The Issue The central issue in this case is whether the Respondent is guilty of the violations alleged in the Administrative Complaint and, if so, what penalty should be imposed.
Findings Of Fact Based upon the testimony of the witnesses and the documentary evidence received at the hearing, I make the following findings of fact: At all times material to allegations of the Administrative Complaint, Respondent, William John Harnett, has been licensed or been qualified for licensure as an insurance agent in the State of Florida. Respondent currently holds licenses for service lines insurance, debit insurance, ordinary life and health insurance, and general lines insurance (which is property, casualty, or surety). The Department is charged with the administration of Chapter 626, Florida Statutes. On December 15, 1975, the Department was appointed to serve as Receiver of Southern American Fire Insurance Company (Southern) . The purpose of this receivership was to seek the rehabilitation of the insurance company. On February 10, 1976, Southern was determined to be insolvent pursuant to Section 631.011(3), Florida Statutes and the Department, as Receiver, obtained an Order of Liquidation. The Department was charged with the responsibility of marshalling the company's assets in order to settle the outstanding claims against it. To this end, the Department filed civil suits against insurance agents and agencies which had allegedly failed to remit premium monies owed to Southern. One such suit was against Harnett, Inc., Respondent, and other individuals associated with Harnett, Inc. From April 9, 1947 until November 14, 1986, Harnett, Inc. was a corporation organized under the laws of the State of Florida whose general business was insurance. Respondent served as the treasurer and a director for Harnett, Inc. Respondent was authorized to and did sign checks and correspondence on behalf of Harnett, Inc. The Department's civil suit against Harnett, Inc. (Case No. 76-23143) was filed in Dade County on July 26, 1976. This suit claimed Harnett, Inc. had failed to remit premium monies owed to Southern and that Respondent, as an officer and director of Harnett, Inc. having direct supervision or control over individuals acting on behalf of Harnett, Inc., was personally liable for the amounts owed. On March 6, 1981, a final judgment (Case No. 76-23143) was entered in favor of the Department as Receiver of Southern. This judgment found against Respondent and Harnett, Inc., jointly and severally, in the sum of $78,617.85. This judgment was affirmed on appeal. 1/ The Department has attempted to collect the funds awarded in this judgment. From October 26, 1962 until November 14, 1986, Franklin Insurance Agency of Miami, Inc. (Franklin) was a corporation organized under the laws of the State of Florida. At all times material to this cause, Respondent was president and a director of Franklin. On October 20, 1976, the Department as Receiver of Southern filed a civil suit against Respondent and Franklin. This suit (Case No. 76-32799) claimed monies were owed to Southern for premiums Franklin had failed td remit. Further, the suit alleged that Respondent, as Franklin's president and director, was personally liable for the refusal and continued refusal of Franklin to pay the premiums. A final judgment was entered for the Department as Receiver of Southern in the Franklin suit on December 9, 1980. This judgment (case No. 76- 32799) provided for recovery against Franklin and Respondent, jointly and severally, in the sum of $35,983.39. The Department has attempted to collect the funds awarded in this judgment. Gables Insurance Agency, Inc. (Gables), organized on November 28, 1967, continues as an active corporation in this state. At all times material to the allegations in the Administrative Complaint, Respondent was the sole officer and director for Gables. Norfolk & Dedham Mutual Fire Insurance Company, Inc. (Norfolk) entered into Agency Agreements with Gables and Harnett, Inc. on February 1, 1976. Subsequently, Norfolk sued Harnett, Inc. (Case No. 84-03815) and Gables (Case No. 84-03816) for premium monies it was claimed to be owed. These suits resulted in final judgments in favor of Norfolk. The suit against Harnett, Inc. (Case No. 84-02815) found the sum of $54,556.00 was owed to Norfolk. The suit against Gables (Case No. 84-03816) found the sum of $18,843.20 was owed to Norfolk. The four judgments identified herein (paragraphs 8, 11, 14 and 15) total $188,000.44 and remain unsatisfied. These judgments represent money damages owed for unpaid insurance premiums. An applicant for licensure with outstanding judgments incurred during the course of doing the business of insurance would not be approved by the Department without a showing of restitution or rehabilitation. The Department deems such an applicant to be untrustworthy, incompetent, and not fit to become qualified and licensed in Florida. Respondent offered no evidence of restitution or rehabilitation. Respondent maintained that no monies were owed by the respective debtor companies or Respondent individually.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That Department of Insurance and Treasurer enter a Final Order revoking the licenses held by Respondent, William John Harnett. DONE and RECOMMENDED this 5th day of July, 1988, in Tallahassee, Florida. JOYOUS D. PARRISH 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 5th day of July, 1988.
Conclusions THIS CAUSE came on for consideration and final agency action. On April 10, 2001, an Administrative Complaint was issued by the Department of Insurance alleging that Respondent Matilda M. Vath failed to timely remit cash collateral and misappropriated, converted or wrongfully withheld fiduciary funds. Respondent timely filed a request for a proceeding pursuant to section 120.57(1), Florida Statutes. For purposes of the Section 120.57, Florida Statutes, hearing this matter was consolidated with the related case in the matter of John L. Vath in case no. 40065-01-AG. Pursuant to notice, the consolidated matter was heard before William F. Quattlebaum, Administrative Law Judge, Division of Administrative Hearings, on November 30, 2001. After consideration of the record and argument presented at the hearing, the Administrative Law Judge issued his consolidated Recommended Order on February 22, 2002. (Attached as Exhibit A). The Administrative Law Judge recommended that a Final Order be entered suspending for three (3) months the licenses and eligibility for licensure of Matilda M. Vath as a limited surety agent, and requiring the refunding of $318.00 to Augustavo Porro. On March 8, 2001, the Respondent timely filed exceptions to the Recommended Order. The Respondent's exceptions are addressed below. RULINGS ON REPONDENT'S EXCEPTIONS Respondent's factual exceptions, which were filed in consolidation with the matter of John L. Vath in case no. 40065-01-AG, were made in an eight paragraph Exceptions to Findings of Fact. Respondent's exceptions do not specifically identify a single specific paragraph or finding of fact in the Recommended Order. For the purpose of this ruling on Respondent's exceptions each paragraph of Respondents’ Exceptions to Findings of Fact is treated as a separate exception. 1. Respondent's first exception is that the record does not support a finding that any willful act was done in violation of the laws of the State of Florida. This exception is not made to any specific finding of fact in the Recommended Order. Respondent's exception is made without support of the record.. It is legally insufficient to merely state that the findings of fact are not supported by the record or were not supported by competent substantial evidence. Hoover v. Agency for Health Care Administration, 676 So.2d 1380 (Fla. 3 DCA 1996). For the purpose of ruling on Respondent's exception it is presumed that the Respondent's exception relates to paragraph 28 of the Recommended Order, which finds as follows: 28. In this case, either the Respondents acted in an untrustworthy and dishonest manner in willful violation of the statutes and rules relevant to this incident or the facts establish a lack of reasonable adequate knowledge and technical competence on their part. There is competent substantial evidence in the record to support this finding of fact. Although the two forfeited bonds totaled only $2,000, the Petitioners took from Mr. Porro money far in excess of that amount. The Petitioners took from Mr. Porro $500 for the two $250 bonds even though those bonds had not been forfeited. The Petitioners’ also took from Mr. Porro an additional $304 for costs and expenses that had not been incurred and which the Petitioners have subsequently not been able to substantiate. Moreover, Petitioners’ defense that the violations were attributable to errors by the Petitioners’ office staff not timely remitting the money owed to Mr. Porro, would, if believed, not excuse the Respondent's from the conclusion that they willfully acted in an untrustworthy and dishonest manner or that the facts establish a lack of reasonable adequate knowledge and technical competence on their part. As evidence of their willful disregard for the responsibilities imposed upon them by the insurance code to faithfully handle monies entrusted to them, the Respondent's admitted that neither corporate officer of the agency exercised direct supervisory control over the office staff they had charged with the responsibility of remitting the money due to their customers, including Mr. Porro. (See Hearing Transcript, page 85, line 25, through page 86, line 17; and page 102, lines 10 through 24). The agency’s authority to reject or modify findings of fact is limited by the provisions in section 120.57(1)(I), Florida Statutes, which provides that “the agency may not reject or modify the findings of fact unless the agency first determines from a review of the entire record, and states with particularity in the order, that the findings of fact were not based upon competent substantial evidence or that the proceedings on which the findings were based did not comply with essential requirements of law.” Because there is competent substantial evidence in the record to support the ALJ's finding of fact, the Department would have to improperly reject the Administrative Law Judge’s findings of fact to permit the adoption of Respondent's exception. Adoption of Respondent's exception would also require that the Department reweigh the evidence. The Department cannot reweigh the evidence. The weight given to the evidence is the province of the Administrative Law Judge and cannot be disturbed by the agency unless the finding is not supported by competent substantial evidence. Brogan v. Carter, (Fla. 1st DCA 1996). Accordingly, Respondent's exception is rejected. 2. Respondent's second exception is that “the record does not support a finding that the customers owed $318.00.” Paragraph 2, Respondent’s Exceptions to Findings of Fact. The Recommended order does not make a finding that any customers owed $318.00. For the purpose of this ruling on Respondent's second exception, it is presumed that the Respondent's exception relates to the Administrative Law Judge’s conclusion that the Respondents Mildred M. Vath and John L Vath owe Mr. Porro $318.00. There is competent substantial evidence in the record to support this finding of fact. Respondents John and Matilda Vath initially took $2,804 from Mr. Porro. (Hearing Transcript, page 22, lines 2 through 11). Respondents made a partial return of the money to Mr. Porro in two payments in the amount of $1,994 and $492. (Hearing Transcript, page 24, line 13 through page 27, line 12). Consistent with the Administrative Law Judge’s finding of fact that money retained by the Respondents for improperly documented expenses are due to Mr. Porro, which finding cannot be reweighed here, the outstanding amount owed by the Respondent's to Mr. Porro is $318. To grant the Respondent's exception, the Department would have to improperly reject findings of fact that are based on competent substantial evidence and reweigh the evidence. Accordingly, Respondent’s second exception is rejected. 3. Respondent's third exception is that the only evidence recording the expenses was the testimony of the Respondents. This exception is not made to any specific finding of fact in the Recommended Order. For the purpose of ruling on this exception it is presumed that Respondent's exception pertains to the finding of fact in paragraph 33 of the Recommended Order that the “improperly documented” expenses are due to Mr. Porro. This exception is an attempt to reargue the facts of the case and requires that the Department improperly reweigh the evidence and reject findings of fact made by the Administrative Law Judge. To reach his conclusion in paragraph 33, the Administrative Law Judge necessarily rejected the testimony of the Respondents on this issue. Because the Respondent's arguments would require that the Department improperly reweigh the evidence, this exception is rejected. 4. Respondent's fourth exception is that there is no evidence showing which of the Respondents was in direct control of the office staff. Respondents then proceed to argue it was the office staff that was responsible for the violations. There is no finding of fact in the Recommended Order that one of the Respondents was in direct control of the office staff. Moreover, as discussed above in the ruling on Respondent's first exception, the lack of control by the Respondents over their office staff, if believed, would not exculpate the Respondents but would aggravate the violations found herein. Accordingly, Respondent's fourth exception is rejected. 5. Respondent's fifth exception is that there is no evidence of willfulness for any of the alleged violations. This is a repeat of the Respondent's first exception. Having already rejected that exception, Respondent's fifth exception is also rejected. 6. Respondent's sixth exception contends that there is insufficient evidence to show a willful deprivation of money. This is another repeat of the Respondent's first and fifth exceptions. Having already rejected those exceptions, Respondent's fifth exception is also rejected. 7. Respondent's seventh exception is that the record does not support a finding that the indemnitor paid the entire bail bond. Respondent's then proceed to argue that the indemnitor failed to pay $89.00 of the premium. Respondent's exception is not directed to any particular finding of fact in the recommended order. It is also not clear to which specific finding of fact this exception could be attributed. There is no specific finding of fact made in the Recommended Order that the indemnitor “paid the entire premium.” Nor do the Respondents argue or explain the relevance of this factual argument to any factual finding in the Recommended Order. Accordingly, Respondent’s seventh exception is rejected. 8. Respondent's eighth exception reads as follows: “The evidence fails to show a substantial woeful [sic] violation of the Insurance Code, or the laws of the State of Florida, or the Law Administrative Code [sic].” For the purpose of ruling on this exception it is presumed that it was Respondent's intent to refer to the finding of willful violations of the Insurance Code in paragraph 28 of the Recommended Order. This is a restatement of the Respondent's first, fifth, and sixth, exceptions. Having already rejected those exceptions, Respondent's eighth exception is also rejected for improperly requiring that the Department reweigh the evidence. Upon careful consideration of the record, the submissions of the parties, and being otherwise fully advised in the premises, it is ORDERED: 1. The Findings of Fact of the Administrative Law Judge are adopted in full as the Department's Findings of Fact. 2. The Conclusions of Law of the Administrative Law Judge adopted in full as the Department's Conclusions of Law. 3. That the Administrative Law Judge 's recommendation that a Final Order be entered suspending for three (3) months the licenses and eligibility for licensure of Matilda M. Vath as an insurance agent, and requiring the refunding of $318.00 to Augustavo Porro, is approved and accepted as being the appropriate disposition. ACCORDINGLY, Matilda M. Vath’s limited surety agent license is suspended for a period of three (3) months. The suspension shall be effective from the date of entry of this Final Order. Matilda M. Vath is hereby also ordered to remit $318.00 to Augustavo Porro, which sum constitutes the outstanding amount of cash collateral that Matilda M. Vath and John L. Vath, who is the respondent in the related case no. 40065-01-AG, owe to Mr. Porro. Pursuant to Section 648.50, Florida Statutes, the suspension of Respondent's licenses and eligibility for licensure is applicable to all licenses and eligibility held by Respondent under the Florida Insurance Code. Pursuant to Sections 648.49(3) and 648.50(3), Florida Statutes, the Respondent shall not engage in 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 a bail bond agent or agency during the period of suspension. Pursuant to Section 648.49(1), Florida Statutes, Respondent's licensure shall not be reinstated except upon request for such reinstatement, and the Respondent shall not engage in the transaction of insurance until his licensure is reinstated. The Department shall not grant reinstatement if it finds that the circumstance or circumstances for which Respondent's licenses were suspended still exist or are likely to recur.
Findings Of Fact At present, and at all times relevant, Michael Mason is, and has been president of International Assurance Underwriters, Inc. (IAU), 2600 Maitland Center Parkway, Maitland, Florida. Respondent Mason was licensed as an insurance agent in the State of Florida in 1978 and continued to be licensed at all times relevant to this proceeding. He is currently eligible for licensure as a surplus lines insurance agent and general lines insurance agent. Prior to its emergency temporary suspension in this proceeding, Mason's license has not been subject to discipline. IAU was incorporated on or about March 11, 1991. Its directors were Michael Mason, John Erb and Robert Campbell. Shortly thereafter, a Limited Binding Authority Agreement was made between Assicurazioni Generali, S.P.A. (Generali), an international insurance company with a branch in London, and Leslie & Godwin Special Risks Ltd., London, (Leslie & Godwin) authorizing Leslie & Godwin to bind insurances, issue certificates of insurance, and settle claims on behalf of Generali. M.C. Rutty, Citadel Insurance Services, Ltd., London (Citadel), was designated as intermediary. Article II of the agreement provides, in pertinent part,"... the binding of insurances hereunder shall be the responsibility of one of the persons named in Section B.2 herein...." (Petitioner's Exhibit #16) Section B.2 provides, in pertinent part: 2. Persons authorized to use this Limited Binding Authority It is a condition of this Agreement that all insurances submitted hereunder must be first accepted and approved by the following persons: Michael T. Mason John K. Erb [names handwritten and initialled by Barry West, Director of Leslie & Godwin, and Maurice Rutty] (Petitioner's exhibit #16) The agreement provided for Generali to insure hospitality businesses (hotels, motels, restaurants, bars, taverns and the like) in the United States, for property limits up to $1,000,000 per location, general liability limits up to $1,000,000 and liquor legal liability up to $1,000,000. Under the arrangement, IAU, as approved producing agent, obtained requests for insurance from its subagents and other brokers or companies. Requests were forwarded to Generali, through Citadel and Leslie & Godwin. Generali was the ultimate authority to approve the risk, but Leslie & Godwin and IAU had some limited authority to bind the company on a temporary basis. Each month a bordereau, or list, was to be submitted by IAU through Citadel and Leslie & Godwin showing what policies were written that month. Premiums were due thirty (30) to forty-five (45) days from the end of the month. IAU immediately began providing insurance business for Generali, primarily involving insureds in Florida, and primarily through three Florida insurance companies: Hull & Company, Hummel Co., and Southeast Insurers, Inc. Except for delays in getting copies of policies in some cases, representatives from these companies noted nothing out of the ordinary in their dealings with IAU or Michael Mason. Claims were made and paid; premiums were paid by the companies to IAU. Sometime around the end of October or early November 1991, the companies learned that a cease and desist order had been entered by the Florida Department of Insurance against IAU. Maurice Rutty and attorneys representing Leslie & Godwin and Citadel met with the companies and obtained lists of policies obtained for them by IAU. At the time that the cease and desist order was entered, the companies had on hand premium funds due to be paid to IAU for Generali policies. Those funds have not been paid and allegedly remain in the companies' accounts. Notwithstanding the risk limits in the Limited Binding Authority Agreement, a substantial number of policies were written by IAU for more than $1,000,000. Ocean Properties was an account involving multiple properties, mostly hotels, with an aggregate risk of $300 to $400 million. A single building in the Bahamas was insured with $45 million property coverage. Maurice Rutty claims that Generali never approved the coverage beyond the $1 million limit, but instead obtained excess coverage beyond the limit after Generali learned of IAU's actions. Rutty admits that Generali routinely approved limits beyond $1 million, but only to $1.2 or $1.5 million. Michael Mason claims that he properly forwarded the paperwork to Citadel, that he never dealt directly with Generali, but that the policies were approved. In June 1991, Generali informed Citadel that it would no longer write policies in Florida as it was concerned about windstorm liability. This change was conveyed to Michael Mason by telephone by Maurice Rutty and by facsimile transmission from Eve Russell, Rutty's partner. In a telephone call with Rutty, Mason argued that the limitation would cripple IAU as most of its work was in Florida. Mason also provided a list of Florida policies showing what he believed was an acceptable ratio of coastal to inland properties. Mason continued to approve policies for Generali on Florida properties. Mason believed that he and Generali, through communication with Citadel, had gotten around the problem of windstorm hazards. The Limited Binding Authority Agreement includes a section styled "underwriting guidelines". One such guideline is that "...a wind exclusion or deductible may apply to risks located within one mile from the coastline." (Petitioners exhibit #16) Mason considered that a discretionary guideline and included windstorm deductibles on some risks located by the ocean. The bordereaux, or lists, submitted by Mason to Citadel were reasonably appropriate, according to Maurice Rutty, except for one or two premium discrepancies, which is normal. The premiums submitted to Citadel for Generali's policies from IAU and other producers were net premiums, after the commissions were deducted. At some point Mason learned that someone in his office had bound risks that were not originally submitted on his list. A supplemental list was filed for those six policies and the premiums were submitted. After Maurice Rutty learned that the bank account set up by Citadel in the United States for receipt of premiums was frozen by the Florida Department of Insurance, he traveled to Florida to meet with the various companies who were providing business to IAU for Generali. He found what he claimed were approximately 140 policies which were written through IAU but were never approved by Generali. With one exception, eventually all of those policies were covered by Generali. The exception was a large policy for the Catholic Diocese of Nassau, Bahamas, which Generali cancelled after a 3-month notice. The policy was beyond the scope of the hospitality program described in the Limited Binding Authority Agreement. No one from Generali nor Leslie & Godwin testified, and the exact nature of the relationship between those companies and IAU was not clearly established. Michael Mason was not a signatory to the Limited Binding Authority Agreement. Rutty's testimony regarding what was approved or disapproved by Generali was unclear. He insisted that Generali did not approve the coverage beyond $1 million, but excess policies were acquired by Generali for the additional amounts. He conceded that facsimile notices of those policies and the Florida policies written after June 1991 could have been received by Citadel, but he did not explain how the coverage denial by Generali was communicated to Mason or IAU. He insisted that coverage was ineffective prior to approval by Generali or by Barry West, but the language of the Limited Binding Authority Agreement appears to delegate some approval responsibility to Mason and Erb. Evidence on what premiums are still due from IAU is also unclear. The Florida companies providing business to IAU concede that they are holding some premium funds. Mason has over $1 million in bank accounts that are frozen by the Florida Department of Insurance. He argues that these funds are sufficient to pay any premiums that were due from IAU when the emergency agency action was taken the end of October 1991. Counsel for the agency concedes that no audit was done, but he has added the premiums for all the policies written by IAU for Generali that were submitted by Hull & Company, Hummel Company and Southeast Insurers, Inc., and those premiums exceed the funds available in Mason's accounts. This exercise does not prove a misappropriation by Mason. It fails to take into account funds still being held by the three companies and funds which even Maurice Rutty concedes were paid for premiums up to the liability limits of $1 million (see transcript, p. 145, lines 11-12). No Florida insurance consumer testified as to failure to receive requested insurance or the incurrence of financial losses, and evidence by the three company representatives did not establish these alleged violations by Mason. The evidence did establish that a once cordial and informal relationship between Citadel and IAU deteriorated by October 1991. Mason also conceded that some problems existed with staff in his office, but except for the delayed submittal of six policies, the nature of the problems was not defined. No witness explained how those internal problems constituted violations of the Florida Insurance Code.
Recommendation Based on the foregoing, it is hereby, recommended that the Administrative Complaint dated November 18, 1991, be dismissed. RECOMMENDED this 1st day of May, 1992, in Tallahassee, Leon County, Florida. MARY CLARK 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 1st day of May, 1992. APPENDIX TO RECOMMENDED ORDER, CASE NO. 91-7548 The following constitute rulings on the findings of fact proposed by Petitioner: Adopted in paragraph 1. Adopted in paragraph 2. Adopted by implication in paragraphs 3 and 5. Adopted in part in paragraph 4, otherwise rejected as unsupported by the evidence. 5.-6. Rejected as contrary to the weight of evidence. Adopted in paragraph 4. Adopted in part in paragraph 4, otherwise rejected as unsupported by the weight of evidence. The actions of the parties, including Generali and Citadel, as well as IAU were not in strict compliance with the Limited Binding Agreement and it is apparent that other agreements, written or oral, existed to govern those actions. 9.-10. Adopted in paragraph 4. 11. Adopted in paragraph 7. 12.-13. Adopted in paragraph 8. Adopted by implication in paragraph 9. Addressed, but not adopted, as unsupported by competent clear evidence. Adopted in paragraph 5. 17. Rejected as contrary to the weight of evidence. 18. Adopted in summary in paragraph 5. 19.-21. Rejected as irrelevant. 22. Adopted in paragraph 9. 23.-24. Rejected as irrelevant (see paragraph 11). COPIES FURNISHED: James A. Bossart, Esquire Dept. of Insurance & Treasurer Division of Legal Services 412 Larson Building Tallahassee, FL 32399-0300 Jason Reynolds, Esquire Box 5428 Daytona Beach, FL 32118 Tom Gallagher State Treasurer & Insurance Commissioner The Capitol, Plaza Level Tallahassee, FL 32399-0300 Bill O'Neil, General Counsel Dept. of Insurance & Treasurer The Capitol, PL-11 Tallahassee, FL 32399-0300
