770 Davie Road Extension, Hollywood, Florida. Beginning on or about January 1, 1986, and continuing through August 31, 1987, Respondent represented to one of his clients that he had obtained insurance coverage for that client's three restaurants. This representation of coverage was false. Respondent received from the client insurance premium payments of $56,550.00, more or less, for the insurance of the client's three restaurants. These funds were obtained by Respondent under false pretenses. Respondent provided the mortgagee of one of the restaurants owned by his client with a document purporting to be a certificate of insurance on that restaurant from Scotsdale Insurance Company insuring the restaurant for the period December 11, 1985, to December 11, 1986. Respondent further provided the mortgagee with a declaration sheet stating that Protective Insurance Company would insure the restaurant from January 1, 1987, to January 1, 1990. Respondent falsified these declaration sheets. Respondent's client suffered no loss, other than the loss of his premium dollars, because of Respondent's misrepresentations as to coverage. Respondent was charged with one count of Grand Theft of the Second Degree, a second degree felony, based on the dealings with his client. Respondent entered a plea of nolo contendere to the charge of Grand Theft of the Second Degree. The Circuit Court, in and for Broward County, Florida, placed Respondent on probation for a period of three years and withheld adjudication of guilt. As a condition of the Order of Probation, the court required that Respondent make restitution to his client in the amount of $56,550.00 and further required that $15,000.00 be paid toward restitution on October 24, 1988, the date Respondent entered his plea of nolo contendere and the date the court entered the Order of Probation. Respondent made a restitution payment of $15,000.00 on October 24, 1988. Respondent has been licensed by Petitioner since April 1972. Although Petitioner has received other complaints about Respondent, no formal action has been previously taken against him. Respondent has been a good citizen, except for this misconduct, and a good family man. Respondent regrets his misconduct. Respondent timely requested a formal hearing after the Administrative Complaint was served upon him.
Recommendation Based on the foregoing findings of fact and conclusions of law it is RECOMMENDED that the Department of Insurance enter a final order which revokes all licenses issued by the Department of Insurance to Respondent, Howard Paul Hauser. DONE and ENTERED this 21st of July, 1989, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 904/488-9675 Filed with the Clerk of the Division of Administrative Hearings this 21st day of July, 1989. APPENDIX The proposed findings addressed as follows: of fact submitted on behalf of Petitioner are 1. Addressed in paragraph 1. 2. Addressed in paragraph 2. 3. Addressed in paragraph 6. 4. Addressed in paragraph 3. 5. Addressed in paragraph 4. 6. Addressed in paragraphs 3-4. The proposed findings of fact submitted on behalf of Respondent are addressed as follows: Addressed in paragraph 9. Addressed in paragraph 6. Addressed in paragraph 6. Rejected as being unnecessary to the conclusions reached. Addressed in paragraph 7. Addressed in paragraph 5. Addressed in part in paragraph 7. Rejected in part as being speculative. Rejected as being a conclusion of law and not a finding of fact. COPIES FURNISHED: Robert G. Gough, Esquire, (at the hearing) and Charles Christopher Anderson, Esquire, (on the proposed recommended order) Office of Legal Services 412 Larson Building Tallahassee, Florida 32399-0300 Gary D. Weiner, Esquire, Glendale Federal Building Suite 209 901 Southeast 17th Street Fort Lauderdale, Florida 33316 Honorable Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, FL 32399-0300 Don Dowdell, General Counsel Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, FL 32399-0300
The Issue Whether Respondent violated Sections 627.832(1)(i) and 627.848, Florida Statutes, and if so, what penalty should be imposed.
Findings Of Fact Respondent, Alliant Premium Finance Corporation, is a Florida licensed premium finance company domiciled in Florida. Alliant has been licensed to sell premium finance agreements to the general public in Florida since December 16, 1993. William J. Villari has been the president of Alliant since its licensure. In 1995, Petitioner, Department of Insurance, performed a routine regulatory examination of Alliant. During the examination, 15 Alliant files, which had refunds due to insureds within 30 days, were reviewed. Out of the 15 files, 12 were late, ranging from 87 to 329 days late. The Department sent Alliant the Department's 1995 Report of Examination, which gave notice to Alliant that between December 16, 1993, and June 30, 1995, Alliant had violated the insurance code by failing to make refunds within 30 days. Mr. Villari advised the Department by letter dated December 18, 1995, that he was taking steps to ensure that in the future refunds would be made on a timely basis. No disciplinary action was taken by the Department as a result of the 1995 examination. During January 1998, the Department performed another routine regulatory examination of Alliant. The findings of the examination are contained in the Report of Examination for the period from July 1, 1995, to September 30, 1997. As was noted in the report, 11 Alliant accounts were reviewed which had refunds due to insureds within 30 days, and 8 of the 11 accounts were refunded late. The lateness ranged from 5 to 67 days. The report was mailed to Alliant on February 17, 1998. The 1998 examination also revealed that between July 1, 1995, and September 30, 1997, Alliant had failed to maintain certificates of mailing showing that notices of intent to cancel insurance contracts were mailed to insureds ten days before cancellation. The evidence did not show that Alliant had failed to mail the cancellation notices, only that Alliant had failed to maintain certificates showing that the notices had been mailed. Respondent does not dispute that Alliant was late in making refunds as noted in the 1998 Examination Report or that Alliant did not maintain certificates of mailing for the cancellation notices. Alliant disagrees with the penalty proposed by the Department.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered, finding that Alliant Premium Finance Corporation violated Sections 627.832(1)(i) and 627.848(1), Florida Statutes, and imposing a penalty of $2,500 for the violation of Subsection 627.832(1)(i), Florida Statutes, and $250 for the violation of Section 627.848(1), Florida Statutes. DONE AND ENTERED this 24th day of May, 2000, in Tallahassee, Leon County, Florida. SUSAN B. KIRKLAND Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 24th day of May, 2000. COPIES FURNISHED: Christopher R. Hunt, Esquire Department of Insurance Division of Legal Services 612 Larson Building 200 E. Gaines Street Tallahassee, Florida 32399-0333 William J. Villari, President Alliant Premium Finance Corporation 303 Gardenia Street West Palm Beach, Florida 33401 Honorable Bill Nelson State Treasurer and Insurance Commissioner Department of Insurance The Capitol, Plaza Level 2 Tallahassee, Florida 32399-0300 Daniel Y. Sumner, General Counsel Department of Insurance The Capitol, Lower Level 26 Tallahassee, Florida 32399-0300
