Findings Of Fact The Corporation, John L. Bennett, Sr., Inc., is a corporation organized and existing under the laws of the State of Georgia. Mr. John L. Bennett, Sr., is the sole owner of all its outstanding stock. The corporation conducts a small loan business, and makes and collects all its loans exclusively within the State of Georgia. The Corporation has never engaged in any other business. The Corporation has been assessed intangible tax upon accounts receivable made and collected within the State of Georgia for the years 1973, 1974 and 1975. On October 26, 1976, the Corporation paid the tax totaling Nine Hundred Sixty-Eight Dollars and Eighty-Six Cents ($968.86), including interest and penalties. Georgia intangible tax was also paid on these receivables for the same years. On May 27, 1977, the Corporation formally executed a requisition for refund of the intangible tax payment. On June 9, 1977, the requisition for refund of taxes was denied by the Office of the Comptroller. John L. Bennett, Sr. is president of the Corporation as well as sole stock holder. He resides in Orlando, Florida, and has lived there since 1937. Mr. Bennett maintains a small office in Orlando staffed with a full-time secretary. The Corporation pays the rent on the office, the secretary's salary, Mr. Bennett's salary, insurance premiums and other miscellaneous items. A check for these expenses is mailed each month from the Corporation's Georgia office to the Orlando office where it is deposited in a local bank account. The secretary in the Orlando office then draws on the account in order to make the foregoing payments. During the tax years in question, the Corporation maintained as many as four loan offices in Georgia. That number has since been reduced to the one presently located in Waycross, Georgia. The Orlando office is the only one which keeps centralized financial data from all Georgia offices. In addition to maintaining these duplicate records, the Orlando office is used for the preparation of all corporate tax returns. Mr. Bennett also keeps his personal records there. However, no customer transactions are conducted from Orlando. Corporate meetings are held in the Orlando office and Mr. Bennett visits the Corporate offices in Georgia Once a month. Most policy decisions are made in the State of Georgia during these monthly trips, however, Mr. Bennett writes letters and makes phone calls to the Georgia offices from Orlando two to three times each month as required by circumstances. Corporate employees in Georgia have the authority to, and do, make routine business decisions on their own. All corporate funds are kept in Georgia with the exception of the monthly expense check referred to previously.
The Issue Should Respondent's license as an insurance agent in the State of Florida be disciplined for the alleged violation of certain provisions of Chapter 626, Florida Statutes, as set forth in the Administrative Complaint and, if so, what penalty should be imposed?
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant findings of fact are made: The Department is the agency of the State of Florida vested with the statutory authority to administer the disciplinary provisions of Chapter 626, Florida Statutes. Respondent, at all times relevant to this proceeding, was licensed as an insurance agent in the State of Florida. Respondent is also currently licensed in the State of Florida as a life and life and health insurance agent. Sometime around May 30, 2000, Patricia I. Coburn and her husband, Kevin L. Coburn received a postcard from Guarantee Reserve Life Insurance Company (Reserve Life) indicating that the Coburns may want to consider life insurance since Social Security only paid $250.00 in death benefits. Kevin Coburn was no longer employed, and the life insurance coverage with his former employer was no longer in force. Therefore, the Coburns, in response to the postcard, made contact with Respondent by telephone. Patricia Coburn testified that Respondent came to the Coburn's home on May 30, 2000, in response to the telephone call. However, Respondent was in the Coburns' home on only one occasion and that was when the application was completed and signed, which was May 31, 2000. The Coburns were looking for an insurance policy that would cover "final" expenses. The Coburns settled on a joint whole life policy with Reserve Life, which carried death benefits of $18,000.00, with an $18,000.00 accidental death coverage and a $5,000.00 child rider. At all times relevant to this proceeding, Kevin Coburn suffered from impaired vision (due to diabetic retinopathy), heart problems (by-pass surgery and congestive heart failure), and kidney problems (in renal failure and currently receiving dialysis three times a week). However, Kevin Coburn's health condition was not readily apparent to Respondent at the time he was in the Coburns' home around May 31, 2000. The application for the insurance policy required that Respondent ask both Kevin Coburn and Patricia Coburn a series of health questions, which required a yes or no answer. The application also required Respondent to mark each of the Coburn's responses in the appropriate place on the application. Respondent asked both Kevin Coburn and Patricia Coburn the required health questions. Other than question number 7 and question number 12, which did not require an answer due to the Coburns' age, each answered the questions with a "no" answer, notwithstanding Patricia Coburn's testimony to the contrary, which lacks credibility in this regard. Based on the Coburns' responses, Respondent marked "no" to the appropriate questions on application. Questions 3(A) and (F), 6.(3), and 9. of the Application provide in pertinent part as follows: Have your ever been diagnosed or treated by a member of the medical profession as having, or have you ever taken medication for: (1) Chronic Kidney Disease; or (2) any kidney disorder for which you are currently receiving dialysis? * * * F. Congestive Heart Failure? * * * 6. During the last 1 year, have you had a . . .(3) heart or by-pass surgery . . .? * * * 9. During the last 5 years, have you had Heart-By-Pass surgery? Respondent marked the answer "no" to these questions for both Kevin Coburn and Patricia Coburn. The application inquired as to whether either of the applicants was disabled. The Coburns responded that they were not disabled but employed, and Respondent so marked the application. After Respondent completed the application, he handed the application to the Coburns for them to review and sign. While it may be questionable as to whether Kevin Coburn reviewed the application, including the answers to the health questions, due to his failing eyesight, Patricia Coburn certainly had the opportunity to review the application, including the answers to the health questions. Neither Patricia Coburn nor Kevin Coburn discussed or revealed Kevin Coburn's current medical condition with Respondent prior to, or during the time, Respondent was filling out the application, including the responses to the health questions, notwithstanding Patricia Coburn's testimony to the contrary, which lacks credibility in this regard. Had Respondent been made aware of Kevin Coburn's medical problems, he could have placed the Coburns' insurance with another insurance company (Cotton State Life Insurance Company or Americo Financial Life and Annuity Insurance Company), notwithstanding Kevin Coburn's medical problems. Admittedly, the policies would not have been at the standard issue rates and there would have been graded death benefits or limited death benefits. Furthermore, Respondent's commission on this type policy would be higher than on a regular death policy. Reserve Life acted favorably on the Coburns' application and in June 2000, issued Policy No. OJ11976 to the Coburns with the Basic Death Coverage as set out in the Application. Kevin Coburn died on September 19, 2000, from a staph infection as a result of his leg being amputated in August 2000, due to the diabetes. Shortly thereafter, Patricia Coburn filed a death claim with Reserve Life. Because Kevin Coburn died within two years of the issuance of the insurance policy, Reserve life, in accordance with company policy, requested Kevin Coburn's medical records so that it could review his health history in order to determine if the health questions had been answered correctly. Upon review of Kevin Coburn's health records, Reserve Life discovered that Kevin Coburn, at the time of the application, was diabetic, underwent dialysis, had undergone heart by-pass surgery, had other health problems, and was disabled. Because of his health problems and disability, Kevin Coburn was not eligible to purchase this particular insurance policy, and had Reserve Life been made aware of Kevin Coburn's health problems and disability, Reserve Life would not have issued this particular policy. In response to Reserve Life's inquiry concerning Kevin Coburn's health history, Patricia Coburn wrote a letter to Reserve Life asserting that she and Kevin Coburn had advised Respondent of Kevin Coburn's health problems, and that Respondent had apparently marked the "no" block instead of the "yes" block concerning the health questions without their knowledge. Without giving Respondent an opportunity to refute Patricia Coburn's allegations, Reserve Life offered Patricia Coburn $9,000.00 as a settlement, which she accepted. The reason for the offer of settlement by Reserve Life was that it would be Patricia Coburn's "word" against Respondent's "word." There is insufficient evidence to show that Respondent knew, or should have known, of Kevin Coburn's medical condition at the time the Coburn's applied for the insurance with Reserve Life.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order finding Respondent, Jerry Lee Surratt not guilty of violating Subsections 626.611(4),(5),(7),(8),(9), and (13), Subsections 626.621(2),(3), and (6), and Subsections 626.9541(1)(a)1., and (e)1., Florida Statutes, and dismissing the Administrative Complaint filed against Jerry Lee Surratt. DONE AND ENTERED this 15th of March, 2002, in Tallahassee, Leon County, Florida. WILLIAM R. CAVE 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) 921-6947 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of March, 2002. COPIES FURNISHED: James A. Bossart, Esquire Department of Insurance Division of Legal Services 200 East Gaines Street, Room 612 Tallahassee, Florida 32399-0333 Jerry Lee Surratt 926 Lake Deeson Pointe Lakeland, Florida 33805 Honorable Tom Gallagher State Treasurer/Insurance Commissioner Department of Insurance The Capitol, Plaza Level 02 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Insurance The Capitol, Lower Level 26 Tallahassee, Florida 32399-0307
The Issue Whether the Department properly excluded coverage for care provided to Petitioner’s child.
Findings Of Fact Petitioner, Susan Carswell, was employed by the State of Florida, Department of Labor and Employment Statistics, from June 1994 until December 1998. She enrolled herself and her children in the State Group Health Insurance Plan (State Plan). The State Plan, Section XXVIII, paragraph A, provides as follows: 18. 'Condition' shall mean any disease, illness, injury, accident, bodily dysfunction, pregnancy, drug addiction, alcoholism, or mental or nervous disorder. * * * 21. 'Covered Services and Supplies' shall mean those health care services, treatments, therapies, devices, procedures, techniques, equipment, supplies, products, remedies, for which expenses are covered under the Benefit Document. (emphasis supplied) * * * 23. 'Custodial Care' means care which does not require Skilled Nursing Care or rehabilitation services and is designed solely to assist the Participant with the activities of daily living, such as: help in walking, getting in and out of bed, bathing, dressing, eating, and taking medicine. (emphasis supplied) * * * 40. 'Illness' means physical sickness or disease, pregnancy, bodily injury, or congenital anomaly. * * * 49. 'Medically Necessary' means the service received required to identify or treat the illness, injury, or mental or nervous disorder which a physician has diagnosed or reasonably suspects. The service must (1) be consistent with the symptom [sic], diagnosis and treatment of the patient’s condition, (2) be in accordance with standards of good medical practice, (3) be required for reasons other than convenience of the patient or his/her physician, (4) be approved by the appropriate medical body or board for the illness or injury in question, and (5) be the most appropriate, efficient and economical medical supply, service, or level of care which can be safely provided. * * * 56. 'Outpatient' means a patient who is receiving medically necessary care or treatment ordered by a physician and who is not an inpatient. * * * 80. 'Skilled Nursing Care' means care which is furnished by, or under the direct supervision of, licensed Registered Nurses (under the general direction of the physician) to achieve the medically desired result and to ensure the Participant’s safety. Paragraph C of the State Plan provides for covered medical and surgical services and supplies as follows: Seventy percent(70) of the Allowance for Medically Necessary Inpatient/Outpatient services and supplies provided to a Participant by a Non-Network Provider for the treatment of the Participant as a result of a covered accident, illness. (emphasis supplied) * * * Ninety percent (90) of the Allowed Amount for Medically Necessary Inpatient/Outpatient services and supplies provided to a Participant by a Network Provider for the treatment of the Participant as a result of a covered accident, illness. (emphasis supplied) Paragraph D of the State Plan provides for other covered services as follows: The Plan shall pay eighty percent (80) of the Allowed Amount or Allowance, whichever is applicable, for the following Medically Necessary Services when ordered by a physician for the treatment of the Participant as a result of a covered accident, illness . . . . Nursing care by a Registered Nurse or Licensed Practical Nurse. Paragraph G of the State Plan provides for exclusions to covered services and supplies as follows: The following are not Covered Services and Supplies under the Plan. 4. Any services and supplies which are not medically necessary. * * * 14. Any services in connection with Custodial Care or preventive care; immunizations or except those in accordance with Child Health Supervision Services or when necessary as a result of an accident. The term "treatment" is not defined in the State Plan. Veronica Carswell is the daughter of Petitioner. She was born on May 5, 1983. Veronica was born healthy, but due to problems resulting from an illness that hospitalized her when she was a week old, she is severely disabled. Her current state is due either to her illness or an accident. She has cerebral palsy, seizure disorder, and vision problems. She is a spastic quadriplegic, severely brain damaged and profoundly mentally retarded. Her body is severely dysfunctional. She has a tracheotomy tube for breathing and a gastrostomy tube for feeding. Veronica is totally dependant on other people for her care. From 1987 to 1998, Veronica resided in a specialty care residential hospital facility in New York. In 1998, Petitioner moved her daughter to Florida so that she could reside at home. In preparation for the move, Petitioner advertised for and hired licensed practical nurses (LPNs) to provide her daughter with the care she needed on a 24-hour basis. Petitioner hired LPN’s because she had discovered it was considerably cheaper to hire an LPN than pay for the services of a lesser qualified home health care aid through a licensed home health care agency. The LPNs provided care to Veronica according to a Care Plan devised by Kathleen Hamilton, LPN, and approved by Dr. Gary Soud, Veronica’s physician. The Care Plan provides for medically necessary treatment or management of Veronica’s current condition and bodily dysfunction. The care required in the plan is recognized as appropriate care and treatment by experts in the field and is not being given for purposes of convenience. Nurse Hamilton is also one of the LPNs who care for Veronica and has provided health care services to Veronica for one year. Other LPNs provide services to Veronica similar to those provided by Nurse Hamilton. The services provided by the LPNs hired by Petitioner include repositioning of Veronica periodically throughout the day, feeding through the gastric tube, checking residual fluid in Veronica’s stomach with a syringe, administering medication through the gastric tube, misting to keep secretions moist, suctioning of the tracheotomy tube, changing the tracheotomy tube ties, replacing the tracheotomy tube every 3 weeks, assessing Veronica’s cardiopulmonary status at least every eight hours and continuously throughout her care, and monitoring Veronica’s oxygen saturation every four hours or as needed by her condition at the time. The attention Veronica requires in order to maintain her breathing is fairly constant, to the point that when Nurse Hamilton testified, she had to sit or stand beside Veronica to administer care, primarily suctioning, to her. Although seizures have not been a problem, Veronica still requires monitoring by a nurse for small seizures, which while not deadly, could adversely affect Veronica’s condition. Veronica’s condition is fragile and without constant care she can quickly deteriorate. Arguably a lay person with proper training could perform the activities involving the gastric tube and repositioning. However, the evidence did not show that Petitioner is adequately trained or able to perform the tasks required for proper use of the gastric tube or repositioning. Moreover, the evidence did not show that such training was available. Likewise, the evidence did not show that a trained lay person was available to perform the care required in relation to the gastric tube or repositioning or that such a person would be more efficient or economical to hire. In fact, the evidence showed that a trained nurse's aide would be more expensive than hiring an LPN to perform the same tasks. Therefore, it would seem appropriate that an LPN perform these services. The same economic analysis applies to all aspects of Veronica’s Care Plan. Additionally the evidence was clear that the care required which involves the gastric tube is not simply care or treatment given for the sole purpose of assisting Veronica with her activities of daily living. Veronica’s condition necessitates the use of special expertise to feed her because she does not feed normally. In order to maintain her status to prevent her deterioration and even death and to prevent infection, which are recognized medical goals, she must receive additional care such as checking her stomach fluids, and cleaning and maintenance of the gastric tube. The amount she is fed must be carefully monitored. The actual feeding of Veronica is a minimum part of the care which is required because she has a gastric tube. The greater activities are the care functions performed for the purpose of maintaining her current status and preventing infection. Since the care and treatment Veronica receives involving the gastric tube are not designed for the sole purpose of assisting Veronica to eat, they do not fall within the exclusion for custodial activities. Similarly, Veronica’s care concerning repositioning is not for the sole purpose of assisting Veronica in her activities of daily living. Repositioning maintains Veronica’s circulation and must be done in order to maintain her current health status and current level of atrophy. Repositioning also prevents the formation of pressure sores. Therefore, because repositioning has multiple medical purposes such care does not fall under the custodial care exclusion. Veronica cannot breathe without a tracheotomy tube. All of the care given to Veronica which involve the tracheotomy tube are medically necessary to maintain her current medical state and to maintain an appropriate level of oxygen in Veronica’s blood and tissues. The same is true of the John Bunn mist administered to Veronica to keep her secretions moist so that she can cough them up or have them suctioned out of her air passageway. Blockage of the air passageways is a real danger with Veronica. The tube coming out is a danger to Veronica. Without these treatments or procedures Veronica’s oxygen level would drop and she would deteriorate. As indicated earlier, the tracheotomy care is constant. Because her breathing is so impaired, Veronica needs to be monitored constantly in addition to the cardiopulmonary assessment done every eight hours and oxygen saturation check done two times per shift. Such monitoring is a nursing assessment requiring special training which is best done by a nurse. Nothing involving the tracheotomy is done for the sole purpose of aiding with Veronica’s activities of daily living. Therefore the custodial exclusion does not apply. Except for the replacement of the tracheotomy tube every month, none of the care or treatment rendered to Veronica is required to be performed by a registered nurse (RN) or under the supervision of a RN. However, some of the care and treatment requires nursing expertise of at least the training of an LPN. However, all of the care can be part of a nurse's function and, at least in this case, is better supplied by a nurse, given Veronica’s fragile condition, level of impairment and the fact that the care is provided most efficiently and economically by an LPN. Therefore, Petitioner is entitled to payment of her claim under the State Plan.
Recommendation Based upon the Findings of Fact and Conclusions of Law, it is RECOMMENDED: That Petitioner’s claim be paid. DONE AND ENTERED this 29th day of October, 1999, in Tallahassee, Leon County, Florida. DIANE CLEAVINGER 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 October, 1999. COPIES FURNISHED: Lamar Winegeart III, Esquire 219 Newman Street, 4th Floor Jacksonville, Florida 32202 Cindy Horne, Esquire Department of Management Services 4050 Esplanade Way, Suite 260 Tallahassee, Florida 32399-0950 Paul A. Rowell, General Counsel Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950 Thomas D. McGurk, Secretary Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950
The Issue The issue is whether an amendment to Rule 59G-6.010, Florida Administrative Code (1995), was an invalid exercise of delegated legislative authority due to the Agency's failure to follow applicable rulemaking procedures.
Findings Of Fact This case concerns a challenge by Petitioners to a version of the Florida Title XIX Long-Term Care Reimbursement Plan ("the Plan") which was noticed for adoption and incorporation by reference into Rule 59G-6.010, Florida Administrative Code,in the June 30, 1995 Florida Administrative Weekly. The Plan, including the version under challenge as well as prior and subsequent versions of the Plan, explains in detail how the state of Florida calculates reimbursement for Florida nursing facilities which care for Medicaid-eligible residents. The state of Florida calculates reimbursement for nursing facilities for caring for Medicaid eligible residents based on three components of nursing facility costs: operating costs, patient care costs, and property costs. Nursing facilities are reimbursed for their operating costs on a per diem basis; operating costs include such items as maintenance supplies, maintenance staff, utilities, laundry, and administration. Florida divides nursing facilities into six classes for reimbursement purposes, based on a facility's location (northern, central, or southern Florida) and size (100 beds or fewer, or more than 100 beds). Operating cost ceilings are established by Respondent for each of the classes of nursing facilities based on the operating costs achieved by nursing facilities in the class and in all classes in the state of Florida. Under both the version of the Plan under challenge here, and the immediately preceding version of the Plan, a nursing facility which achieved a per diem operating cost lower than its respective class ceiling could receive an upward adjustment to its operating cost reimbursement rate as an incentive to operate efficiently. This upward adjustment is known as an "operating incentive." In the June 30, 1995 Florida Administrative Weekly, Volume 21, Number 26, Respondent published as a proposed rule the adoption of Version XIII of the Plan. As was the case with prior versions of the Plan, Version XIII of the Plan is incorporated by reference into Rule 59G-6.010, Florida Administrative Code. The intended adoption of Version XIII of the Plan would replace Version XII of the Plan, dated May 22, 1995, as the version of the Plan incorporated by reference into Rule 59G- 6.010, Florida Administrative Code. Version XIII of the Plan, among other changes, changed the methodology used to determine the eligibility of nursing homes providing care to Medicaid patients for operating cost incentives, as well as the methodology used to calculate the dollar amount of operating cost incentives for such eligible nursing homes. The intent of the changes is to reduce the total dollar amount paid to nursing homes as operating incentives by a combination of reducing the number of nursing homes eligible to receive operating incentive payments, and reducing the dollar amount of the operating incentive payment to each eligible nursing home. Respondent's adoption of Version XIII of the Plan was in response to proviso language contained in the Florida General Appropriations Act for fiscal year 1995-96, Chapter 95-429, Laws of Florida. The proviso language was attached to specific appropriation 265, and indicated that total state Medicaid funding for nursing home care was being reduced by $13,574,661 "for the operating incentive component of Medicaid nursing home reimbursement." Chapter 95-429 did not specifically present a reimbursement formula or specify particular changes to the calculation of operating incentives to achieve these changes. Under both Version XII and Version XIII of the Plan, the threshold eligibility of a nursing facility to receive an operating incentive payment is determined based on two factors: (1) its licensure rating (superior, standard, or conditional) during a specified prior 6-month period, and (2) the utilization of the facility by Medicaid-eligible residents, stated as a percentage of the total patient days of care provided by the facility. Under both Version XII and Version XIII of the Plan, the dollar amount of operating incentives to be paid to an eligible facility was calculated using: (1) the difference between the facility's per diem operating cost and the operating cost ceiling for its class; (2) fractional adjustment factors for the number of days of superior and standard licensure ratings; (3) an upward adjustment cap tied to the pertinent class ceiling; and (4) a prorated adjustment factor for facilities with less than 90 percent Medicaid utilization. Version XIII of the Plan reduced the number of nursing homes eligible for operating incentives by raising the threshold percentage of a facility's total patient days represented by its Medicaid patient days. Under Version XII of the Plan, a facility had to provide at least 20 percent of its patient days to Medicaid residents, and meet other criteria, to receive even a partial operating incentive; under Version XIII, that threshold increased to 65 percent. In other words, under Version XIII of the Plan, facilities providing fewer than 65 percent of their patient days to Medicaid residents would not be eligible for any operating incentive regardless of their cost efficiency. Version XIII of the Plan also reduced the dollar amount of operating incentives to be paid to an eligible nursing home by implementing the additional following revisions: The fractional adjustment factor to a facility's operating cost savings, as compared to the class ceiling for the number of days of superior licensure rating was reduced from .6667 to .64, and the factor for days of standard licensure rating was reduced from .3333 to .32. The cap on a facility's operating incentive upward adjustment was lowered from 15 percent of its class ceiling to 10 percent of its class ceiling. The Medicaid utilization proration formula was modified to reduce the partial operating incentive payments to those eligible facilities whose utilization was between 65 percent and 90 percent, as compared to the partial operating incentive payments paid to nursing homes with the same utilization percentage under Version XII of the Plan. A copy of an Respondent’s internal memorandum, dated June 20, 1995, summarizes the Version XIII changes to the operating incentive calculation. Beginning July 1, 1995, Respondent began determining the eligibility of nursing homes for operating incentives and calculating the dollar amount of operating incentives to eligible nursing homes, by using the same formulas which were contained in Version XIII of the Plan. Prior to July 1, 1995, Respondent did not publish notice in any newspaper of general circulation, other than in the June 30, 1995 Florida Administrative Weekly, concerning revisions to the Plan to change the methodology used to calculate operating incentives for periods beginning on or after July 1, 1995. The June 30, 1995 notice of adoption of Version XIII of the Plan did not furnish an estimate of any expected increase or decrease in annual aggregate Medicaid expenditures; did not explain reasons for changes in the reimbursement methods; and did not identify a local agency in each county of the state where a copy of the Plan was available for review. Respondent estimated that implementation of the changes in operating incentive calculations contained in Version XIII of the Plan would result in a reduction or elimination of operating incentives for over 400 nursing homes, with over 200 of these nursing homes experiencing a loss of more than $20,000 annually. Respondent did not consult with the Florida Medical Care Advisory Committee prior to publication of notice of the intended adoption of Version XIII of the Plan, or prior to filing the Plan with the Department of State. By transmittal letter dated September 28, 1995, Respondent submitted Version XIII of the Plan to the federal Health Care Financing Administration (HCFA). The submittal to HCFA included an Institutional State Plan Amendment Assurance and Finding Certification Statement which indicated that, among other things, the state complied with the public notice requirements of 42 C.F.R. 447.205 by publishing notice of the Plan amendment on June 30, 1995. Within 21 days of the June 30, 1995 publication of notice in the Florida Administrative Weekly, four challenges to Version XIII of the Plan were filed pursuant to Section 120.54, Florida Statutes. These challenges were consolidated, and were styled: National Healthcare, L.P. v. AHCA, DOAH Case No. 95-3689RP National Healthcare, L.P. v. AHCA, DOAH Case No. 95-3690RP Servicemaster Diversified Health Services, L.P. v. AHCA, DOAH Case No. 95-3691RP Florida Convalescent Center, Inc. v. AHCA, DOAH Case No. 95-3692RP Each of these four challenges to Version XIII concerned how the Plan dealt with the determination of "related party" status, and the impact of such a determination on reimbursement. On August 18, 1995, in Volume 21, Number 23 of the Florida Administrative Weekly, at page 5517, Respondent published a Notice of Change to Version XIII of the Plan. The language modified by this change concerned the "related party" issues referenced in paragraph 16 above. On October 13, 1995, Respondent executed and filed an Agreed Upon Suggestion of Mootness in DOAH Case Nos. 95-3689RP, 95-3690RP, 95-3691RP and 95-3692RP. On October 16, 1995, the undersigned entered an Order Closing File and Relinquishing Jurisdiction in Case Nos. 95-3689RP, 95-3690RP, 96-3691RP and 95- 3692RP. On November 7, 1995, Respondent filed Version XIII of the Plan and a Certification concerning compliance with rulemaking requirements with the Department of State. The Certification, signed by Respondent’s General Counsel, Jerome Hoffman, identified the effective date of the rule revision as November 27, 1995. The first page of Version XIII of the Plan, filed with the Department of State, also identifies November 27, 1995 as the effective date of Version XIII of the Plan. On or about July 1, 1995, Respondent sent a letter to each nursing facility in the state of Florida briefly summarizing the reimbursement methodology changes contained in Version XIII of the plan, and advising each facility of the Medicaid reimbursement per diem rate pursuant to Version XIII of the Plan. In the June 28, 1996 Florida Administrative Weekly, Volume 22, Number 26, at pages 3854-3855, Respondent published as a proposed rule the revision of Rule 59G-6.010, Florida Administrative Code to adopt Version XIV of the Plan. Respondent intended for Version XIV of the Plan to replace Version XIII. On July 19, 1996 two separate petitions challenging the proposed revision to Rule 59G-6.010, Florida Administrative Code, and Version XIV of the Plan were filed with the Division of Administrative Hearings. These challenges were styled: Mediplex Rehabilitation of Bradenton v. AHCA, DOAH Case No. 96-3399RP HCP III Bradenton, Inc. d/b/a Riverfront Health Care and Rehabilitation Center v. AHCA, DOAH Case No. 96-3401RP As of the date of the parties’ Stipulation of Facts in the instant cases, Case Nos. 96-3399RP and 96-0340RP remained pending at the Division of Administrative Hearings. Prior scheduled final hearings were canceled on motion of the Petitioners in Case Nos. 96-3399RP and 96-3401RP, and status reports were submitted to Administrative Law Judge William A. Buzzett on September 25, 1996. Respondent had not filed Version XIV of the Plan with the Department of State for adoption as of the date of the parties’ Stipulation of Facts in the instant cases. For purposes of disposition of the instant Motions for Summary Final Order only, Respondent agrees that Petitioners Hillhaven, HCR and IHS have standing to bring this rule challenge. Representatives of both Hillhaven and HCR sat on the Reimbursement Committee of the Florida Health Care Association at the time that Committee held discussions, in May or June of 1995, concerning Respondent's proposed reduction in operating incentive payments to nursing facilities. Respondent contends that, as a result, Hillhaven and HCR had actual notice of the proposed reduction in operating incentives prior to Respondent's publication of Notice of Intent to adopt Plan Version XIII; as Hillhaven and HCR are unable to independently verify receipt of actual notice during the time period in question at this time, for purposes of consideration of the pending motions only, Hillhaven and HCR do not contest Respondent's assertion that they had actual notice.
The Issue Whether the Department of Insurance (hereinafter referred to as the "Department") should remove Respondent from the office of President of Perry & Company, a premium finance company authorized to do business in Florida, pursuant to Section 624.310, Florida Statutes, for the reasons set forth in the Administrative Complaint?
Findings Of Fact Based upon the evidence adduced at hearing, the factual stipulations into which the parties have entered, and the record as a whole, the following Findings of Fact are made: Respondent's Early Employment After graduating from Miami Dade Community College with an A.A. degree in computer science, Respondent was employed as a teller, and then as the head teller, at Pan American Bank in Miami, Florida. He remained in the employ of Pan American Bank for approximately six months. Respondent then went to work for Brickell Bank, another bank located in the Miami area. He started as a new accounts representative, but ultimately became the bank's "in-house computer person" and worked on various computer- related projects for the bank. Respondent was employed by Brickell Bank for a period of two to three years. Respondent left Brickell Bank to become the Vice President of Computer Operations at General Bank. At the time, First Miami Insurance Company (hereinafter referred to as "First Miami"), as well as its immediate parent corporation, General Trust Mortgage Corporation, were wholly owned subsidiaries of General Bank. First Miami was a Florida domestic property and casualty insurer, specializing in the issuance of "non-standard" automobile insurance policies. It was initially licensed by the Department in 1988. The majority shareholders of General Bank were Pedro Ramon Lopez and his wife, Teresa Saldise, who, at all times material to the instant case were practicing attorneys licensed to practice law in the State of Florida. Lopez was General Bank's Chairman of the Board. Saldise was its Vice Chairman of the Board. In late 1988 or early 1989, Respondent, who at the time had no previous experience working in the insurance industry, was assigned by General Bank the task of better automating and otherwise improving the efficiency of First Miami's operations. First Miami was having problems with its telephone and computer systems which, combined with other operational deficiencies, were resulting in delays in policy issuance and claims payments. The Department had received complaints from consumers regarding these delays, which it was investigating. During the investigation, Respondent met with a Department official and explained to him First Miami's computer operations. In the middle of 1989, Respondent became a full-time employee of First Miami. He was given the same title that he had had with General Bank, Vice President of Computer Operations. As Vice President of Computer Operations, Respondent initially reported to Frank Santanaria, who at the time was First Miami's Chief Financial Officer. Subsequently, when he assumed greater responsibility for the operations of the company, he reported to Diana Madero, First Miami's then Executive Vice President. The "Spin Off" of First Miami In August or September of 1989, General Bank decided to "spin off" both First Miami and General Trust Mortgage Corporation and make them independent of the General Bank corporate structure. The "spin off" was intended to satisfy the concerns of federal banking regulators. At the time of the "spin off," Respondent was actively involved in the day-to-day operations of First Miami. Although he did not participate in the decision to "spin off" First Miami, nor was he involved in taking any of the steps necessary to effectuate the "spin off," he was aware, before the "spin off" occurred, that the "spin off" decision had been made and was in the process of being implemented. The Post-"Spin Off" First Miami Following the "spin off," Lopez transferred his ownership interest in First Miami to Saldise. From the date of this transfer until First Miami's liquidation, Saldise was the principal shareholder and President of First Miami and, as such, the person in effective control of the company. She exercised such control through a holding company, First Miami Holding Company, in which she had a 75 percent ownership interest. Respondent was either an officer or director, or both, of First Miami Holding Company from May 23, 1990, until the administrative dissolution of the company on October 9, 1992. Although Lopez was neither a shareholder, officer nor director of First Miami following the transfer, he served as a consultant to the company and, along with his wife, made strategic decisions about the company's direction, its business activities, and its investments. In making these decisions, Saldise and Lopez occasionally sought the legal advice of other attorneys, including Stephen Rubin, with whom they dealt directly. Rubin is a member of The Florida Bar 4/ who has been practicing law since 1969, following his graduation from Columbia University Law School. 5/ He is primarily a litigator who specializes in complex corporate, commercial and regulatory matters, however, he also does general transaction work. Respondent replaced Diana Madero as First Miami's Executive Vice President, in charge of the company's day-to-day operations, sometime around the time of the "spin off" 6/ and he remained in that position until the Department's takeover of the company in June of 1992, receiving a salary of approximately $75,000.00 a year. As Executive Vice President, Respondent reported to Saldise and Lopez. For a period of time following the "spin off" Respondent also held the office of Treasurer. From at least February of 1990, until the Department's takeover of First Miami, Respondent was on its Board of Directors. As of December 31, 1991, the other members of the Board were as follows: Saldise; Raimundo Aleman, the Vice President of Accounting and Treasurer, who was responsible, throughout the period that Respondent was Executive Vice President, for the preparation of all of company's financial statements and reports; Orlando Roberto Soto, the Secretary; and Juan Saldise. November, 1989 Petition for Order to Show Cause Following the "spin off," First Miami acquired approximately $5,000,000.00 of General Bank stock. In November of 1989, federal banking regulators placed General Bank into conservatorship and seized its assets. Such action rendered worthless the General Bank stock held by First Miami. Following the takeover, an article appearing in a Miami newspaper quoted the Department's General Counsel as having said that First Miami was insolvent and that its majority shareholder, Saldise, and her husband, Lopez, had "walked off" with the $5,000,000.00 that First Miami had paid for the General Bank stock that was now worthless. Shortly thereafter, the Department filed in Leon County Circuit Court a Petition for Order to Show Cause against First Miami alleging that there was reason to believe that the company was insolvent. First Miami's business declined after the publication of the newspaper article and the filing of the Petition for Order to Show Cause. Independent insurance agents and premium finance companies were reluctant to continue their dealings with the company. Representatives of two large premium finance companies that had done a considerable amount of First Miami business, Perry & Company and Equivest Premium Finance, visited with Respondent and others at First Miami's offices to inquire about First Miami's solvency. During the pendency of the Petition for Order to Show Cause, the Department, with the assistance of auditors employed by Coopers & Lybrand, conducted an investigation of First Miami. The investigation was headed by Curt O'Shields. During his investigation, O'Shields had discussions with Respondent regarding First Miami's capital and surplus position as of September 30, 1989. Following the investigation, in a February 7, 1990, memorandum to the Department's General Counsel, O'Shields recommended that the Department "settle with [First Miami] and drop the rehabilitation proceedings." O'Shields noted in his memorandum that "[o]perationally, the Company has greatly improved" and "[f]inancially, [it] ha[s] provided evidence to support admitting certain assets sufficient to make the Company solvent." O'Shields' recommendation was followed. On or about February 13, 1990, the Department and First Miami entered into a stipulation which provided as follows: THIS STIPULATION is by and between the State of Florida, Department of Insurance and Treasurer and First Miami Insurance Company. For and in consideration of the mutual promises and covenants set forth hereinbelow, the parties stipulate and agree as follows: The parties stipulate and agree to entry of an Order of Dismissal of Civil Action 89-4343 pending in the Circuit Court of the Second Judicial Circuit In and For Leon County, Florida, and further agree immediately upon the execution of this Stipulation to enter into the Stipulation for Dismissal attached hereto as Exhibit A. First Miami agrees that it will not carry as an admitted asset any stock it may own in General Bank. The parties stipulate and agree that because Forum Reinsurance Company Limited at this time is not an approved reinsurer for purposes of its 1989 annual statement First Miami may not carry as an admissible asset the amount of reinsurance ceded in excess of the amount of First Miami's trust; provided, however, that the Department agrees to promptly review an application for approval of Forum Reinsurance Company Limited as an approved reinsurer, or a request for approval of Forum Reinsurance Company Limited as a SNAR, in good faith and on the same basis as it would review an application from any other insurer. 7/ First Miami for purposes of its 1989 annual statement shall carry its wholly-owned subsidiary, PRLS, Inc. 8/ as an admitted asset at a value of $650,000.00; provided however, that said valuation is contingent on First Miami's obtaining a fully executed contract for sale of said subsid- iary by June 30, 1990. If First Miami does not obtain an executed contract for sale of said sub- sidiary by June 30, 1990, on its June 30, 1990 financial statement and thereafter it shall not carry PRLS, Inc. as an admitted asset. Respondent, approved, but did not execute, the stipulation. The Stipulation for Dismissal, attached to the stipulation as Exhibit A, provided that the parties had "resolved all matters relevant that gave cause to the filing of the PETITION FOR ORDER TO SHOW CAUSE" and that "THEREFORE, the parties agree[d] to entry of an Order by the Court dismissing this action." Such an order was entered on February 13, 1990. Carrera Insurance Underwriters and the "No Down Payment" Program After the entry of the Order of Dismissal, First Miami engaged in a campaign to repair its relationships with independent insurance agents and premium finance companies. It also formed, in June of 1990, a subsidiary, Carrera Insurance Underwriters (hereinafter referred to as "Carrera"), so as to reduce its reliance upon business generated by independent insurance agents. Saldise, Lopez, Madero, Soto and Respondent were the initial members of Carrera's Board of Directors. To attract business, Carrera, at the suggestion of Lopez, instituted a "no down payment" program. Based on the legal research he had done, Lopez concluded that the "no down payment" program was not unlawful. Other insurance companies, independent agents, and agent associations, such as the Latin-American Agents Association and the Specialty Agents Association, complained to the Department about the program. After having received these complaints, the Department contacted First Miami and a meeting between representatives of First Miami and the Department was arranged. The meeting was held in Tallahassee. Among First Miami's representatives at the meeting were Saldise, Lopez and Respondent. The primary spokesperson at the meeting for First Miami was Lopez. Respondent's role at the meeting was to address computer-related issues. Neither at the meeting, nor at any other time, did the Department advise First Miami that it had concerns regarding the legality of the "no down payment" program. The Forum and Munauto Reinsurance Agreements First Miami's reinsurance agreement with Forum Reinsurance Company Limited (hereinafter referred to as "Forum"), which was referred to in the February 13, 1990, stipulation between First Miami and the Department, had been entered into on November 27, 1989. The reinsurance agreement with Forum was negotiated, on First Miami's behalf, by Erin Doherty of Saturn Intermediaries. She received input regarding the preferences of First Miami primarily from Saldise, Lopez and Madero. Respondent assisted in the negotiations by providing computer-generated reports and data. Respondent did not then, nor did he at any time he was with First Miami, have the authority to independently enter into contracts of reinsurance on behalf of First Miami without the prior approval of Saldise or Lopez. In conjunction with this reinsurance agreement, a Trust Agreement was entered into by Forum (as "Grantor"), First Miami (as "Beneficiary") and the Bank of New York Trust Company (as "Trustee"). Under the Trust Agreement, First Miami, rather than Forum, had the authority to direct and control the investment of trust fund assets. This was an unusual arrangement inasmuch as it is generally the reinsurer which exercises such direction and control. First Miami directed that the assets of the Forum reinsurance trust fund be invested in insurance premium finance contracts of South Florida Premium Finance Company. South Florida Premium Finance Company was a "captive" premium finance company. It financed only premiums due on policies issued by First Miami. First Miami owned 9.09 percent of the shares of South Florida Premium Finance Company. General Trust Mortgage Corporation owned the remaining shares. Respondent was an officer and director of South Florida Premium Finance Company from February 21, 1990, until October 9, 1992, the date of the administrative dissolution of the corporation. From August 1, 1989, until June 5, 1992, Respondent was either an officer or director, or both, of General Trust Mortgage Corporation. First Miami sought the Department's approval of its reinsurance arrangement with Forum. By letter dated February 26, 1990, which read as follows, the Department granted the requested approval: This is pursuant to your request for the Department to approve Forum Reinsurance Co., Ltd. of Bermuda ("Forum Re") as a "Satisfactory Non-Approved Reinsurer" for purposes of taking credit in First Miami Insurance Company's ("First Miami") accounting and financial statements for calendar year ended December 31, 1989. Your request is hereby granted under Sec. 624.610(2)(b)1, F.S., with the condition that the reinsurance contract entered into by First Miami and Forum Re shall be commuted on or before December 31, 1990 and replaced with another reinsur- ance contract satisfactory to the department. 9/ Forum commuted its reinsurance agreement with First Miami in July or August of 1990. 10/ Forum notified Doherty of its action. Doherty then contacted First Miami and discussed the matter with Respondent. Respondent asked Doherty to find an admitted reinsurer for First Miami that would be agreeable to allowing First Miami to exercise control over the investment of reinsurance trust fund assets. Doherty unsuccessfully attempted to locate such a reinsurer for First Miami. On October 11, 1990, First Miami entered into a written reinsurance agreement with Munauto, S.A., a non-admitted Spanish reinsurer, which covered both current and prior business and was particularly advantageous to First Miami. In conjunction therewith, a Trust Agreement which permitted First Miami to direct and control the investment of trust fund assets was entered into by Munauto (as "Grantor"), First Miami (as "Beneficiary") and the Bank of New York Trust Company (as "Trustee"). 11/ The reinsurance agreement contained an addendum which was signed by Respondent in his capacity as First Miami's Executive Vice President. The Munauto reinsurance and trust agreements were drafted by First Miami's retained attorney, Stephen Rubin. Saldise and Lopez had negotiated these agreements on behalf of First Miami. They first met with Munauto representatives in Spain approximately two to three months before the written agreements were executed. Following this initial meeting, Munauto's Chairman of the Board and its President visited First Miami's offices in Miami where they continued their discussions with Saldise and Lopez. During their visit, they also met with Respondent, who provided them with information regarding First Miami's operations and introduced them to the department heads. Doherty was not in any way involved in the negotiations that culminated in the execution of these agreements. In fact, she was not even aware of the existence of the agreements. As requested by Respondent, Doherty continued her efforts to obtain a suitable reinsurer for First Miami even after these agreements had been executed. Respondent had made such a request at the direction of Saldise, who wanted to explore other reinsurance options. On its Quarterly Statement for the quarter ending September 30, 1990, which was signed by Respondent and filed with Department on November 15, 1990, First Miami provided the Department with the following advisement: Forum has cancelled the Reinsurance Agreement. Munauto S.A. has replaced Forum Reinsurance Co. (P's FOF 46, 1st and 2nd sent) The Munauto reinsurance and trust agreements, however, were never submitted to the Department for approval. Investment in Premium Finance Contracts First Miami was advised by its retained attorney, Stephen Rubin, that it was legally permissible for it invest in the premium finance contract accounts receivable of South Florida Premium Finance Company. Rubin further informed First Miami that it was his legal opinion that First Miami's ownership of these premium finance contract accounts receivable constituted an admitted asset of First Miami under the Insurance Code. He explained that, in his view, First Miami's "participations" in these accounts receivable, based upon promissory notes, were tantamount to "securities," within the meaning of Section 625.012, Florida Statutes. Respondent was among those at First Miami with whom Rubin discussed this matter, and he relied upon Rubin's legal advice. The $1,000,000.00 Dividend On January 29, 1991, at a meeting of the Board of Directors of South Florida Premium Finance Company, the Board declared a "cash dividend of $1,000,000 to the shareholders of record as of December 1, 1990:" First Miami, which held 9.09 percent of the shares; and General Trust Mortgage Corporation, which held 90.91 percent of the shares. Saldise and Respondent were among the Board members present at the meeting. After the meeting, South Florida Premium Finance Company issued the following checks to First Miami and General Trust Mortgage Corporation on the dates and in the amounts indicated: check number 003541, dated May 10, 1991, to First Miami in the amount of $61,325.80; check number 003542, dated May 10, 1991, to General Trust Mortgage Corporation in the amount of $613,325.51; check number 003543, dated April 26, 1991, to First Miami in the amount of $37,387.32; check number 003545, dated April 26, 1991, to General Trust Mortgage Corporation in the amount of $373,914.31. 12/ All four of these checks were signed by Respondent and Aleman for South Florida Premium Finance Company. They all cleared the bank on May 13, 1991. The Immediate Final Order On or about March 1, 1991, the Department received First Miami's Annual Statement for the year ending December 31, 1990. The Department reviewed the statement to ascertain, applying the principles of "statutory accounting" (which differ from generally accepted accounting principles or "GAAP accounting"), First Miami's current ability to meet its obligations. 13/ The review caused the Department to be concerned that First Miami was not currently able to meet its obligations. On March 12, 1991, the Department sent First Miami a letter in which it stated the following: A review of First Miami Insurance Company's Annual Statement indicates that real estate (page 2, line 4.1) was listed at appraised market value, instead of cost, less depreciation. Premium and Agents' balances and installments booked but deferred and not yet due were $6,732,243 at December 31, 1990. Please explain the justification for the admission of this asset. Further, please indicate, how much and when the unearned premium was set up for this asset. Page 72, Schedule P-part 2b, line 12 shows a redun[dan]cy figure of (833), please explain this. The above referenced filing inconsistencies reported in the 1990 Annual Statement should be revised and reported properly in the amended 1990 Annual Statement to be filed with the Department within fifteen (15) days from the date of your receipt of this letter. In addition to the above reporting inconsistencies, the Department has conducted a Diversification analysis of First Miami Insurance Company's Annual Statement, which indicates that the company is not diversified by approximately $4,192,253. With respect to the improper diversification, please submit a business plan to the Department within thirty (30) days from the date of your receipt of this letter, indicating the company's plan of action to correct this concern. Since time is of the essence with respect to these matters, failure to respond could result in further administrative action. Should you have further questions or comments regarding these matters, please do not hesitate to contact me. Two days later, on March 14, 1991, the Department wrote to Respondent advising him that it was "imperative that [he] submit to this Department upon receipt of this letter, Premium Volume Written, Policyholders Surplus, Earned Premiums, and Losses Incurred for the months of January and February, 1991." Respondent responded immediately. In his cover letter to the Department, he stated the following: As per your request, I am attaching a copy of our total page of premiums written for January. The net premium written is $1,110,697.20, our Data processing Department is producing the end of month February reports and should be available by 3:00 p.m. on March 15, 1991. In order to determine our net surplus of January and February Mr. Raimundo Aleman, Vice President of Accounting, is presently working on producing these numbers. Please forgive us for not having these numbers available, but as you know we have spent January and February preparing the end of year blanket. Mr. Aleman will have a full set of Financial Statements for January ready for you by March 22nd. We believe that the February Financial Statement will be completed by the second or third week of April. Should you need further assistance in this matter, please do not hesitate to contact me. In a follow-up letter dated March 27, 1991, Respondent informed the Department of the following: As per your request, please be advised the accounting department has been able to finish the Financial Statement for January 1991. Our net surplus is $3,535,987.00. We are continuing to close February 1991 and as soon as the numbers become available we will forward them to you. Should you need further information regarding the aforementioned, please do not hesitate to call me. By letter dated April 9, 1991, the Department requested the following of Respondent: Pursuant to our conversation on April 1, 1991 concerning issues that are important to the Department of Insurance please confirm in writing. First Miami Insurance Company will not take credit for reinsurance because the reinsurer is an unauthorized Alien carrier, non-approved by the Department. First Miami Insurance Company, Mrs Teresa Saldise, nor her husband, Mr. Pedro Ramon Lopez, have any investments in banks in the United States or abroad. With regards to the 1990 Annual Statement, premiums, Agents Balances and installments booked but deferred and not yet due were $6,732,243, please provide documents substantiating unearned premiums excluding net of reinsurance. In addition, how much of that balance is over ninety days old? The Statement of Actuarial Opinion was not submitted with the Annual Statement, please remit within five (5) days from receipt of this letter. The company's short term assets less short term liabilities indicates a liquidity deficiency of $4,504,955. What is the company doing to improve this deficiency? Since time is of the essence with respect to these matters, failure to respond could result in further administrative action. Should you have further questions or comments regarding these matters, please do not hesitate to contact me. Respondent wrote to the Department on April 15, 1991. In his letter, he stated the following: In response to your letter dated March 12th, 1991, in reference to our Annual Statement, please be advised of the following: Premiums and Agents balances and installments booked but deferred, and not yet due were $6,732,243 at December 31, 1990. This amount reflects premium finance contracts that have been purchased from South Florida Premium Finance. The total of this amount is all outstanding monthly payments from insureds. The amount is backed by unearned premiums in the amount of $11,627,613.73. The net of that amount is also reflected on page 3, number 9. Unearned premiums Part 2A, Column 5, Item 34. Page 72 Schedule P, Part 2B line 12 shows a negative figure of $833. Please see attached. I don't believe that an amended Annual Statement is necessary due to the fact that the above two numbers in my opinion are shown correctly. Should you have any further questions about them let me know. In reference to the Diversification analysis of the First Miami Insurance Company 1990 Annual Statement, I am not sure what statute you are basing yourself on to determine whether there is a diversification problem nor how you arrive at the $4,192,253.00 figure. Can you please refer me to a particular statute or explain the manner you calculate the diversification analysis. If this amount reflects the amount invested in premiums, I believe it is a fully admitted asset according to statute 625.012(3). "Premium notes policy, policy loans, and other policy assets and liens on policies and certificates of life insurance and annuity contracts and accrued interest hereon, in an amount not exceeding the legal reserve and other policy liabilities carried on each individual policy." Should you have any further questions regarding the above, please do not hesitate to call me. On Friday, May 10, 1991, the Department issued an Immediate Final Order (hereinafter referred to as the "IFO") in which it directed that First Miami "CEASE AND DESIST instanter from writing any new, reinsurance and/or renewal business effective 5:00 P.M. Friday, May 10, 1991," inasmuch as grounds "exist[ed] for the immediate suspension or revocation of FIRST MIAMI'S certificate of authority." The IFO alleged that FIRST MIAMI in the conduct of business under its certificate of authority Is in unsound financial condition. (Section 624.418(1)(a), Florida Statutes) Is using methods and practices in the conduct of its business as to render its further transaction of insurance in this state hazardous or injurious to its policyholders or the public. (Section 624.418(1)(b), Florida Statutes) No longer meets the requirements for the authority originally granted. (624.418(1)(d), Florida Statutes) Has violated any lawful order or rule of the department or any provision of this code. (Section 624.418(2)(a), Florida Statutes) Is impaired or insolvent. (Section 624.418(3)(a), Florida Statutes Has failed to have and keep to the extent of an amount equal to its entire reserve and the minimum capital and surplus required to be maintained. (Section 625.305(1), Florida Statutes Has entered into and ceded reinsurance to non-approved reinsurers. (Section 624.610(2)(b), Florida Statutes) Has excess investments in subsidiaries and affiliates. (Section 625.325(2), Florida Statutes) With respect to the issue of reinsurance, the IFO further, more specifically, alleged the following: FIRST MIAMI took a credit for reinsurance in Forum Reinsurance Company, Ltd., a non-approved reinsurer, in the amount of $3,479,939.00, which contract, pursuant to agreement with the DEPART- MENT, was to be replaced with another reinsurance contract satisfactory to the DEPARTMENT by December 31, 1990. In addition, FIRST MIAMI'S 1990 Annual Statement reflects a credit for reinsurance in Munauto Reinsurance, S.A., a non-approved reinsurer, in the amount of $6,358,231.00. The reinsurance contract was entered into in 1990 by FIRST MIAMI with a non-approved reinsurer and has not been approved by the Department in violation of Section 624.610, Florida Statutes. Since neither of these companies are approved by the Department, the Department cannot determine if either can satisfactorily pay current or future claims of the insureds in this state. With respect to the "Premium and Agents' balances and installments booked but deferred and not yet due" referred to in the Department's March 12, 1991, letter to First Miami, the IFO alleged the following: The balance of $6,732,243.00 due from FIRST MIAMI'S subsidiary and premium finance company, South Florida Premium Finance Company, consisting of FIRST MIAMI'S premiums, agents balances and installments shown on the books but deferred and not yet due was 201 percent of policyholders surplus. Such amounts should have been submitted to FIRST MIAMI at the time premiums were financed. As reflected on the 1990 Annual Statement, the amount represents a loan back to South Florida Premium Finance Company and as such, is a receivable from an affiliate which exceeds the allowable statutory limitation by $5,837,107.00 in violation of Section 625.325(2), Florida Statutes. In addition, such amount is not shown as a loan on the 1990 Annual Statement for South Florida Premium Finance Company. Pursuant to section 625.012, Florida Statutes, only those investments and loans held in accordance with the Florida Insurance Code may be considered in determination of financial condition. Therefore the $5.8 million cannot be considered an asset of the company. According to the IFO, although "FIRST MIAMI'S policyholders surplus as indicated on its 1990 annual statement was $3,347,596[, w]ith the adjustments of assets and liabilities required in order to comply with applicable statutes, FIRST MIAMI'S surplus [was] really a negative $7,498,838.00" and therefore it was "in violation of section 624.408, Florida Statutes which require[d] surplus of $1,370,321.00 and [was] impaired or insolvent." The IFO did not specifically address First Miami's "no down payment" program. First Miami received the IFO the afternoon of May 10, 1991, and immediately contacted its attorneys in Tallahassee for legal advice. Respondent was involved in discussions with First Miami's attorneys concerning the IFO. First Miami's Tallahassee attorneys sought and obtained, on Monday, May 13, 1991, an order from a Leon County Circuit Court judge enjoining the Department from enforcing the IFO. Doherty was among the witnesses who gave testimony at the injunction hearing for First Miami. She testified that an admitted carrier, namely U.S. Capital Insurance Company (hereinafter referred to as "U.S. Capital"), was ready, willing and able to enter into a reinsurance agreement with First Miami. Doherty had begun negotiating with U.S. Capital, on behalf of First Miami, in 1990. In addition to enjoining the enforcement of the IFO, the judge ordered First Miami to take the following action: Within twenty-four (24) hours of the time this Order is entered, [First Miami] shall provide to the [Department] an English Language version of any and all reinsurance Treaties or Agreements to which First Miami is currently a party, unless such English version treaties have been previously provided to [the Department]. No later than 5:00 p.m. on May 24, 1991, [First Miami] shall provide to the [Department] proof of existing reinsurance, if not already provided. No later than 4:00 p.m. on May 21, 1991, [First Miami] shall deposit the aggregate amount of One Million ($1,000,000.00) Dollars of its funds into the registry of the court or with the Division of Collateral Securities of the Office of the Treasurer as additional security for the issuance of this Order. No later than 5:00 p.m. on May 24, 1991, First Miami Insurance Company, shall receive unimproved real estate with a fair market value of Two Hundred Fifty Thousand ($250,000.00) Dollars and in exchange therefor shall give to the contributor a surplus note in the form and on the terms customarily approved by the Department of Insurance, and the value of the contributed asset shall not be available for the purpose of writing insurance. [First Miami] shall file, in a timely manner, as required by law, any and all statutorily required, quarterly financial statements, and provide a copy of same immediately to the [Department]. After obtaining the injunction, First Miami resumed its solicitation and acceptance of premiums and continued to engage in such activity until its takeover by the Department in June of 1992. The One Million Dollar Security Deposit On May 14, 1991, Respondent and Aleman, in their capacities as officers of General Trust Mortgage Corporation, gave Sun Bank of Miami written "authorization to debit General Trust Mortgage Corporation master Account #0189000017703 the amount of $1,000,000 and issue a cashier[']s check payable to Teresa Saldise." On or about May 15, 1991, Saldise deposited the check in her money market account at Commercial Trust Bank in Hialeah. On or about May 22, 1991, Saldise withdrew from this account $1,000,000.00, with which she purchased a $1,000,000.00 cashier's check made payable to the Leon County Clerk of the Court. The cashier's check was thereafter deposited with the Leon County Clerk of the Court on First Miami's behalf to comply with the judge's order enjoining the IFO. On May 21, 1991, First Miami executed a note promising to repay the $1,000,000.00 to Saldise and General Trust Mortgage Corporation at an interest rate of 12 percent per year. The note provided that the "principal [was] payable on demand." This note was secured by a mortgage on First Miami's home office property, Units A and D-1 of the Brickell Bay Club Condominium, as well as parking spaces 181 through 381 at the condominium complex. This property was valued at $2.7 million on First Miami's 1990 Annual Statement. In addition, First Miami agreed to pay $25,000.00 in loan points, $10,000.00 in attorney's fees and $63,024.36 for 12 months of "condominium association assessments." Respondent, along with Soto, signed the note and mortgage for First Miami. The documents were duly recorded and a UCC-1 form was filed. In order to facilitate First Miami's compliance with the judge's order, the Department approved the arrangements First Miami had made to obtain the $1,000,000.00 First Miami was required to deposit "as additional security for the issuance of this Order." Subsequently, on January 19, 1992, Saldise and General Trust Mortgage Corporation made a demand for full payment of the loan. First Miami then sought an extension of the repayment period. Saldise and General Trust Mortgage Corporation agreed to an extension of 60 days. In return for the extension, Saldise and General Trust Mortgage Corporation were given additional collateral for their $1,000,000.00 loan, in the form of four mortgage notes having a total value of $1,473,750.00. Respondent and Soto signed, on behalf of First Miami, the paperwork necessary to effectuate this mortgage note extension agreement. Before Respondent did so, though, he consulted with First Miami's attorney, Stephen Rubin, concerning the appropriateness of giving additional collateral for the loan. Rubin told Respondent during their discussion regarding the matter that the additional collateral would still be considered assets of First Miami even after the agreement was executed. In its Quarterly Statement as of March 31, 1992, that it submitted to the Department, First Miami disclosed the following regarding the mortgage note extension agreement: The Company notes that certain promissory notes owned by the Company in the original principal amount of $1.47 million have been pledged as additional security for the note issued by the Company on May 21, 1991. The Company's note is also secured by the previously-disclosed mortgage on the Company's headquarters office. The "Company's headquarters office" was listed on the statement as a $2,700,000.00 asset of First Miami, as it had been on all previous quarterly and annual statements submitted to the Department since 1989 Annual Statement. The Saga Bay Property With respect to the requirement contained in the judge's order enjoining the IFO that First Miami "receive unimproved real estate with a fair market value of Two Hundred Fifty Thousand ($250,000.00) Dollars," Saldise and/or Lopez contributed to First Miami 13 real estate parcels located in the Saga Bay development in Dade County, Florida. In exchange therefor, First Miami gave a surplus note, which the Department approved. Post-IFO Reinsurance On May 15 and 16, 1991, Jim Smith, a Reinsurance Financial Specialist with the Department, visited the offices of First Miami. The purpose of his visit was to analyze and review First Miami's reinsurance program. Smith issued a written report detailing his findings on May 20, 1991. In the "Summary" section of his report, Smith stated the following: Based on the information available, the current reinsurance program is highly suspect. I believe there is a possibility that First Miami is re- insuring itself or at a minimum only obtaining limited financial reinsurance. The use of the trust agreement would normally provide some assurance as to the availability of funds. However, the purchase of premium finance contracts from South Florida Premium Finance Company circumvents this normal protection feature. First Miami has purchased over 6 million [dollars] of these contracts since March 20, 1991. 14/ The lack of correspondence between First Miami and Silver Breeze, Ltd. 15/ and/or Munauto S.A. is also of concern. I find it unconscionable that a company would accept a potential $20 million liability without having some preliminary written negotiations or correspondence. Another concern is that Munauto S.A. accepted the previous reinsurer's contract without modifying the terms to protect its interest. 16/ Such action is not characteristic of an arm's length transaction in the reinsurance industry. Also atypical is the wire transfer of funds through General Trust Mortgage, an affiliate, to the intermediary and reinsurer. Smith went on to further state the following: I have reviewed the accounting entries in regard to the Munauto reinsurance treaty and they appear to be normal and booked correctly. I also reviewed debits and credits to the re- insurance trust account at Sun Bank. These entries appeared normal except for use of these trust funds to purchase or invest in South Florida Premium Finance contracts. The terms of the temporary restraining order (TRO) require First Miami Insurance Company to replace the current reinsurer with an approved reinsurer acceptable to the Department. I highly agree with this provision. I would suggest that First Miami has no effective reinsurance lacking supportive evidence to the contrary. Therefore, it is imperative they replace the current re- insurance with an approved reinsurance treaty which actually transfers the underwriting risk. At the request of First Miami, following the issuance of the IFO, Doherty, on First Miami's behalf, while still negotiating with U.S. Capital, commenced negotiations with another potential reinsurer, Dai Ichi Kyoto. In July of 1991, Doherty met with representatives of Dai Ichi Kyoto in London. Respondent was present at the meeting. The negotiations culminated in a signed, conditional reinsurance agreement. Respondent signed the agreement on behalf of First Miami. Under his signature he placed the following handwritten notation, which he initialed: "Subject to approval of the Florida Department of Insurance." The agreement never received the approval of the Department. In early August of 1991, First Miami entered into a series of reinsurance agreements with Warwick Re Insurance and Reinsurance Company, LTD (hereinafter referred to as "Warwick Re"). The agreements were drafted by Rubin, First Miami's retained attorney. In drafting the agreements, he utilized the Munauto reinsurance documents, making revisions where appropriate. Warwick Re was incorporated on August 7, 1991, in Anguilla. The subscribers, each with 250 shares, were General Trust Mortgage Corporation and Procesys, Inc. Respondent signed the necessary documents on behalf of General Trust Mortgage Corporation. Lopez signed on behalf of Procesys, Inc. Prior thereto, on July 31, 1991, in anticipation of its incorporation, Warwick Re had applied for registration as an insurer in Anguilla. Respondent was listed as a director of Warwick Re on the registration form and he signed the form in various places in his capacity as a director. The following day, August 1, 1991, the Boards of Directors of General Trust Mortgage Corporation and Procesys, Inc. each resolved to make a capital investment in Warwick Re in the amount of $100,000.00. Each resolution was signed by Respondent in his capacity as a director. According to a financial statement prepared by Mario Toca, a certified public accountant, as of September 30, 1991, Warwick Re had $20,988,714.00 worth of assets. On August 8, 1991, Bob King of U.S. Capital sent a memorandum to Respondent requesting a decision regarding the offer U.S. Capital had made to First Miami regarding reinsurance. That same day, Respondent sent King a letter in which he stated the following: In reference to the reinsurance treaty between U.S. Capital and First Miami Insurance Company, I would like to advise you that we are negotiating with the Helm Bank the possibility of them pur- chasing the Premium Finance Contracts from us, in consideration of our banking relationship. This means that we would establish a Trust for the outstanding reserves of your portion of the Quota Share. The Trust will invest in A plus Securities only. Should you have any questions, do not hesitate to contact me. On August 22, 1991, King sent Doherty a letter informing her of the following: As a result of First Miami's inability to conclude our proposed transaction, please be advised that we withdraw any and all offers as presented or amended. Unfortunately, we find ourselves unable to proceed with an organ- ization which cannot make a determination as to its objectives and method of transacting business. Respondent was furnished a copy of the letter by King. After receiving King's letter, Doherty faxed a copy of the letter to Lamont Wynn of the Department at Wynn's request. Whereas the Department was swiftly advised of the breakdown in negotiations between U.S. Capital and First Miami, it was not until January 27 1992, that the Department first learned of the reinsurance agreements between First Miami and Warwick Re. On that date, representatives of the Department, including Lisette Lozano, went to the offices of First Miami to review First Miami's books and records. While on the premises, Lozano spoke with Respondent, who, throughout the period he was the Executive Vice President of First Miami, served as First Miami's primary spokesperson in its dealings with the Department. Before speaking with Lozano, Respondent had received instructions from Saldise and First Miami's attorneys that he was to discuss with Department representatives only those matters relating directly to First Miami. Not deviating from these instructions, Respondent told Lozano that Warwick Re was "now the reinsurer of First Miami." Respondent volunteered that Warwick Re was an Anguilla company that owned more than 90 percent of South Florida Premium Finance Company. Lozano, who was not at all familiar with Warwick Re, asked Respondent the names of the officers and directors of the company. Following the instructions he had been given, Respondent told Lozano that he was not able to answer any questions concerning Warwick Re unrelated to its reinsurance agreements with First Miami. That same day, January 27, 1992, South Florida Premium Finance Company and General Trust Mortgage Corporation issued checks in the amounts of $200,000.00 and $703,549.16, respectively, payable to Warwick Re. Both checks were signed by Respondent. The next day the checks were deposited in Warwick Re's newly opened account at Sun Bank. The Department ultimately determined that the reinsurance agreements between First Miami and Warwick Re were not "appropriate reinsurance transactions," although it had no proof that Warwick Re was insolvent. Infusion of Additional Capital into First Miami In or about late 1991, Saldise and Lopez made Respondent aware of their plans to formally contribute additional assets to First Miami in order to strengthen the company's financial condition and thus lessen the possibility that the Department would question the company's solvency. Among these assets were ownership interests in the following corporations: Warwick Properties, Inc.; Investors Arts and Antiques, Inc.; Community Broadcasters, Inc.; and Procesys, Inc. Respondent questioned Lopez as to whether the assets which were to be contributed to First Miami would be considered admitted assets under the Florida Insurance Code. Lopez told Respondent that he had researched the matter and come to the legal conclusion that they would be admissible, at least for a three year period. Furthermore, he showed Respondent a draft of a legal memorandum he was preparing which addressed the subject. Respondent subsequently reviewed a second legal memorandum, prepared by another attorney, Marc Cooper, which discussed the admissibility of these assets. Respondent was further advised that although no written contracts effectuating the contemplated transfer of assets had yet been executed, oral agreements to do so did exist. Saldise felt uncomfortable infusing these additional assets into First Miami without written agreements making it clear that it was her intention that the transfer of these assets would be effective only if the Department deemed them to be admitted assets. Rubin, First Miami's retained attorney, drafted these written agreements and related board resolutions. Although it was originally contemplated that these written agreements would be prepared and signed before the end of 1991, they were not ready for execution until March of the following year. 17/ Saldise instructed Respondent to sign the agreements on behalf of each of the parties. Respondent felt ill at ease doing so and asked Saldise whether it was appropriate for him to sign on behalf of more than one party. Saldise assured him that it was inasmuch as he was an officer of each of the parties on behalf of whom he would be signing. Respondent also sought Rubin's legal advice on the matter. Rubin told Respondent that there was no reason, from a legal standpoint, why he could not follow Saldise's instructions regarding execution of the written agreements. Respondent also asked Rubin if the agreements actually accomplished what Saldise and Lopez had intended: to give legal title of these assets to First Miami. Rubin responded in the affirmative to this inquiry, although he further advised Respondent, as he had Saldise, who nonetheless decided to proceed with the transfer of assets, that if a conservatorship or liquidation proceeding were initiated by the Department all of First Miami's assets would be frozen and unavailable to Saldise personally. 18/ Another matter about which Respondent was concerned was the effective date of the agreements, which the agreements indicated was December 31, 1991. He therefore raised the subject with Rubin. Rubin advised Respondent that there was "no problem" with the December 31, 1991, effective date since the written agreements, although they would be signed after that date, merely memorialized what had already been orally agreed upon by the parties prior to December 31, 1991. Relying on the advice he had been given, Respondent, in late March of 1992, executed the written agreements as he had been instructed, thereby formally effectuating the contribution of assets to First Miami, but only after one of the agreements, which had originally reflected a December 31, 1991, date of execution, had been modified, at his insistence, to accurately reflect the date he actually signed the agreement. Payment of Attorney's Fees First Miami authorized payment of past and future attorney's fees incurred by Saldise and Lopez in defending themselves in a federal court proceeding involving General Bank. In this federal court proceeding, which was initiated after the "spin off" of First Miami, the federal government was attempting to freeze the personal assets of Saldise and Lopez. These personal assets included many, if not all, of the assets that Saldise and Lopez planned to contribute, and that later actually were contributed, to First Miami. If these assets planned for contribution were frozen, they would be unavailable to First Miami. Accordingly, First Miami felt that it was appropriate to expend funds, in the form of payment of Saldise's and Lopez's attorney's fees, in an effort to prevent this from happening. Notice to the Department of the Capital Infusion First Miami notified the Department of the capital contributions made to the company by including in the 1991 Annual Statement it submitted to the Department the following footnote, footnote 18, which was drafted by Rubin and reviewed by Respondent: PURSUANT to contracts entered between Liborio Financial Group 19/ and First Miami Insurance Company, Liborio has agreed to contribute its ownership of four subsidiary corporations, including assets owned by these subsidiaries, to First Miami subject to the satisfaction by First Miami of the condition precedent with respect to two of the subsidiaries that the State of Florida Department of Insurance finds that all assets held by First Miami qualify as admitted assets, and that First Miami is in compliance with capital and surplus requirements. This footnote was included in the 1991 Annual Statement at the specific direction of Saldise and Lopez. Respondent had disagreed with Saldise's and Lopez's method of disclosure and had suggested that instead they meet with Department representatives prior to the filing of the 1991 Annual Statement to disclose the information contained in footnote 18. Saldise and Lopez, however, vetoed Respondent's suggestion. The Contributed Assets Warwick Properties, Inc. Warwick Properties, Inc., (hereinafter referred to as "WP") was incorporated on July 31, 1991. Respondent was one of the incorporators. From the date of its incorporation until its administrative dissolution on October 9, 1992, Respondent was an officer, director or both of the corporation. According to a financial statement prepared by CPA Toca, as of December 31, 1991, WP had total assets of $4,500,660.00 and total liabilities, excluding stockholders' equity of $1,176,638.00. Among its assets was an apartment complex known as the Marianna apartments. In October of 1989, these apartments were appraised by Philip Spool, ASA, who estimated their market value at $2,100,000.00. The apartments were valued at $2,300,000.00 in an appraisal conducted in June of the following year by Appraisal and Real Estate Economics Associates, Inc. The written appraisal report was issued on July 9, 1990. This appraisal was referred to in Note 6 of Toca's financial statement, which read as follows: As stated in Note 1, property is recorded at historical cost in accordance with generally accepted accounting principles. However, the estimated current value of land and building based on an independent appraisal performed on July 9, 1990 amounted to $2,300,000. Another asset held by WP was a third mortgage on Saldise's personal residence. In an appraisal conducted in August of 1988, by Appraisal and Real Estate Economics Associates, Inc. the residence was valued at $3,275,000.00 using a "cost approach" and $3,250,000.00 using a "sales comparison approach." Investors Arts and Antiques, Inc. Investors Arts and Antiques, Inc., owned works of art and antiques. These items had been appraised and assigned valuations. Investors Arts and Antiques, Inc., also owned 52.5 percent of Community Broadcasters, Inc. The other shareholders were Maria Elena Prio and Carrie Meek. Community Broadcasters, Inc., held a Federal Communications Commission license to operate a radio station in the Miami area and had obtained certain programing rights as a result of having entered into an agreement with Business Radio Network, Inc. Respondent was at no time an officer or director of either Investors Arts and Antiques, Inc., or Community Broadcasters, Inc. According to a financial statement prepared by CPA Toca, as of March 23, 1992, Investors Arts and Antiques, Inc., had total assets of $2,487,700.00, with donated capital amounting to $2,487,200.00. These donations of capital had been made by Saldise and Lopez. Procesys, Inc. According to a financial statement prepared by CPA Toca, as of December 31, 1991, Procesys, Inc., had total assets and liabilities of $75,065.00. In a note to his statement, Toca made the following comment: In accordance to the Statements of Accounting Standards (SFAS Nos. 2 and 86), the costs incurred internally in creating computer software are charged to expense until the completion of a working model. Thereafter, all costs are capitalized and amortized based on current and future revenues. Accordingly, subject to future revenues, the "Company's" management, estimates that the products developed have a market value of $3,000,000. Procesys, Inc. owned the ATRACK computer software system, which was designed for use by companies providing automobile insurance. First Miami used the ATRACK system pursuant to a licensing agreement it entered into with Procesys, Inc., which agreement the Department had approved. Although it was used extensively by First Miami to deal with day-to- day operational matters, the system did not have an accounting function and therefore was not used by First Miami for that purpose. Lopez helped to develop the ATRACK system when he was involved in another insurance company, International Bankers Insurance Company, prior to his involvement in First Miami. Respondent refined and modified the system to meet the particular needs of First Miami. In February of 1992, pursuant to Lopez's request, Respondent asked Alberto Alphonso, the owner of Microcare Service Corporation (hereinafter referred to as "Microcare"), the vendor which provided First Miami with computer-related goods and services, to appraise the value of the ATRACK system. 20/ Alphonso was a friend of Respondent's whom Respondent had known since his community college days. Alphonso's corporation, Microcare, had previously been owned by Respondent under the name Computer Technology Systems, Inc. Upon the transfer of his ownership interest to Alphonso, Respondent resigned his position as an officer/director of the corporation and has not held any similar position since his resignation. He did do some "moonlighting" work through Microcare, and his wife, Dania Campos, continued to work as a secretary for the corporation for a short period of time after the transfer. Otherwise, however, neither he nor his wife have had any involvement in the affairs of Microcare, nor have they received any dividends or corporate disbursements from the corporation. Alphonso agreed to do the appraisal. On or about February 17, 1992, he submitted his written report to Lopez. Alphonso stated in the report that in his "opinion, based upon potential revenues of this product, that obtaining exclusive marketing and copy rights would have a fair market value of $3,087,500." In early April of 1992, Respondent approached the owner of Nationwide Computer Systems, Inc., Mike Burns, an MIT graduate with an extensive computer background, requesting that he provide another opinion concerning the fair market value of the ATRACK system. Respondent explained to Burns that he was "in a rush to get the appraisal." Respondent did not specifically state why he needed the appraisal, but Burns was left with the impression that it was "just required to fill some requirement to have three appraisals." Respondent advised Burns of the appraisal Alphonso had done and showed Burns Alphonso's report. In doing so, Respondent commented that he was "comfortable with the appraisal." Burns was at first reluctant to undertake the task because he thought that someone else might be better qualified to do so. He felt more confident about his qualifications after learning of Alphonso's appraisal because he considered himself at least as qualified as Alphonso, with whom he was familiar, to do such an appraisal. He therefore ultimately agreed to accept the assignment. On or about April 13, 1992, Burns submitted his written report to Respondent. In the concluding paragraph of his report, Burns stated the following: It is my opinion that the ATRACK software uses the most modern tools and operating platform and the skills of programmers and designers are above- average, and that its modular design will give it an advantage in opening new markets. For this reason I have evaluated the software at $2.90 million in its current form. I am assuming that programmers associated with the software will bring their expertise and experience with the software. If a new programming staff is required, there will be substantial up-front learning curve costs. My estimate is based upon the information I could gather in a limited time-frame. The staff of First Miami Insurance was open to all my requests and no attempt was made to keep me from any data I required. Some supporting material is included. Valuation of First Miami's Home Office In January of 1989, First Miami's home office property was appraised by Appraisal and Real Estate Economics Associates, Inc., and given a market value of $1,600,000.00. Thereafter, the property was extensively renovated. Following the completion of these extensive renovations, a second appraisal of the property was done by Fred Carach. In his report, Carach opined that, as of October 29, 1989, the property had a market value of $2,700,000.00 In the IFO proceeding, the Department did not raise as an issue the value of the home office property. At no time did the Department voice any concerns regarding the appraisers that conducted these two appraisals for First Miami of its home office property. While they may not have shared their thoughts on the matter with First Miami representatives, Department officials did question whether First Miami was overstating the true value of its home office property. They therefore retained Charles Failla to provide them with an appraisal of the property. In his written report, Failla opined that, as of March 13, 1992, the date of the report, the property had a market value of $800,000.00. Valuation of South Florida Premium Finance Company Onyx Financial Group, Inc., (hereinafter referred to as "Onyx") is a company located in Miami, Florida, which South Florida Premium Finance Company retained to provide an appraisal of its market value in anticipation of making a public offering. (The public offering, however, was never made.) On or about December 11, 1991, Onyx provided such an appraisal. Onyx sent the appraisal to Respondent. First Miami used the appraisal to prepare financial statements that were later submitted to the Department. First Miami's Handling of Claims As noted above, at the time that Respondent was initially assigned to work for First Miami, the company was experiencing difficulty in timely paying claims and, as a result, was the subject of numerous consumer complaints made to the Department. In response to concerns expressed by the Department about these complaints, First Miami made improvements to its telephone and computer systems and hired additional claims adjustors as well as a new claims manager. It also, in large measure through the efforts of Respondent, developed and implemented a specific procedure to track and quickly respond to these complaints. Immediately after First Miami took these measures, there were fewer reported delays. As of May 13, 1991, the date the IFO was enjoined, the Department was satisfied with the remedial steps taken by First Miami and had "concluded that the consumer complaint problem [was] not related to any solvency problems." Statistics maintained by the Department's Division of Insurance Consumer Services, however, reveal that, for the entire calendar year of 1991 and for the first two months of 1992, the Department received a relatively large number of consumer complaints about First Miami, most of which related to alleged delays in paying claims. The numbers, by line of insurance, were as follows: 1991 Jan/Feb 1992 "P/P Auto No-Fault" 64 26 "Other P/P Auto Liab" 376 71 "P/P Auto Phys Damage" 317 86 The numbers for Allstate and State Farm Insurance Companies, which held much larger shares of the respective markets than did First Miami, in comparison, were as follows: Allstate 1991 Jan/Feb 1992 "P/P Auto No-Fault" 118 28 "Other P/P Auto Liab" 398 23 "P/P Auto Phys Damage" State Farm 154 19 1991 Jan/Feb 1992 "P/P Auto No-Fault" 133 23 "Other P/P Auto Liab" 267 42 "P/P Auto Phys Damage" 187 27 According to these statistics, however, First Miami did not have the highest "Complaint Index" (which is arrived at by dividing the insurer's 1991 complaint share by its 1990 market share) for all of the lines of insurance covered. As evidenced by the Department's statistics, "non-standard" insurers, like First Miami, tend to have a higher "Complaint Index" than other insurers. Following the hiring of its new claims manager, First Miami developed a written claims handling procedure, which provided, in part, as follows: Step 1. New claims are received via telephone, mailed or faxed to First Miami Insurance Company by the insured, claimant, attorneys or agent. Customer Service completes the automobile loss notice (ACCORD FORM), and verifies coverage. Step 2. Accord forms are given to the Data Entry Department to complete a new loss report form. Step 3. Claims manager or assistan[t] manager reviews accord form, assigns preliminary reserves and assigns claims to adjuster. The choice of adjuster to handle the claim will depend on the type and severity of the claim. The most qualified adjusters will handle the most serious claims. The initial reserves are as follows when the amount of loss cannot be reasonably estimated. PD, COLL 800 to 1,100 COMP 500 to 800 PIP 2,000 Ded 400 PIP full 1,000 BI-UM 1,000 Step 4. Data Entry Clerk sets up new loss [reserve] based on preliminary reviews. The adjuster must review the accuracy of the reserve or the files which are processed on diary. Adjustment, both upward and downward, must be made on all coverage where appropriate. The police report is requested and appraisal assignment is made. The file is returned to the cabinet to await 15 day diary cycle. File will be reviewed Bi-monthly by adjuster and manager/supervisor. SETTLEMENT OF CLAIM: The adjuster can settle claims up to $3,000. Anything over $3,000 requires the signature of the claims committee which meets once a week. After claim has been settled, the unit supervisor reviews claims file to verify coverage and liability. RELEASE OF PAYMENT: Proper release forms must be received before final payment/check is issued. Unit supervisor is allowed to release payments up to $2,000. If payment is from $2,000 to $3,000, it must be released by either the claims manager or his assistant. If over $3,000, payment must be released by Alex J. Campos, EVP. 21/ After payment is released, and outstanding reserves are closed out on the "Reserve History Sheet[,]" [t]his claims report is printed out on the "Daily Close Report" which indicates that the remaining reserves have been eliminated. . . . In addition, First Miami's adjusters were given written instructions they were expected to follow. Through these written instructions, the adjusters were advised of, among other things, the following: All of the adjuster's claims handling activities, should be directed towards achieving the major claims handling goals which are: Provide the best possible customer service. Comply with the insurance policy/contract and the law. Minimize our losses and expenses. In handling a claim, the adjuster not only deals with facts and figures, but also with people. Therefore, the adjuster is responsible for helping to build friendly and satisfactory relations with the insured-claimant and the public. The adjuster may be the only contact the insured-claimant has with the insurer, other than the sales agent. A person who receives prompt attention and fair treatment will want to continue his or her relationship with us. An insurer with a reputation for fast, fair claims service is likely to attract new policyholders. One of our primary goals is to comply with the insurance contract/policy[, a]s we have both a moral and legal obligation to assure the insured receives the protection purchased. This also includes complying with any applicable law. The adjuster is responsible for seeing that moral, legal, and contractual obligations are fulfilled. While we as an insurer are committed to fulfilling all our obligations, we are also committed to controlling and reducing our losses/expenses. This can be achieved by limiting our claims payments to only those legitimately established by contract and law. Thus, again, the adjuster is responsible for prompt and efficient processing of claims and claims data. As this last paragraph may suggest, First Miami, at the insistence of Saldise and Lopez, had a very "conservative" claims payment philosophy: to pay claims only after they had been thoroughly investigated and determined to be valid. Conducting such investigations necessarily delayed the processing of claims. 22/ The use of a claims committee to review claims was an essential component of First Miami's "conservative" approach to the payment of claims. First Miami's claims committee consisted of a core of three individuals: an attorney retained as a consultant by First Miami; the claims manager; and the assistant claims manager. The attorney on the claims committee was Carlos Lidsky. Lidsky has practiced personal injury and insurance law in the State of Florida for approximately the past 20 years. From time to time, Lidsky and his two colleagues on the claims committee would invite additional individuals, including Respondent, to sit on the committee for particular meetings and join in the discussions and deliberations. On those occasions that he sat on the claims committee and, as a member thereof, withheld approval of questionable claims, he reasonably believed that the committee's actions were in the best interest of First Miami's shareholders and policyholders. Assisting the claims committee in evaluating claims involving medical issues was a nurse and a physician that First Miami had hired for that purpose in an effort to combat fraudulent claims. The physician was a respected orthopedic specialist, who also was a minor shareholder of General Trust Mortgage Corporation, First Miami's parent corporation. Where the claims committee was presented with objective evidence of bodily injury, it invariably approved payment up to the policy limits. In those personal injury protection cases where there was no such evidence, however, the committee withheld its approval and contested the claim. In a significant number of personal injury protection cases, Lidsky advised First Miami to invoke the arbitration clause of the policy and First Miami followed his advice. This often led to a compromise and settlement of the claim. Where First Miami was presented with a subrogation claim and there was an indication that there may have been some comparative negligence, the matter was investigated before any payment was made. Lidsky had standing instructions to, on behalf of First Miami, negotiate in good faith all disputed subrogation claims, (including not only those filed against First Miami but those filed by First Miami as well) and enter into, what are referred to in the industry, as "bulk settlement" agreements. At one point in time during the latter stages of First Miami's existence, the aggregate amount of pending subrogation claims made against it by State Farm Insurance Company and Allstate Insurance Company and separate claims being handled by Bell Adjusting Company was $1,200,000.00. None of these claims were ever paid. 23/ First Miami, however, through Lidsky, who acted at the specific direction of Saldise and Lopez, did enter into "bulk settlement" negotiations with State Farm Insurance Company (whose pending subrogation claims against First Miami at the time amounted to approximately $492,000.00) in an effort to resolve these pending claims, as well as those unpaid subrogation claims First Miami had made against State Farm. 24/ These negotiations were not fruitful. They terminated without any agreement being reached. Lidsky believed that State Farm had not negotiated in good faith and so informed Respondent, who had not participated in the negotiations. Unable to reach a settlement with First Miami, State Farm resorted to litigation, suing the alleged tortfeasors. Other claims-related lawsuits were filed against First Miami policyholders. On occasion, First Miami was also sued. In some of these cases, the plaintiffs prevailed. Lidsky and First Miami's Claims Department were responsible for seeing to it that First Miami policyholders who were the subject of a lawsuit received the legal representation First Miami was obligated to provide. Respondent was not made aware of any case where First Miami refused to provide such representation. First Miami's Loss Reserves In his capacity as Executive Vice President of First Miami, Respondent did not himself establish the levels of the company's reserves. First Miami maintained two types of reserves: an individual case reserve regarding specific claims, and an IBNR ("Incurred But Not Reported") reserve. First Miami's Claims Department established claims reserves for individual cases. Two actuaries, one employed by First Miami, Jeff Cohn, and the other an independent contractor, James Stergiou, reviewed and certified the actuarial soundness of First Miami's IBNR reserve. Stergiou provided Respondent with written statements certifying the adequacy of First Miami's IBNR reserve for the years 1990 and 1991. In its communications with First Miami, the Department never raised any questions regarding Stergiou's qualifications to provide such certifications, and Respondent had no reason to believe that Stergiou was not so qualified. First Miami's Lawsuit Believing that the Department and Insurance Commissioner, in concert with the Latin-American Agents Association and the Specialty Agents Association, had acted in violation of civil rights and antitrust laws in its dealings with First Miami, Saldise and Lopez decided in December of 1991, or January of 1992, that First Miami should file a lawsuit against these parties to seek redress. Two attorneys, Sonny Meyers and Stephen Rubin, were retained to represent First Miami in connection with such contemplated legal action. Saldise requested Respondent, in preparation for a meeting with Meyers and Rubin, to review various matters pertinent to the lawsuit, including the chronology of events concerning the "no down payment" program about which the Latin-American Agents Association and the Specialty Agents Association had complained to the Department. The meeting was held on February 4, 1992. A court reporter was present at the meeting. Following the meeting, a transcript of the meeting was prepared. 25/ The lawsuit was ultimately filed in federal court in Miami. Disposition of Carrera Thereafter, as part of an attempt to amicably resolve its differences with the Department, First Miami decided to sell Carrera, the entity through which First Miami had offered the "no down payment" program that had generated so much controversy. Carrera was initially sold to Victor Madero, Diana Madero's husband, for between $900,000.00 and $1,000,000.00. At the time of the sale, Diana Madero had an insurance agency of her own and was not in any way connected with First Miami. The sale was negotiated by Lopez on behalf of First Miami. After Mr. Madero had made three or four payments, he decided that he did not want to remain in the insurance business. He made no further payments and First Miami "took back" Carrera from him. Thereafter, First Miami sold Carrera to Lewis Sands for approximately the same price Madero had paid. Payments were to be made over a 12 year period and interest was charged. Sands made payments of approximately $66,000.00 before defaulting. As a result of the default, First Miami again took possession of Carrera. It subsequently sold Carrera to Frank Davila for approximately the same price Madero and Sands had paid. Payments were to be made for a period of less than 12 years and interest was charged. Following the sale to Davila, which, like the sale to Sands, was negotiated by Respondent 26/ and another First Miami Vice President, Sergio Fonte, First Miami had no ownership interest or involvement in the operation of Carrera. Carrera was administratively dissolved on August 13, 1993. Financial Statements Raimundo Aleman, First Miami's Chief Financial Officer, reported to Respondent during the time Respondent was the company's Executive Vice President. As noted above, Aleman was responsible for formulating and placing the entries on the Quarterly and Annual Statements First Miami submitted to the Department. He was designated on the statements as First Miami's "contact person." As a general rule, before the statements were sent to the Department, Respondent reviewed Aleman's work product to determine if there were any obvious omissions or mistakes. With respect to the Quarterly Statement as of March 31, 1992, however, Respondent only reviewed the footnotes. All of First Miami's Quarterly and Annual Statements contained a sworn attestation, signed by certain of its officers, certifying that the information contained therein was complete and accurate "according to the best of their information, knowledge and belief." Respondent signed this attestation as Treasurer on the 1989 Annual Statement, the Quarterly Statement as of March 31, 1990, the Quarterly Statement as of June 30, 1990, and the Quarterly Statement as of September 30, 1990. He signed none of the other financial statements that First Miami submitted to the Department, with the exception of the Quarterly Statement as of September 30, 1991, which he executed on behalf of Saldise. These other financial statements that First Miami submitted to the Department, but which Respondent did not sign, were: the 1990 Annual Statement; the Quarterly Statement as of March 31, 1991; the Quarterly Statement as of June 30, 1991; the 1991 Annual Statement; and the Quarterly Statement as of March 31, 1992. Respondent was listed as a Vice President and Director on these statements, all of which were signed by Aleman in his capacity as Treasurer. Respondent was not aware, nor did he have any compelling reason to believe, that any of the financial statements that First Miami submitted to the Department during the time he was its Executive Vice President contained misleading or inaccurate information concerning First Miami's financial condition or any other matter of significance to the Department. There was no intent on Respondent's part to deceive the Department. In discharging his duties as First Miami's Executive Vice President, including those duties related to the preparation and filing of the financial statements the company submitted to the Department, Respondent reasonably relied upon the advice and opinions of attorneys, accountants, appraisers, actuaries and other professionals concerning matters which, by all appearances, were within the scope of these professionals' expertise. For instance, he reasonably relied upon the professional opinions that had been rendered regarding the admissibility and valuation First Miami's assets and the adequacy of the company's loss reserves. His views concerning the financial condition and solvency of First Miami, understandably, were shaped by these opinions. The On-site Review and Respondent's Deposition After First Miami filed its 1991 Annual Statement on or about March 15, 1992, the Department conducted an on-site review at First Miami's offices. Respondent served as First Miami's primary spokesperson during the review, answering questions posed by the Department's representatives concerning, among other things, the 1991 Annual Statement that First Miami had filed. In doing so, Respondent expressed the view that the transactions reflected in footnote 18 were "bona fide . . . with economic substance behind them" and that First Miami was not insolvent, which is what he reasonably believed. Subsequently, various First Miami officials were subpoenaed and deposed by the Department. Respondent was among those deposed. First Miami had designated Respondent as its representative for purposes of responding to a subpoena with which it had been served by the Department. Although Aleman was more knowledgeable than Respondent about the financial affairs of First Miami and the contents of its 1991 Annual Statement, he was not so designated because of his difficulty in orally communicating in the English language. Aleman, though, did retrieve documents for Respondent's use at the deposition. Prior to the deposition, Respondent consulted with Lopez and First Miami's attorneys with respect to the company's position concerning the admissibility of assets. During his deposition, in responding to questions, Respondent relied upon the documents he had been given by Aleman, as well as the notes he had taken during his pre-deposition meeting with Lopez and the other attorneys. Conservatorship and Liquidation of First Miami On or about May 14, 1992, First Miami filed its Quarterly Statement as of March 31, 1992, with the Department. Certain assets which appeared on the 1991 Annual Statement were not included in this Quarterly Statement. Saldise had directed Aleman to delete these assets in response to the concerns the Department had expressed regarding their inclusion in the 1991 Annual Statement. After the filing of this Quarterly Statement, the Department instituted conservatorship and liquidation proceedings in Leon County Circuit Court and, in conjunction therewith, sent personnel to First Miami's offices. During the conservatorship, which commenced on May 29, 1992, Respondent, who had been cooperative in his prior dealings with the Department, remained on the payroll of the company. He prepared computer programs to assist in the calculation of commission payments. In addition, he provided to Department personnel on the premises valuable information concerning the operations of First Miami, including its computer system. An unopposed order liquidating First Miami and appointing the Department Receiver was entered on June 5, 1992. Among the findings set forth in the order was that First Miami was "insolvent as defined in section 631.011(11), Florida Statutes (1991)." Among the directives set forth in the order was the following: All affiliated companies including, but not limited to General Trust Mortgage Corporation, Liborio Financial Group, Inc., First Miami Holding Corporation, South Florida Premium Finance Company, Procesys, Inc., Investors Arts & Antiques, Warwick Properties Inc., Carrera Insurance Underwriters, Inc., Camino Insurance Underwriters, Inc., and Warwick Re are hereby directed to make their books and records available to the Receiver . . . . The order further provided that "[a]ll officers, directors, agents and employees and all other persons representing [First Miami] or currently employed by [First Miami] in connection with the conduct of its business are discharged forthwith." The Department determined that, at the time of liquidation, First Miami had admitted assets totalling $4,203,356.00, which fell into the following categories: Mortgage loans on real estate: First liens $1,465,889.00 Real estate: Properties occupied by $800,000.00 27/ the company Cash on hand and on deposit: Cash on deposit $1,247,553.00 Short term investments $594,672.00 28/ Electronic data processing equipment $95,242.00 On its last financial statement, the Quarterly Statement as of March 31, 1992, First Miami had listed a total of $27,340,837.00 of admitted assets. The difference between the Department's June 5, 1992, total and First Miami's March 23, 1992, total was, in large measure, the product of the Department's disagreement with First Miami and with the professionals upon which First Miami relied 29/ as to the admissibility and valuation of certain of First Miami's assets. Post-Liquidation Activities Following the entry of the order of liquidation, Respondent was retained for a period of two or three weeks to continue to assist the Department/Receiver, as well as the Florida Insurance Guaranty Association, which had taken over the responsibility of processing and paying claims made against First Miami. No other First Miami officer or director was similarly retained. 30/ Saldise and Lopez left Miami for Madrid, Spain, a day or two after the entry of the liquidation order. First Miami had almost 600 claims-related cases in litigation at the time of liquidation. Lidsky's office handed the files in these cases over to the Florida Insurance Guaranty Association at the Department's request. As of January 31, 1994, for both loss claims and expenses, the Florida Insurance Guaranty Association had paid $12,397,234.35 on behalf of First Miami. As of March 7, 1994, it had reserved $1,638,369.14 to pay additional loss claims on First Miami's behalf. Respondent's Present Employment Situation Respondent is currently the President (but not a director) of Perry & Company, a premium finance company authorized by the Department to do business in the State of Florida. Perry & Company's Chairman of the Board is Richard Perry. Perry has known Respondent for approximately four or five years. He first became acquainted with Respondent when Respondent was employed by First Miami. At the time, Perry & Company was one of the companies that financed premium payments on insurance policies issued by First Miami. Perry was very much impressed with the operational efficiency of First Miami. On behalf of Perry & Company, he extended Respondent an offer of employment, at a higher salary than Respondent was receiving from First Miami. Respondent declined this initial offer of employment. Perry renewed the offer after he learned that First Miami had been liquidated and placed in receivership. Before he did so, though, he asked Harry Landrum, a Tallahassee consultant and lobbyist, to check with his sources at the Department to find out if, given Respondent's previous association with First Miami, Perry & Company's relationship with the Department would suffer if the company hired Respondent. Landrum reported back to Perry that his sources had only kind words to say about Respondent. Having received this favorable report about Respondent, Perry felt comfortable renewing his offer of employment to Respondent. This time Respondent accepted Perry's offer. Respondent began his employment with Perry & Company in July of !992, when he assumed the position of Executive Vice President. His primary responsibility as Executive Vice President was in the area of data processing. In December of 1992, Respondent became Perry & Company's President, the position he holds today. As President of Perry & Company, Respondent is responsible for virtually all of the company's day-to-day operations. To date, he has successfully discharged these duties. During his affiliation with Perry & Company, Respondent has not engaged in any conduct that has jeopardized the financial soundness of the company. He has not caused, nor is it likely, based upon his past performance with Perry & Company and as Executive Vice President of First Miami, that he will cause, Perry & Company or those with whom the company does business to suffer any unwarranted loss or damage.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department enter a final order dismissing the Administrative Complaint against Respondent. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 18th day of October, 1994. STUART M. LERNER 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 18th day of October, 1994.
The Issue Whether Rules 4-6.012(2), 4-6.013(2) and 4-46.003(1), Florida Administrative Code, or any of them, constitute an invalid exercise of delegated legislative authority? The parties' commendably thorough prehearing stipulation has yielded verbatim the first 15 paragraphs of the following
Findings Of Fact First National Life Insurance Company ("First National Life") is an authorized foreign insurer operating under a certificate of authority issued by the Department of Insurance and Treasurer ("Department") pursuant to Section 624.401(1), Florida Statutes. First National Life is subject to the jurisdiction and regulation of the Department pursuant to the Florida Insurance Code. 2. First National Life is an authorized foreign insurer organized under the Laws of Alabama and domiciled in the State of Alabama. First National Life maintains its regional home office in Pensacola, Florida. In 1985, the Florida Legislature passed Chapter 85-305 titled An Act Relating to the Florida Retirement System; authorizing the Department of Administration to select a State Licensed Insurance Company to offer and administer a Medicare Supplement Policy to eligible retirees of a state or local public employer; authorizing health insurance coverage; providing an appropriation; providing for health insurance coverage for certain retired persons and their spouses; providing a retroactive effective date. Pursuant to this act under Section 1, Sub-Section 1: The Department of Administration shall solicit competitive bids from state licensed insurance companies to provide and administer a fully insured Medicare Supplement Policy for all eligible retirees of a state or local public employer. Such Medicare Supplement Policy shall meet the provisions of ss. 627.671-627.675 Florida Statutes. For the purpose of this sub-section, "eligible retirees" means any public employee who is retired from a state or local public employer who covered by Medicare, Parts A and B. The Department of Administration shall authorize one company to offer the Medicare Supplement Coverage to all eligible retirees. All premiums shall be paid by the retiree. Said legislation empowered the Florida Department of Administration to authorize one company to offer the Medicare Supplement Coverage to all eligible retirees, with premiums to be paid by the retirees. As a result of the aforementioned competitive bidding process, pursuant to Section 110.1234, Florida Statutes, the Department of Administration authorized First National Life Insurance Company to be the one insurance company to offer Medicare Supplement Coverage to all eligible public employee retirees as defined in the act. The First National Life Insurance Company has sent printed or published material and descriptive literature of First National Life through the United States mail to eligible retirees under the statute. Rule 4-6.012 cites as its specific authority Chapters 624.308 and 626.9611 and recites implementation of Chapter 626.9541(1), (2), Fla. Stat. Rule 4-6.013 recites as its specific authority Chapter 624.308 and 626.9611 Fla. Stat. It recites implementation of Chapter 626.9541(1), (2) Fla. Stat. Rule 4-46.003 recites as its specific authority Chapter 624.308(1), 626.9611, 626.9641 Fla. Stat. It recites implementation of Chapter 626.830 and 626.9541(1), (2), (3), (5), (11), (12), and Chapter 626.9641 (1)(a), (c), (e), (h). The Retired Public Employee Group Medicare Supplement Plan authorized by chapter 85-305 Laws of Florida, constitutes one of the "State Group Health Insurance Plans" as defined in chapter 110.123 Fla. Stat. (1987). First National Life Insurance Company in the above- described group plan, its financial condition or status, or the payments of its claims, or the merits, desirability, or advisability of its policy forms or kinds of plans of insurance, are approved, endorsed, or accredited by a division or agency of the State of Florida. The solicitations of group coverage for the above- described group plan are in some manner connected with an agency of state government. The Medicare Supplemental Insurance Plan offered by First National Life Insurance Company is affiliated with or authorized by a governmental agency. The rule provisions under challenge are set out in Petitioner's Exhibit No. 4, together with the history notes as they appear in the Florida Administrative Code: 4-6.012 Jurisdictional Licensing and Status of Insurer. (2) An advertisement shall not create the impression directly or indirectly that the insurer, its financial condition or status, or the payment of its claims, or the merits, desirability, or advisability of its policy forms or kinds of plans of insurance are approved, endorsed, or accredited by any division or agency of this State or the United States Government. Specific Authority 624.308, 626.9611 FS. Law Implemented 626.9541(1), (2) FS. History - Revised 1-19-73, Repromulgated 12-24-74, Formerly 4-6.12 4-6.013 Identity of Insurer. (2) No advertisement shall use any combination of words, symbols, or physical materials which by their content, phraseology, shape, color or other characteristics are so similar to combination of words, symbols, or physical materials used by agencies of the federal government or of this State, or otherwise appear to be of such a nature that it tends to confuse or mislead prospective insureds into believing that the solicitation is in some manner connected with an agency of the municipal, state or federal government. Specific Authority 624.308, 626.9611 FS. Law Implemented 626.9541(1), (2) FS. History - Revised 1-19-73, 7-20-73, Repromulgated 12-24-74, Formerly 4-6.13 4-46.003 Unfair or Deceptive Acts or Practices Defined. It shall be deemed an unfair or deceptive act or practice in the direct solicitation or sale of Medicare supplemental insurance policies, to: Make any verbal or written statement which implies or conveys the impression that any Medicare supplemental insurance plan, by use of promotional materials, titles, initials or trade names being offered or used by a company or agent, is affiliated with or authorized by the Federal Government, the Medicare Program, the Social Security Administration or any other governmental agency. Specific Authority 624.308(1), 626.9611, 626.9641 F.S. Law Implemented 626.830, 626.9541(1), (2), (3), (5), (11), (12) 626.9641(1)(a), (c), (e), (h) F.S. History - New 7-1-79, Formerly 4-46.03 Each of these provisions is cited in the administrative complaint respondent filed against petitioner on December 2, 1987. Petitioner's Exhibit No. 5.
Other Judicial Opinions A party who is adversely affected by this final order is entitled to judicial review pursuant to Sections 120.68 and 766.311, Florida Statutes. Review proceedings are governed by the Florida Rules of Appellate Procedure. Such proceedings are commenced by filing one copy of a Notice of Appeal with the Agency Clerk of the Division of Administrative Hearings and a second copy, accompanied by filing fees prescribed by law, with the appropriate District Court of Appeal. See Section 120.68(2), Florida Statutes, and Florida Birth-Related Neurological Injury Compensation Association v. Carreras, 598 So. 2d 299 (Fla. ist DCA 1992). The Notice of Appeal must be filed within 30 days of rendition of the order to be reviewed.
Findings Of Fact Brittnay Dupont (Brittnay) is the natural daughter of Robin Dupont and Steve L. Dupont. She was born a live infant on October 11, 1991, at Memorial Hospital in Hollywood, Broward County, Florida, and her birth weight was in excess of 2500 grams. The physician providing obstetrical services during the birth of Brittnay was Eric N. Freling, M.D., who was, at all times material hereto, a participating physician in the Florida Birth-Related Neurological Injury Compensation Plan, as defined by Section 766.302(7), Florida Statutes. Brittnay was the product of an uncomplicated pregnancy when her mother, Robin Dupont, was admitted to Memorial Hospital on October 10, 1991, ten days post term. At or about 1:30 p.m., October 10, 1991, the vaginal membrane was artificially ruptured, and the presence of lightly meconium stained amniotic fluid was observed. As a result, Dr. Freling called the attending neonatologist to be present during the delivery of Brittnay to prevent the aspiration of meconium. According to the delivery summary, the first stage of labor began at 3:00 p.m., and lasted seven hours and forty-five minutes; the second stage of labor lasted one hour and fifty-four minutes; and the third stage of labor lasted eleven minutes, with Brittnay being delivered at 12:29 a.m., October 11, 1991. At approximately two and a half hours prior to delivery, the fetal heart rate monitor indicated that Brittnay experienced "some late decelerations down to as low as 90 with good recoveries to 120 to 150." Pitocin was stopped, and the "late decelerations lasted approximately one hour which were then followed by a reassuring heart rate pattern of 150 with accelerations to 180." During the third stage of labor there were also variable decelerations noted but, as with the prior decelerations, were not felt to be, and were not shown in this proceeding to be, significant or reflective of any problem with the delivery. Upon delivery, Brittnay was immediately suctioned, successfully, by Dr. Freling and the attending neonatologist to prevent the aspiration of meconium, and was administered positive pressure ventilation with 100 percent oxygen for two minutes to address what may be characterized as mild respiratory distress. At birth, Brittnay's Apgar scores at one and five minutes were three and eight, respectively. These scores are a numerical expression of the condition of a newborn infant, and reflect the sum points gained on assessment of the heart rate, muscle tone, respiratory effort, color and reflex irritability, with each category being assigned a score ranging from the lowest score of zero through a maximum score of two. 1/ As noted, at one minute Brittnay's Apgar score totaled three, with heart rate being graded at two, reflex irritability being graded at one, and muscle tone, respiratory effort and color being graded at zero. At five minutes, Brittnay's Apgar score totaled eight, with heart rate, reflex irritability and respiratory effort being graded at two each, and muscle tone and color being graded at one each. At fifteen minutes of age, Brittnay was noted to have some "respiratory stridor with poor perfusion and some jitteriness," and was taken to the Newborn Intensive Care Unit for further evaluation. Neurological examination revealed a "jittery infant who was tremulous and with decreased tone throughout." The discharge summary further reflects that: The patient was evaluated by Dr. Brown of neurology. He noted that the infant had a left partial brachial palsy, that her tone was generally decreased. She had a high-pitched cry. She was irritable. She had sustained ankle clonus, left greater than right. Facial muscles were felt to be within normal limits. There was a small parietal cephalhematoma present. His impression was perinatal distress with upper and probable lower partial brachioplexus palsy. The infant was followed over as period of several days, begun on feeding. On the second day of life although she had initial trouble latching on she would take her feedings without difficulty and tolerated them without problems. She was advanced to full feedings and was doing well on them on the day of discharge, 10/14/91. Discharge examination showed continued neurological irritability with tremulousness at rest and irritability with stimulation. She had still small partial right mouth droop. Her left arm had improved motion of the forearm. Hand motion was good but the left shoulder did not respond to stimulation. There was excessive clonus noted at the feet and generalized hypotonia was persistent. Her high-pitched cry had improved to a more normal cry. She was in stable condition and eating well and was discharged for further follow up on an outpatient basis. Over the years that have ensued since Brittnay's discharge from Memorial Hospital she has been evaluated by numerous physicians who have spent a considerable period of time trying to determine the etiology or cause of her impairment (i.e., whether prenatal in origin or acquired during the birthing process). That Brittnay suffers a profound impairment of her motor ability, as evidenced by a marked generalized hypotonia and hyporeflexia, that has rendered her permanently and substantially physically impaired is evidence from the proof in this case, and not subject to dispute. What is disputed is whether such physical impairment was caused by oxygen depravation or mechanical injury occurring in the course of labor, delivery or resuscitation in the immediate post delivery period, and whether Brittnay is permanently and substantially mentally impaired. Turning first to the issue of Brittnay's mental condition, it must be concluded that the proof fails to support the conclusion that Brittnay suffers any mental impairment, much less a substantial and permanent mental impairment. Rather, the proof is compelling that Brittnay's attention and overall cognitive functioning are age appropriate, that she has not suffered any mental impairment, and that she suffered no oxygen deprivation or mechanical injury during the course of labor, delivery or resuscitation in the immediate post- delivery period that was, more likely than not, apt to cause any permanent and substantial mental impairment. 2/ As to the etiology of Brittnay's motor impairment, the proof demonstrates that, more likely than not, such impairment is a consequence of a congenitally acquired peripheral muscle disease, which is wholly unrelated to any brain or spinal cord injury, and is not associated with any event that might have occurred during labor, delivery or resuscitation in the immediate post delivery period. 3/
