Findings Of Fact At all times pertinent to the allegations contained herein, the Petitioner, Department of Insurance, (Department), was the state agency responsible for the licensing and registration of insurance agents in Florida and for the regulation of the insurance industry in this state. At the same time, Respondent was licensed in Florida as a general lines agent, a life and health (debit) agent, a life and health agent, and as a dental health care services contract salesman. He was president, director and registered agent of, and was the only licensed insurance agent working at, Devor of Brandon, a general lines insurance agency located in Brandon, Florida. At the times in issue, Respondent employed Jay Schetina, not a licensed insurance agent in Florida, to work as a salesman at the Brandon office. Mr. Schetina worked directly under the supervision and control of the Respondent and was in charge of the Brandon office when Respondent, who worked four days a week at the other office he owned in Cape Coral, Florida was not there. On January 11, 1989, Nellie Wynperle Henry went to the Respondent's Brandon agency to buy automobile insurance. She dealt with Mr. Schetina who sold her a policy to be issued by Underwriters Guarantee Insurance Company for an annual premium of $1,288.00, and to be effective January 17, 1989. She gave Mr. Schetina a $429.00 down payment and ultimately was issued policy no. 12207947. The policy reflected Respondent as agent for the company. Though she was not told what it was and does not recall signing it, an application for an auto service contract, to be issued by Century Auto Service, was also prepared and bears what purports to be her signature. That application was prepared and submitted without her knowledge or permission. The fee for the policy was $40.00, of which the agency got to keep 90%. Since she was already a member of AAA and had their service coverage, Ms. Wynperle did not need the service club policy sold to her at Respondent's agency and, in fact, had told Mr. Schetina so. Though she was charged for the service policy, she never received a copy of it and did not know she had it. At the time she applied for the auto insurance, Ms. Wynperle also applied to finance the unpaid balance due over and above the down payment through Underwriter's Financial of Florida, Inc., a premium finance company. The premium finance agreement includes the amount of the unwanted service policy, and is also incorrect in that it reflects that the down payment tendered by Ms. Wynperle was only $389.00. Dorothy Lunsford purchased auto insurance from the Respondent's agency on January 18, 1989. The premium for her policy, also with Underwriters Guarantee, was $707.00 and she made a down payment, by check, of $217.00. She financed the balance but the application for financing showed a down payment of only $177.00. On the same day, an application form for an auto service policy was also submitted in Ms. Lunsford's name. The cost of this policy was $40.00. On January 31, 1989 Joanne Coleman applied for automobile insurance at Respondent's agency. She was to be insured by two companies' policies, one issued by United Guarantee and one by Hamilton Insurance Company. The total combined premium was $670.00. Both policies were issued and Respondent's agency was listed as agent on both. She paid for the policies with a check for $687.00. No explanation was given for the difference. At the same time she applied for the auto insurance, though she had had no discussion with the clerk with whom she dealt at the agency about it, an application for an auto service policy was also filled out in her name, carrying a premium of $20.00. She did not receive a service policy. She neither authorized or consented to the submittal of the service club application in her name. Ms. Coleman's memory of the events, however, was not clear, but it is clear that she did not want the service policy she was charged for. On February 9, 1989, Kathy Gall applied for auto insurance with the Respondent's agency. The annual premium was$733.00 and at the time, she gave the agent a check for the down payment in the amount of $240.00. She applied to finance the balance but when prepared at the agency, the application form reflected a down payment of only $220.00. This was in error. However, at that same visit, an application for an auto service policy was also filled out in Ms. Gall's name. The policy bore a premium of $20.00. At no time did Ms. Gall authorize that service policy nor, in fact, was it ever discussed with her and she did not know she was purchasing it. Finally, on February 6, 1989, Lucinda Romano applied with the Respondent's agency for an automobile insurance policy with Allegheny Mutual Casualty Company. At that time, she gave Devor a check for $61.80. Though at the time she went into the agency she did not intend to purchase an auto service contract because she was having financial problems and wanted only the most basic lawful coverage, and did not sign the application for it, she was charged for an auto service policy at a cost of $20.00. She thought she was purchasing only PIP coverage which cost $60.00. Ms. Romano subsequently requested a refund of the amount she paid for the auto service policy and the payment was refunded by check on May 19, 1989 from Jay Schetina. Sometime after the Devor agency was taken over by Sam Capitano/Action Insurance Agency, and the latter's employees were servicing the company's files, Ms. Brown-Parker, an employee of Action found the auto service policies, including those issued in the name of Ms. Romano, Ms. Gall, Ms. Coleman, and Ms. Wynperle,and Ms. Lunsford, which had not been transmitted to the policyholders. Both copies of the policy were in the file. Respondent is also the subject of a Consent Order issued on February 26, 1990, subsequent to the date of the matters in issue herein. The Settlement Stipulation For Consent Order, on which the Order is based, refers to the matters in issue here which relate to Respondent's allowing his non-licensed employees to use his license to practice insurance, and allowed the agency to operate, at least at times, without an active, full time agent in charge. At paragraph 10(c), the Stipulation provides, in part: ... If the Department has good cause to believe that, after the issuance of the Consent Order in this cause, unlicensed individuals are transacting insurance at any agency at which Respondent operates as a general lines agent ..., or that any agency at which Respondent operates ... is not at all times after issuance of the Consent Order in this cause under the active, full-time charge of a general lines agency, the Department shall initiate proceedings to suspend or revoke the licenses and eligibility for licensure and registrations of the Respondent based upon the original grounds as alleged in the Administrative Complaint referred to herein. The original charges referred to, supra, relate to Respondent's alleged authorization of unlicensed employees to transact insurance, and his alleged authorization of the agency to, at times, operate without an active, full-time agent in charge. It did not refer to the incidents alleged herein, to wit: theimproper charges for undesired auto club membership and the preparation of false premium finance applications.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that a Final Order be issued dismissing the allegations that Respondent, John W. Ganter, violated Section 626.611, Florida Statutes, but finding him guilty of violations of Section 626.621, 626.9521 and 626.9541(1)(k)1, Florida Statutes, as to Ms. Wynperle, Ms. Gall, Ms. Coleman, Ms. Romano, and Ms. Lunsford, and imposing a suspension of his licenses and eligibility for licensure for a period of one year. However, under the provisions of Section 626.691, it is further recommended that in lieu of the suspension, the Respondent be placed on probation for a period of two years under such terms and conditions as specified by the Department. DONE and ENTERED in Tallahassee, Florida this 10th day of October, 1991. ARNOLD H. POLLOCK 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 10th day of October, 1991. APPENDIX TO RECOMMENDED ORDER The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. FOR THE PETITIONER: 1. - 5. Accepted and incorporated herein. 6. & 7. Accepted and incorporated herein. Accepted and incorporated herein. - 12. Accepted and incorporated herein. 13. - 16. Accepted and incorporated herein. 17. - 19. Accepted and incorporated herein. 20. - 22. Accepted and incorporated herein. 23. & 24. Accepted. 25. Not a Finding of Fact. FOR THE RESPONDENT: 1. & 2. Accepted and incorporated herein. Accepted expect for the representation that Petitioner presented no evidence as to Count II. The Stipulation of the parties clearly makes detailed reference to the allegations regarding Ms. Lunsford. Accepted as to Counts VI, VII & VIII. Rejected as to Count II. Accepted and incorporated herein. - 8. Accepted and incorporated herein. Rejected. - 14. Accepted and incorporated herein. Rejected. - 20. Accepted and incorporated herein. Rejected. & 23. Accepted and incorporated herein. Accepted. Accepted. Accepted. Rejected. - 34. Accepted as to the actual dealings of the Respondent. COPIES FURNISHED: David D. Hershel, Esquire Division of Legal Services 412 Larson Building Tallahassee, Florida 32399-0300 Orrin R. Beilly, Esquire The Citizens Building, Suite 705 105 S. Narcissus Avenue West Palm Beach, Florida 33401 Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Bill O'Neil General Counsel The Capitol, Plaza Level Tallahassee, Florida 32399-0300
Findings Of Fact The Petitioner takes exception to the findings of fact contained in the Recommended Order at paragraphs 12, 19, and 27, wherein the Hearing Officer found that the evidence did not prove that the Respondent had committed the violations charged as referenced in each finding. This conclusion is not supported by competent and substantial evidence as required by section 120.57(1)(a) 10., Florida Statutes. The Hearing Officer was convinced that the multitude of forms utilized by the Respondent in selling the non-insurance products (motor clubs) to Hulan Mitchell, Jenna Chester and Michele Humose demonstrated that they had given their informed consent. However, the Hearing Officer overlooked the blatant misrepresentation and false statement contained in the "premium" receipts issued to each of the insureds. Although the Hearing Officer is free to determine the credibility of the witness' testimony, the Hearing Officer cannot ignore or reject unrefuted competent and substantial evidence in the record that clearly and convincingly demonstrates that the premium receipts are a misrepresentation of fact or false statement. No witness testimony is necessary to make this finding. The documents speak for themselves and were not otherwise questioned or refuted. The record unequivocally established the following: Hulan Mitchell - The "premium" receipt (Pet. Ex. "1") issued to Mr. Mitchell indicates a total premium of $378. The actual cost of the "insurance" was $328 with a downpayment of $98 required. See Premium Finance Agreement (Pet. Ex. "1") This is absolutely unrefuted on the record. The premium receipt includes $50 for the cost of the motor club, which is not a policy of insurance and accordingly is not "premium". Also the downpayment required, purportedly for insurance, included $50 for the motor club ($98 + $50 = $148). Furthermore, based on clear documentary evidence in the record, Mr. Mitchell was again subject to a misrepresentation of fact (undisputed) wherein on July 9, 1993 he received a letter (Pet. Ex. "1") threatening to cancel his "insurance" policy because he did not pay a $48 balance due on the motor club. Accordingly the record clearly indicates that the Respondent has made a false or misleading statement with reference to the insurance transaction for Mr. Mitchell. The fact that the Hearing Officer held that Mr. Mitchell knew (despite his testimony otherwise) that he had purchased a motor club, does not negate the fact that the Respondent made a false or misleading statement. JENNA CHESTER - The deceptive premium receipt practice was visited upon Ms. Chester on two occasions. First on February 1, 1994 a "premium" receipt (Pet. Ex. "2") was issued in an amount of $670 for "total premium" due and a required downpayment of $261. The actual cost of the "insurance" was $585 with a required downpayment of $176. See Premium Finance Agreement (Pet. Ex. "2") The "premium" receipt and downpayment included a non-insurance fee for a motor club in the amount of $85. On May 23, 1994 Ms. Chester went to the Respondent to repurchase coverage which had been cancelled. At that time, another "premium" receipt was issued to her in the amount of a "total premium" of $719 and a required downpayment of $286 (Pet. Ex. "2") The actual cost of the insurance was $619 and a required downpayment of $186. See Premium Finance Agreement (Pet. Ex. "2") The additional $100 was for the non-insurance motor club which was sold to Ms. Chester. Although the Hearing Officer held that Ms. Chester knew she was purchasing this motor club (despite Ms. Chester' s testimony otherwise) this does not negate the fact that the Respondent has made false or misleading statement in this insurance transaction with Ms. Chester. Michelle Humose - The unrefuted documentary evidence indicates that on May 5, 1994, Ms. Humose was issued a "premium" receipt (Pet. Ex. "3") indicating a "total premium" in the amount of $926 and a required downpayment of $348. The actual cost of the "insurance" was $826 with a required downpayment of $248 See Premium Finance Agreement (Pet. Ex. "3") The additional $100 included in the "premium" receipt was for the non-insurance motor club sold to Ms. Humose. Again despite the Hearing Officer's finding contrary to Ms. Humose's direct testimony that she did not know she was purchasing a motor club, the Respondent has clearly and convincingly made a false or misleading statement with respect to this insurance transaction with Ms. Humose. It is implicit in the Findings of Fact by the Hearing Officer that each referenced transaction took place as described herein. The Hearing Officer merely failed to explicitly state in the Recommended Order that the unrefuted documentary evidence establishes a prima facie misrepresentation of fact. Indeed, the exact factual scenario established herein was determined to constitute a misrepresentation in In the Matter of: Kenneth Michael Whitaker, Case Number 93-L-432DDH (Final Order dated July 3, 1995). It was specifically determined "that the Respondent's standard business practice of combining the costs of insurance coverages with the costs of the auto club memberships and then calling such costs "total premium" on receipts issued to customers constituted a misrepresentation and was deceptive." Also, it was further determined "that the Respondent's standard business practice of deducting all or part of the ancillary product fee up front resulted in false statements on other documents that the full downpayment for premium or financing of premium had been made, when in actuality it had not." Whitaker Final Order at pp's 9-10. The Department determined that this activity was a violation of section 626.611(9), Florida Statutes. This finding was also affirmed on appeal in Whitaker v. Department of Insurance and Treasurer, Case No. 95-2702, (21 FLW 1353, Slip Opinion dated June 13, 1996). The court upheld this violation when it summarized the practice in the opinion as follows: Appellant took all or part of the ancillary product from the required premium downpayment and gave the consumer a receipt which listed the full downpayment as "Total Premium". The receipt did not reveal that part of the "premium" went to purchase an ancillary product. Whitaker Slip Opinion at pp's 3-4. This type of fraudulent and deceptive practice also constitutes a violation of section 626.9541(1)(b), Florida Statutes, by placing before the public a representation or statement which is untrue, deceptive or misleading. The Hearing Officer has already considered the unrefuted facts on the record and was clearly in error to make a finding otherwise. Accordingly, pursuant to section 120.57(a)(a) 10., Florida Statutes, which reads in part: The agency may not reject or modify the findings of fact, including findings of fact that form the basis for an agency statement, unless the agency first determines from a review of the complete record, and states with particularity in the order, that findings of fact were not based upon competent substantial evidence or that the proceedings on which the findings were based did not comply with essential requirements of law. the Department may modify the findings of fact. In this case there was no competent and substantial evidence to make a finding that the Respondent did not make a false or misleading statement with the premium receipts issued in this cause. A review of the entire record demonstrates unrefuted documentary evidence which supports the modified findings of fact contained herein. Therefore, Petitioner's exceptions to findings of fact 12, 19 and 27 are hereby GRANTED. RULINGS ON EXCEPTIONS TO CONCLUSIONS OF LAW The Petitioner takes exception to conclusions of law at paragraphs 30 and 31, based on the Hearing Officer's rejection of unrefuted facts established on the record, i.e., deceptive and misleading premium receipts. Conclusions of Law 30 and 31 are revised to reflect that the premium receipts issued to insureds constitute fraudulent and deceptive practices as well as placing before the public a representation or statement which is untrue, deceptive, or misleading. Conclusion of Law 30 is modified as follows: In this case, the Respondent was charged with violating sections 626.611(4), 626.611(5), 626.611(7), 626.611(9), 626.611(13), 626.621(2), 626.621(6), 626.9541(1)(b), 626.9541(1)(e), 626.9541(1)(k)1., and 626.9541(1)(z), Florida Statutes. Boiled down to the essentials the Department alleged that Respondent violated the provisions listed above by unlawfully selling insureds motor club memberships without their informed consent, made false and misleading statements regarding the coverage provided and falsely represented and illegally required insureds to purchase motor club membership as part of their purchase of automobile insurance and that Respondent engaged in the prohibited practice of "sliding" additional coverages or products into the purchase of the insured without the informed consent of the insured. This revision is necessary because the Hearing Officer failed to include sections 626.9541(1)(b) and 62.9541(1)(e), Florida Statutes, as alleged violations. Conclusion of Law 31 is likewise revised as follows: The Department failed to establish by clear and convincing evidence that Respondent attempted to "slide" coverage or ancillary products involved in this case. Likewise, the evidence did not clearly or convincingly demonstrate that Respondent did not obtain the informed consent of her customers prior to selling them the auto club memberships involved here. However, based on the unrefuted evidence in the record, the Respondent has violated sections 626.611(9) and 626.9541(1)(b), Florida Statutes, by issuing "premium receipts" which falsely and deceptively represented "total premium" which included a fee for a non-insurance product, ie. motor club membership. Accordingly, the Respondent is guilty of three counts of violating sections 626.611(9) and 626.9541(1)(b), Florida Statutes. The Petitioner's exceptions to conclusions of law 30 and 31 are hereby GRANTED. RULING ON EXCEPTIONS TO RECOMMENDATION The Petitioner takes exception to the recommendation that the Administrative Complaint be dismissed. The Penalty Guidelines contained in Chapter 4-231, Florida Administrative Code, should be applied in this case. There are three documented violations (one for each count) of engaging in fraudulent and dishonest practices as prohibited in section 626.611 (9), Florida Statutes, and placing before the public a representation or statement which is untrue, deceptive or misleading in violation of section 626.9541(1)(b), Florida Statutes. Under the penalty guidelines, a violation of section 626.611(9), Florida Statutes, requires a suspension of 9 months per count. Under the penalty guidelines, a violation of section 626.9541(1)(b), Florida Statutes, requires a suspension of 6 months per count. Based on Rule 4-231.040, Florida Administrative Code, the highest penalty per count should be assessed, therefore the appropriate penalty is three counts at 9 months for a total suspension period of 27 months. Since the total required suspension exceeds 2 years, the appropriate sanction is the revocation of the Respondent's licenses in accordance with section 626.641(1), Florida Statutes. The violation of section 626.9541(1)(b), Florida Statutes, permits the assessment of an additional fine on top of any other administrative sanction, pursuant to section 626.9521, Florida Statutes. This section permits fines for wilful violations of up to $10,000 per violation not to exceed $100,000. The Petitioner recommends that a fine of $3,000 be assessed against the Respondent. However, insufficient grounds have been demonstrated to justify the assessment of a $3,000 administrative fine. Therefore, Petitioner's exceptions to the recommendation are hereby GRANTED, except for the Petitioner's argument for an additional sanction in the form of a $3,000 administrative fine which is hereby DENIED. PENALTY Rule 4-231.160, Florida Administrative Code, prescribes the aggravating and mitigating factors which the Department shall consider and, if warranted, apply to the total penalty in reaching the final penalty. Aggravating factors in this matter, as delineated in Rule 4-231.160, Florida Administrative Code, are the willfulness of the Respondent's conduct and the existence of secondary violations established in Counts I-III of the Administrative Complaint. Only minimal mitigating factors exist which are outweighed by the aggravating factors. The existence of these aggravating factors would increase the Respondent`s total penalty, thereby resulting in a higher final penalty. Increasing the Respondent's total penalty would be pointless, however, for section 626.641(1), Florida Statutes, limits a licensee's period of suspension to a maximum of 2 years. The Respondent's 27-month total penalty already exceeds the two-year statutory limit. Consequently, the Department has determined that a revocation of the Respondent's insurance agent license is warranted and appropriate in this matter, and is necessary to adequately protect the insurance-buying pubic. IT IS THEREBY ORDERED: All licenses and eligibility for licensure held by TARA JEANNE SMITH, are hereby REVOKED, pursuant to the provisions of sections 626.611, 626.621, 626.641(2) and 626.651(1), Florida Statutes, effective the date of this Final Order. As of the date of this Final Order, the Respondent shall not engage in or attempt or profess to engage in any transaction or business for which a license or permit is required under the Florida Insurance Code, or directly or indirectly own, control or be employed in any manner by an insurance agent or agency. Any party to these proceedings adversely affected by this Final Order is entitled to seek review of this Final Order pursuant to section 120.68, Florida Statutes, and Rule 9.110, Florida Rules of Appellate Procedure. Review proceedings must be instituted by filing a Notice of Appeal with the General Counsel, acting as the agency clerk, at 612 Larson Building, Tallahassee, Florida 32399-0333, and a copy of the same and the filing fee with the appropriate District Court of Appeal within thirty (30) days of rendition of this Order. DONE and ORDERED this 4th day of September, 1996, in Tallahassee, Florida. BILL NELSON Treasurer and Insurance Commissioner COPIES FURNISHED: Tara Jeanne Smith 2588 Panther Creek Road, Apt. A Tallahassee, Florida 32308-5628 Charles J. Grimsley, Esquire Charles J. Grimsley and Associates, P.A. 1880 Brickell Avenue Miami, Florida 33129 Diane Cleavinger, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 Stephen C. Fredrickson, Esquire Division of Legal Services 200 E. Gaines Street Tallahassee, Florida 32399-0333
Recommendation Based upon the findings of fact and the conclusions of law, it is, RECOMMENDED: That the Department of Insurance enter a Final Order finding Respondent not guilty of violating Chapter 626, Florida Statues and dismissing the Administrative Complaint. DONE and ENTERED this 12th day of July, 1996, in Tallahassee, Leon County, Florida. DIANE CLEAVINGER, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 SunCom 278-9675 Filed with the Clerk of the Division of Administrative Hearings this 12th day of July, 1996. APPENDIX The facts contained in paragraphs 1, 2, 3, 4, 7, 8 and 16 of Petitioner's Proposed Findings of Fact are adopted. The facts contained in paragraphs 5, 6 and 9 of Petitioner's Proposed Findings of Fact are subordinate. The facts contained in paragraphs 10, 11, 12, 13, 14, 15, 17, 18, 19, 20, 21, 22 and 23 of Petitioners' Proposed Findings of Fact were not shown by the evidence. The facts contained in paragraphs 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 24, 25 and 26 of Respondent's Proposed Findings of Fact are adopted. The facts contained in paragraph 23 of Respondent's Proposed Findings of Fact are subordinate. COPIES FURNISHED: Stephen C. Frederickson, Esquire Division of Legal Services 645A Larson Building Tallahassee, Florida 32399-0333 Charles J. Grimsley, Esquire Charles J. Grimsley and Associates 1880 Brickell Avenue Miami, Florida 33129 Bill Nelson Commissioner Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Dan Sumner Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, Florida 32399-0300
The Issue The issues for determination in this proceeding are whether Respondent committed the acts alleged in the Administrative Complaint, and, if so, what penalty, if any, should be imposed on Respondent's license.
Findings Of Fact Petitioner is the state agency responsible for regulating insurance and insurance-related activities in Florida pursuant to Chapters 626 and 627, Florida Statutes (2001). Respondent is licensed as a general lines insurance agent pursuant to license number A152865. (All references to statutes are to those promulgated in Florida Statutes (2001) unless otherwise stated.) Respondent is the primary agent for Cash Register Auto Insurance of Pinellas Park, Inc. (Cash Register). Cash Register is a Florida Corporation engaged in the business of selling insurance and is an insurance agent with its principal place of business at 6251 U.S. Highway 19, North, Pinellas Park, Florida. In August 2001, Mr. Maksim Segal (Segal) spoke by telephone with an unidentified representative of Cash Register and obtained a quote of $1,036 for the annual cost of the minimum insurance required by law for his 1981 Mercedes 300D vehicle (minimum coverage). Segal obtained similar quotes from several agencies, but Cash Register offered the lowest cost for the minimum coverage that Segal wanted. On August 15, 2001, Segal entered the office at Cash Register to purchase automobile insurance. Ms. Kelly Comstock (Comstock), a Cash Register employee, assisted Segal. Comstock gave the quote to Segal, took an application, and accepted the premium payment from Segal. Segal completed the transaction in approximately 10 to 20 minutes and left the office at approximately 1:37 p.m. Segal paid Cash Register $1,036 for the annual cost of the minimum coverage that Segal had requested. However, the insurance company subsequently billed Segal an additional $76 for unpaid premium pursuant to an invoice dated November 8, 2001. Segal contested the additional premium but paid it so that he could continue driving his car. An additional premium was due because Segal failed to disclose on his insurance application that his mother, another licensed driver in his household, had a previous accident. The accident increased the annual premium to $1,046. The insurance company did not bill Segal $10 for the difference between the new premium of $1,046 and the $1,036 that Segal paid to Cash Register. The insurance company billed Segal $76 because Cash Register paid the insurance company only $970 even though Cash Register collected $1,036 from Segal. Cash Register deducted $6 as a charge for the cost of two driving record reports for Segal and his mother and deducted $60 as a charge for membership in Colonial Touring Association, Inc. (CTA or motor club). The membership purports to provide accidental death and dismemberment benefits to Segal's mother as his designated beneficiary. After deducting the $66 from Segal's $1,036, Cash Register sent the remaining $970 to the insurance company. If Cash Register had not retained the $60 it charged for the motor club, the amount that Cash Register would have forwarded to the insurance company would have been $1,030. The additional premium billed on November 8, 2001, would have been $16 rather than $76. The primary allegation against Respondent is that he sold the motor club membership to Segal without Segal's informed consent or represented that the membership was part of the minimum coverage required by law when it was not. The act of selling an unwanted product to a customer in such a manner is statutorily defined as "sliding." Segal was 18 years old on August 15, 2001. He graduated from high school with a 3.5 grade point average and was a member of several honor societies, including the National Honor Society. In high school, Segal passed six International Baccalaureate courses. As a high school junior, Segal performed well on the SAT exams. He attained scores of 680 and 720, respectively, in the verbal and math parts of the exam. Segal is now enrolled in the University of Florida and is pursuing a degree in engineering. Segal is a native of Russia and a naturalized citizen of the United States. Segal speaks and reads his native language and is fluent in Spanish. Segal learned to speak and read English in one year and writes essays in English. At the time of the transaction on August 15, 2001, Segal was alert and was not under the influence of drugs or alcohol. On August 15, 2001, Segal signed numerous documents that disclose the specific coverage that Segal purchased and rejected. The documents include a confirmation of coverage form that discloses that Segal purchased motor club insurance in the amount of $6,000. The confirmation of coverage form discloses that ancillary products such as the motor club membership are: . . . high commission items that allow the agency to make a reasonable profit and continue to offer you the most competitive rates available on your auto insurance. These are separate plans from your auto policy and are optional. The confirmation of coverage form also contains the following declarations: I have read, confirm and consent to the coverages and benefits indicated on this form. DO NOT SIGN THIS FORM IF IT CONTAINS ANY BLANKS OR UNINITIALED MARK THROUGHS. GET A COPY FOR YOURSELF! READ THIS FORM AFTER YOU GET HOME. Segal also signed a motor club form. The form designates his mother as beneficiary of insurance in the amount of $6,000 and discloses that the insurance costs $60. Segal also signed an application for automobile insurance. The application discloses that Segal paid an annual premium of $970 for automobile coverage. The coverage consisted of property damage in the amount of $10,000 and personal injury protection in the amount of $10,000, subject to a deductible of $2,000. Neither party called Comstock as a witness or submitted her deposition testimony. No other witnesses observed the exchange between Comstock and Segal. Segal was the only witness who was present during the transaction between him and Comstock. Findings pertaining to the exchange between Segal and Comstock are based on the deposition testimony of Segal, the documents he signed, and the activities that Comstock was authorized to perform. That evidence is clear and convincing to the trier of fact. Comstock did not rush Segal through the transaction. Comstock gave Segal an opportunity to read the documents he signed on August 15, 2001, and no one stopped him from reading the documents. No document was concealed from Segal. Segal did not read the documents and did not ask questions about the documents. Comstock provided Segal with copies of all of the documents he signed. In addition, Cash Register provided Segal with a copy of a New Business Receipt that itemizes the charges that comprise the total charge of $1,036. The New Business Receipt shows premium charges of $642 for property damage, $328 for personal injury protection, $60 for accidental death and dismemberment, and $6 for fees. Both the New Business Receipt and the insurance application disclosed a premium for automobile insurance in the amount of $970. However, Segal paid $1,036 to Cash Register. Segal did not notice the disparity. Segal merely confirmed that the total amount due was consistent with the original quote and trusted Respondent to provide Segal with the insurance coverage he originally requested. Neither Comstock, Respondent, nor any other employee at Cash Register orally explained to Segal the coverage that he accepted or rejected in the documents he signed. Comstock was not licensed as a customer service representative and had no authority to explain insurance coverage to Segal. However, an unlicensed person in an insurance agency can give quotes, take an application for insurance, sell a motor club membership, and receive cash and premiums from customers. Neither Comstock, Respondent, nor any other employee at Cash Register orally explained to Segal that his membership was optional and was not required by law as part of the minimum insurance coverage that Segal originally requested. None of the licensed or unlicensed persons at Cash Register explained to Segal that the cost of the membership did not actually purchase life or automobile insurance or that the cost of the membership was not included in the premium for no additional charge. Segal did not realize that he was purchasing a motor club membership as well as the requested insurance. Respondent did not have Segal's informed consent to sell Segal the motor club membership. As Segal explains in this testimony: . . . I came into "Cash" Register to buy insurance . . . . I got something I didn't want, and . . . I owed $76. . . . Q. When you're talking about something you didn't want . . . . you're talking about the motor club? A. Yes. Q. At what point did you decide you didn't want it? A. When I found out I had it. Petitioner's Exhibit 1 at 61-62. Respondent is the primary agent for Cash Register. Section 626.592 makes Respondent responsible for supervising all individuals at Cash Register. Respondent is responsible and accountable for the acts and omissions of any employee at Cash Register, including the sliding that occurred in the transaction with Segal in violation of Section 626.9541(1)(z). In addition to the violation of Section 626.9541(1)(z), the Administrative Complaint alleges that the Segal transaction violated 14 statutory provisions. The following findings address those alleged violations. The sliding that occurred on August 15, 2001, demonstrates a lack of fitness or trustworthiness to engage in the business of insurance within the meaning of Section 626.611(7). The sliding also constitutes a dishonest practice in the conduct of business under Respondent's license within the meaning of Section 626.611(9). The sliding constitutes a source of injury or loss to the public and is detrimental to the public interest within the meaning of Section 626.621(6). The sliding is a violation of a provision of Chapter 626 within the meaning of Section 626.621(2). Finally, the sliding is an unfair or deceptive act or practice involving the business of insurance within the meaning of Section 626.9521. The evidence is less than clear and convincing that Respondent violated Section 626.621(12) by knowingly aiding, assisting, procuring, advising, or abetting any person in the violation of Section 626.9541(1)(z) or any other provision in Chapter 626. Respondent did not testify, and the evidence of his personal knowledge of the Segal transaction on August 15, 2001, is less than clear and convincing. The evidence is less than clear and convincing that Comstock violated Rule 4-222.060, Florida Administrative Code, by holding herself out as an insurance agent, customer representative, or any other licensed person, or performing any function that required Comstock to be licensed. Rather, the evidence shows that Comstock did not engage in a substantive discussion of insurance products but performed only those functions for which she is authorized in Rules 4-222.020 and 4- 222.050, Florida Administrative Code. (Unless otherwise stated, all references to rules are to rules promulgated in the Florida Administrative Code on the date of this Recommended Order.) The evidence is less than clear and convincing that others licensed as customer representatives and employed at Cash Register violated Subsections 626.112(1) and (2). Petitioner failed to make a sufficient showing that anyone exceeded the scope of activities authorized by their respective licenses. On August 15, 2001, Respondent did not violate Sections 626.611(13) and 626.621(3) by failing, willfully or otherwise, to comply with any order of the Department of Insurance (Department). The Department entered a Final Order against Respondent in a separate case on December 24, 2001. Respondent could not have violated the terms of that order on August 15, 2001. The evidence is less than clear and convincing that Respondent otherwise violated Section 626.611(13). An essential element of a violation of the statute is that the alleged violation must be "willful." Respondent did not testify concerning the requisite intent, and the remaining evidence is insufficient to support an inference of intent. The Administrative Complaint does not charge Respondent with willful deception in regard to an insurance policy within the meaning of Section 626.611(5). The evidence is less than clear and convincing that Respondent violated Subsections 626.9541(1)(a) and (b). Those provisions generally address public statements in advertising. This is a license discipline proceeding and is penal in nature. Terms within relevant statutes must be construed against the imposition of discipline and in favor of the licensee. The representation that the payment of $1,036 by Segal was for automobile insurance was a false statement within the meaning of Section 626.9541(1)(e). The false statement occurred in the form of an omission when the employees at Cash Register failed to orally explain that the motor club membership was optional and was not part of the minimum coverage requested by Segal. The evidence was less than clear and convincing that Respondent engaged in "twisting" within the meaning of Section 626.9541(1)(l). The evidence is insufficient to show that any act or omission by Respondent or his employees was intended to induce Segal to: . . . lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on, or convert any insurance policy or to take out a policy of insurance in another insurer. Petitioner spent a significant amount of time during the hearing on the issue of whether Respondent properly bound the insurance company when Segal left Cash Register on August 15, 2001. As a threshold matter, the Administrative Complaint contains 18 paragraphs of factual allegations that must support the charges contained in 26 paragraphs. None of the factual allegations contain any references to the issue of whether Respondent properly bound the insurance company when Segal left Cash Register. Petitioner complains that Respondent violated the policies of the insurance company by not signing the completed application before Segal left Cash Register in order to bind the insurance company. Petitioner's proof then leads down a winding trail. Petitioner's proof shows that if Respondent had signed the application, the act would have been ineffective to bind an intermediary company responsible for assigning new business to the actual insurance company. The intermediary company authorizes agents to bind the company only by an electronic binding system performed over the telephone. However, the evidence shows that the intermediary company was not the actual insurance company. The actual insurance company allows agents to bind the company by signing the application. Respondent completed the required electronic binding procedure three hours after Segal left Cash Register, a period that is faster than the industry norm. The insurance company did not issue the policy for more than 60 days after Segal left Cash Register because the intermediary company was too busy to assign the new business to a specific company any sooner. When the company did issue the policy, the effective time and date that the company was bound was approximately 13 hours before Segal left Cash Register on August 15, 2001. During much of the hearing, Petitioner cited to policies and procedures published by the intermediary company. However, Petitioner acknowledged that the intermediary company is not a state agency, and its rules are not the rules at issue in this proceeding. In a similar vein, Petitioner spent much of its energy during the hearing attempting to prove that Respondent did not sign the application as soon as it was submitted. There is no relevant factual allegation in the Administrative Complaint, and Petitioner cited no statute or rule that requires Respondent to sign the application at a prescribed time. Respondent has a history of discipline against his license for a similar offense. On December 24, 2001, Petitioner entered a Final Order in DOAH Case Number 01-1863PL. Petitioner adopted the Recommended Order of ALJ Robert E. Meale. Petitioner suspended Respondent's license for three months.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Petitioner enter a Final Order finding Respondent guilty of the charges pertaining to sliding and suspending Respondent's license for six months. DONE AND ENTERED this 4th day of December, 2002, in Tallahassee, Leon County, Florida. DANIEL MANRY 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 4th day of December, 2002. COPIES FURNISHED: Jed Berman, Esquire Infantino and Berman Post Office Drawer 30 Winter Park, Florida 32790-0030 David J. Busch, Esquire Division of Legal Services Department of Insurance, 200 East Gaines Street 645A Larson Building Tallahassee, Florida 32399-0333 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 Respondent committed the offenses set forth in the Administrative Complaint and the penalties, if any, that should be imposed.
Findings Of Fact At the time of the formal hearing and at all times pertinent to these proceedings, Respondent was licensed in the State of Florida by Petitioner as a life and health insurance agent and as a general lines insurance agent. At the time of the formal hearing and at all times pertinent to these proceedings, Respondent served as the general lines insurance agent of record for A-AAAce Insurance Underwriters (A-AAAce) of 2507 Sheridan Street, Hollywood, Florida. Nation Motor Club is an automobile club that provides towing, rental reimbursement, accidental death, and other benefits to its members. Respondent sold memberships in Nation Motor Club and earned a commission equal to 90% of the annual fee for each membership he sold. Nation Motor Club grants a member a thirty-day period following the filing of his application to cancel his membership and to receive a full refund of his membership fee. ANDERSON TRANSACTION On or about September 28, 1989, Edward A. Anderson went to the offices of A-AAAce to obtain insurance for his automobile. Mr. Anderson first met with Steve Harrison, an employee of A-AAAce who holds no licensure from Petitioner and for whose acts Respondent accepts responsibility. Mr. Anderson recalled that he wanted personal injury protection (PIP), property damage liability, and comprehensive and collision insurance for his automobile, but he could not specifically recall what types of coverage he requested from Mr. Harrison and he could not recall the details of what was explained to him by Mr. Harrison. Mr. Anderson recalled being told by Mr. Harrison the cost of his insurance coverage, but he could not recall what Mr. Harrison told him the amount would be. Following his discussion with Mr. Harrison, Mr. Anderson was presented certain documents for his execution. Respondent, who had been sitting at the adjacent desk during the conversation between Mr. Anderson and Mr. Harrison, supervised the execution of these documents by Mr. Anderson. Included among those documents executed by Mr. Anderson was a membership application for the Nation Motor Club. On this application form, Mr. Anderson designated the beneficiary in the event accidental death benefits became payable as a result of his membership. This application reflects that the annual fee for membership was $200.00. Neither Mr. Harrison or Respondent prevented or attempted to prevent Mr. Anderson from reading any of the forms presented to him for his execution. Mr. Anderson did not read the forms before he signed them. Instead, he relied on his discussions with Mr. Harrison and Respondent and signed what was put before him. Mr. Anderson had not requested membership in the Nation Motor Club and he was not aware that he was purchasing a membership in the Nation Motor Club at the time he agreed to do so. He believed that the premiums he was being charged and the papers he was signing related to the insurance coverage he had requested, and he did not understand that he was paying $200.00 for membership in the Nation Motor Club. On November 8, 1989, Florida Insurance Commissioner Tom Gallagher accompanied Lottie Brown, one of Petitioner's investigators, in paying a surprise inspection visit to the offices of A-AAAce. That surprise visit was prompted by a complaint unrelated to this proceeding. By happenstance, Mr. Anderson was in the offices of A-AAAce during that surprise visit. On November 8, 1989, Mr. Anderson became aware for the first time that he had purchased a membership in the Nation Motor Club. On November 11, 1989, Respondent refunded to Mr. Anderson the $200.00 membership fee he had paid and he caused Mr. Anderson's membership in the Nation Motor Club to be cancelled. Mr. Anderson would not have purchased the membership in Nation Motor Club had he understood that he was doing so. BROWN TRANSACTION On February 17, 1990, Rebecca Brown went to the offices of A-AAAce to obtain insurance for her automobile. Ms. Brown talked with Respondent and asked for minimum personal injury protection (PIP) and liability coverage. Respondent discussed with Ms. Brown the insurance coverage she wanted and quoted Ms. Brown the amount of $355.00 as being the price for the "full package" of coverage she would be receiving. Respondent told Ms. Brown the coverage he was proposing included benefits for towing, rental reimbursement, and accidental death. Ms. Brown did not understand that the quoted price included membership in the Nation Motor Club or that the annual fee for that membership was $100.00. The premium for the insurance coverage alone was $255.00. Ms. Brown signed an application for membership in the Nation Motor Club which reflects the sum of $100.00 as being the cost of membership. On this application, she inserted the name of the beneficiary who was to receive any accidental death benefits that may become payable as a result of her membership. Ms. Brown also signed a premium finance agreement which reflected the cost of the insurance she was purchasing. Respondent did not try to prevent Ms. Brown from reading the documents she was asked to sign. Ms. Brown did not read the documents because she was in a hurry to complete the transaction. Instead, she relied on Respondent's directions as to what and where to sign. Ms. Brown first became aware that she had purchased a membership in the Nation Motor Club when she was so advised by an investigator for Petitioner on March 8, 1990. Ms. Brown thereafter contacted Respondent about this membership and Respondent promptly applied the $100.00 membership fee toward payment of the other insurance she had purchased and withdrew her application for membership in the Nation Motor Club. Ms. Brown would not have purchased the membership in Nation Motor Club had she had a clear understanding that she was doing so. CANGIANELLA TRANSACTION On February 17, 1990, John Cangianella went to the offices of A-AAAce to obtain automobile insurance for his automobile. Mr. Cangianella talked with Respondent and asked for minimum personal injury protection (PIP) and liability coverage. Respondent discussed with Mr. Cangianella various options as to coverage, including membership in Nation Motor Club. Mr. Cangianella could not specifically recall the types of coverage that had been explained to him or the costs thereof. Respondent quoted Mr. Cangianella the amount of $355.00 as being the price for the coverage. Mr. Cangianella did not understand that the quoted price included membership in the Nation Motor Club or that the annual fee for that membership was $100.00. The premium Mr. Cangianella would have paid for his insurance coverage alone was $255.00. Mr. Cangianella signed an application for membership in the Nation Motor Club which reflects the cost of membership. Mr. Cangianella also signed a premium finance agreement which reflected the cost of the insurance he was purchasing. On the application, he inserted the name of the beneficiary who was to receive any accidental death benefits that may become payable as a result of his membership. Respondent did not try to prevent Mr. Cangianella from reading the documents he was asked to sign. Mr. Cangianella had been out late the night before and he did not read the documents because he was in a hurry to complete the transaction. Instead, he relied on Respondent's directions as to where to sign. Mr. Cangianella first became aware that he had purchased a membership in the Nation Motor Club when he was so advised by an investigator for Petitioner in early March 1990. Mr. Cangianella thereafter contacted Respondent about this membership. Respondent refunded the $100.00 membership fee on March 9, 1990, and withdrew Mr. Cangianella's application for membership in the Nation Motor Club prior to its submission. Mr. Cangianella would not have purchased the membership in Nation Motor Club had he had a clear understanding that he was doing so. Mr. Anderson, Ms. Brown, and Mr. Cangianella continue to do business with Respondent's agency. Respondent's licensure has not been previously disciplined by Petitioner.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered which dismisses the Administrative Complaint filed against Respondent. DONE AND ORDERED this 1st day of April, 1991, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 1st day of April, 1991. APPENDIX TO THE RECOMMENDED ORDER The following rulings are made on the proposed findings of fact submitted on behalf of the Petitioner. The proposed findings of fact in paragraphs 1-3, 5, 10, 13-15, 17, 19, 21- 22, and 25-27 are adopted in material part by the Recommended Order. The proposed findings of fact in paragraph 4 are rejected as being legal conclusions. The proposed findings of fact in paragraphs 6-9 are rejected as being unsubstantiated by the evidence. These dealings were between Mr. Anderson and Mr. Harrison. While it has been concluded that Respondent was responsible for Mr. Harrison's acts, the proposed findings, as written, are unsubstantiated. The proposed findings of fact in paragraph 11 are rejected as being unsubstantiated by the evidence. The record does not clearly reflect the amount of the premium. The proposed findings of fact in paragraphs 12, 18, and 20 are rejected as being, in part, unsubstantiated by the evidence and, in part as being contrary to the findings made and to the conclusions reached. The proposed findings of fact in paragraphs 16 and 24 are rejected as being unnecessary to the conclusions reached. The proposed findings of fact in paragraph 23 are rejected as being unsubstantiated by the evidence. The proposed findings of fact in paragraph 28 are adopted in part by the Recommended Order, are rejected in part as being recitation of testimony, and are rejected in part as being unsubstantiated by the evidence. The following rulings are made on the proposed findings of fact submitted on behalf of the Respondent. The proposed findings of fact in paragraphs 1-7, 9-14, 16, and 18 of Part I are adopted in material part by the Recommended Order. The proposed findings of fact in paragraph 8 of Part I are rejected as being unsubstantiated by the evidence. Respondent's Exhibit 3 is not clear as to the dates of the insurance being financed. The proposed findings of fact in paragraph 15 of Part I are rejected as being unnecessary to the conclusions reached. The proposed findings of fact in paragraph 17 of Part I are rejected as being unsubstantiated by the evidence. The proposed findings of fact in paragraphs 1-8, 10-20, and 22 of Part II are adopted in material part by the Recommended Order. The proposed findings of fact in paragraphs 6 and 21 of Part II are rejected as being unsubstantiated by the evidence. The proposed findings of fact in paragraph 9 of Part II are rejected as being unnecessary to the conclusions reached. The proposed findings of fact in paragraphs 1-17, and 19 of Part III are adopted in material part by the Recommended Order. The proposed findings of fact in paragraph 18 are rejected as being unsubstantiated by the evidence. COPIES FURNISHED: Michael W. Moskowitz, Esquire 1500 N.W. 49th Street, #401 Fort Lauderdale, Florida 33309 Gordon T. Nicol, Esquire Department of Insurance 412 Larson Building Tallahassee, Florida 32399-0300 Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Bill O'Neill General Counsel The Capitol, Plaza Level Tallahassee, Florida 32399-0300
Findings Of Fact At all material times, Respondent has been licensed in Florida as a life and health insurance agent and general lines agent, Respondent was an officer or director of A Abacus Mr. Auto Insurance of Naples, Inc. (Mr. Auto), and Mr. Auto was an incorporated general lines insurance agency doing business at 2283 E. Tamiami Tr. in Naples. In late 1989 or early 1990, Respondent employed Maribelle Nunez to work at Mr. Auto. She was inexperienced in insurance. A supervisory employee trained Ms. Nunez in the manner that Respondent had approved. Ms. Nunez was trained to respond to frequent requests for the least expensive motor vehicle insurance or minimal motor vehicle insurance required by law. When customers requested quotes for such coverage, Ms. Nunez was instructed to include a "premium" for accidental death and dismemberment coverage. This training was consistent with the policy of Respondent and the practice of the other employees working for Respondent at Mr. Auto. In fact, the "premium" was a fee for joining the Colonial Touring Association, Inc., which was a motor club that provided its members accidental death and dismemberment coverage. The fee generally consisted of $30 or $45. Respondent's commission for the motor club memberships sold was 90 percent, but his commission on personal injury protection was only 17 percent. Ms. Nunez was trained to switch a customer to a different insurer if he rejected the accidental death and dismemberment coverage. The premium charged by the other insurer would be higher than the rate first quoted plus the motor club fee. After a customer agreed to purchase the insurance package presented to him, which consisted of minimal coverage plus accidental death and dismemberment, Ms. Nunez prepared the paperwork reflecting the customer's "choice" of the motor club membership. She then instructed the customer to sign where indicated. Well over 90 percent of Respondent's motor vehicle insurance sales included the motor club membership. On February 1, 1992, Joseph Benedetto visited Mr. Auto to purchase personal injury protection. He asked for the minimum coverage for his 1983 Ford pickup truck and 1972 Porsche 914. Either Ms. Nunez or another employee handled the transaction in the manner described above. Mr. Benedetto purchased what he believed was the minimum coverage required by law, even though it included a $30 fee for the motor club membership. However, even with the $30 fee included, Mr. Auto's rate was the lowest of the two or three agencies Mr. Benedetto had called. On December 10, 1991, Donna Erb visited Mr. Auto and asked for minimal insurance coverage plus collision because her 1990 Ford Probe was financed. Ms. Nunez handled the transaction in the manner described above. Ms. Erb purchased what she believed was the minimum coverage required by law, plus collision, even though it included a $30 fee for the motor club membership. However, even with the $30 fee included, Mr. Auto's rate was the cheapest that Ms. Erb could find. Petitioner presented no evidence regarding Mark Lane or Christina Harle, who are the alleged customers described in Counts III and IV. In December 1990, Gene Torsell visited Mr. Auto and asked for minimal insurance coverage for an automobile that he was using but did not own. Ms. Nunez handled the transaction in the manner described above. Mr. Torsell purchased what he believed was the minimum coverage required by law, even though it included a $45 fee for the motor club membership. However, even with the $45 fee included, Mr. Auto's rate was the cheapest of the two or three agencies that Mr. Torsell had checked. On October 19, 1990, Paul Pemberton visited Mr. Auto and asked for minimal insurance coverage for an automobile. Either Ms. Nunez or another employee handled the transaction in the manner described above. Mr. Pemberton purchased what he believed was the minimum coverage required by law, even though it included a $45 fee for the motor club membership. Consistent with the training that Respondent or his supervisory employees gave Ms. Nunez and other employees, Respondent's employees did not adequately disclose the optional nature of the motor club fee and wrongly refused to sell customers the cheapest insurance available if they declined the optional accidental death and dismemberment coverage. Respondent was aware of all such practices as they took place.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the Department of Insurance and Treasurer enter a final order finding Respondent guilty of four violations of Section 626.9541(1)(x), Florida Statutes, and suspending his license for a total of six months. ENTERED on May 25, 1994, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings on May 25, 1994. COPIES FURNISHED: Hon. Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, FL 32399-0300 Bill O'Neil, General Counsel Department of Insurance The Capitol, PL-11 Tallahassee, FL 32399-0300 Attorney William W. Tharpe, Jr. 612-L Larson Bldg. Tallahassee, FL 32399-0333 Attorney Donald T. Franke 1044 Castello Dr., #103 Naples, FL 33940
Findings Of Fact Charles Edward James in the relevant period of time considered by these proceedings was an insurance agent licensed by the State of Florida in the categories of ordinary life, general lines, and disability. In that same time period Respondent was the president, director, and registered agent for Friendly Auto Insurance of Panama City, Inc., located at 704 West Eleventh Street, Panama City, Florida. He was also the president, director, and registered agent of All Auto Insurance of Quincy, which operates from 101 East Jefferson, Quincy, Florida. At various times in the critical period, Respondent had five other employees in Panama City in the Friendly Auto Insurance Agency. Among those employees was Alton McCollum, Jr., a licensed general lines agent in the State of Florida. His tenure with the Panama City office was from approximately February or March, 1982, until April, 1983. Anita Prevost worked in the Panama City operation commencing August, 1981, and was employed at the time of hearing as the office manager. Michelle Tolden started working in the Panama City office in February, 1982, as a clerk. At the time of the hearing she was excused from her employment on maternity leave. Tina Clark worked as a clerk in the Panama City office, but resigned prior to the hearing date. Carmen Browning was an employee in the business whose length of employment is unknown. McCollum, as a licensed general lines agent, had been hired by Respondent to operate the Panama City office and allow Respondent to do business in Quincy. At the time James employed McCollum, he gave no specific instructions as to how McCollum would supervise the Panama City office. James basically told McCollum that he wanted McCollum there so that McCollum's agent's license could be utilized to allow the Panama City office to remain open. McCollum spent a couple of hours a day operating the office. His time was primarily devoted to review of applications received by office employees. When he was not available in the office, McCollum could be contacted by phone by other office personnel. When he arrived, he assumed that the employees who were not agents understood how to conduct the business in the sense of giving quotes for automobile insurance over the phone and filling out the necessary forms. In the beginning, he was not familiar with the sale of motor club benefits, having never worked with that type of offering. The motor club memberships that were being sold at the time that McCollum was serving as the agent for Friendly Auto called for commissions to Friendly in the amount of 70 to 80 percent of the premium. Eventually, McCollum determined that the motor club sales through the Panama City operation were questionable. He discovered that customers were not being told that they were getting a motor club membership in addition to their requests for basic automobile insurance. In effect, what he found was that the other employees in Respondent's Panama City office were quoting a single price to customers requesting basic automobile insurance which included the cost of the basic insurance premium and the price of membership in the motor club. As McCollum realized motor club is not part of basic automobile insurance coverage in Florida. McCollum then attempted to have other employees within the Respondent's office specify to customers the particulars of what they were receiving, i.e., that motor club memberships were separate from automobile coverage. He also instructed the other employees in selling motor club memberships to explain to the customers that they were purchasing a motor club membership and specifically indicate what the cost was of that plan. As a result, Friendly Auto sold fewer auto club memberships while under the supervision of McCollum. McCollum also discovered that the other employees in the Panama City office were inappropriately filling out the applications in the sense that the name, address, driving history, and other background information were filled out but that portion related to premium costs and the break out of those costs was not being completed at the time the customer was in the office. That information was being placed in the application at a later date. The normal procedure was for the customer to be provided with a copy of the application which did not contain the specific itemized costs related to premium payments. Once McCollum discovered the problem with the applications, he instructed the employees in the office to fill out the application forms completely to include specifying the premium costs in the application and providing the customer with a completed copy of the application to include a break out of these premium charges. Tina Clark in particular did not readily accept the suggested changes for improving the integrity of the operation. McCollum had suggested that James fire this employee. Instead, Respondent decreased the hours available for that employee to work in the office based upon his belief that she would leave voluntarily and the employee left several months later, indicating that she could not accept reduced hours of work. Anita Prevost was hired by Respondent and trained by Carmen Browning. Before McCollum's involvement with the Panama City office, Prevost, in taking applications for automobile insurance, would quote a cost which included motor club membership as well as the automobile premium costs, even if the customer simply requested insurance necessary to receive a license and tag for an automobile. At the time of filling out the automobile insurance form it would be signed, the motor club membership application form would be signed, and a rejection form related to coverages not requested in the automobile policy line would be signed. Prevost and other employees would not refer to the motor club membership by that name. Instead, at most benefits of the motor club membership would be explained, such as towing, rental reimbursement, accidental death benefits, and emergency road service. The idea of explaining the coverage and not referring to the motor club membership as such was that of the Respondent. When an individual discovered that they had purchased a motor club membership, Prevost and other employees per Respondent's instructions would provide a full refund of the membership costs to that customer. Prevost, and other employees, in dealing with PIP coverage routinely filled out a deductible in the amount of $8,000 after asking a customer if they had hospitalization and without regard for the customers' response. When confronted with a customer who was not interested in that amount of deductible, they would offer a lesser deductible or no deductible. This technique was in keeping with instructions given by Respondent. Later, in dealing with the PIP purchase, Prevost and other employees in the agency would ask if the customer had hospitalization. If they said yes, an $8,000 deductible PIP would be suggested; otherwise, it would be recommended that the customer purchase the PIP coverage that did not carry a deduction. This new policy was established by the Respondent in early 1982 but was not always adhered to as seen in subsequent facts. When Michelle Tolden took applications for persons who wanted basic automobile insurance, she explained the limits of liability in the coverage; coverage related to PIP and its limitations and the benefits related to motor club memberships to include road service, rental, towing reimbursement and any accidental death benefits. The words "motor club" were not mentioned and Tolden has not deviated from the practice from this decision not to mention motor clubs. She feels that the customer understands better what is involved without mentioning the term "motor club." This technique is contrary to the instructions given by McCollum. Tolden, prior to her maternity leave, dealt with the question of the sale of $8,000 deductible PIP in the same fashion as described in the facts related to Prevost. Respondent, in his training in Port Myers, Florida, prior to coming to Panama City, had utilized the technique of packaging minimum automobile insurance coverage necessary with a ¬or club membership when a customer sought "tag" insurance. He and his employees pursued this technique at the time he operated as the general lines agent with Friendly Auto from June 1981 to March 1982. This packaging did not tell a customer specifically that the customer was purchasing an unnecessary and unrequested motor club membership. The resulting confusion and deception related to the aforementioned packaging is seen in the following factual account related to select customers mentioned in the complaint. According to James, in selling PIP $8,000 deductible the realized return was $3.00 with a cost of service of between $20 and $25. As a consequence, he decided to package automobile coverage and the motor club membership in view of the fact that the motor club paid 70 percent or better as commission for the agency in the sale of memberships. This enabled the agency to realize a profit in the combination of the sale of minimum automobile coverage and motor club memberships. The average return for commissions on automobile insurance policies generally is 15 percent. COUNT I LINDA C. SMITH In May, 1982, Linda C. Smith went to Respondent's Panama City office to purchase the necessary automobile insurance to obtain a tag. Smith desired to have PIP and liability coverage; however, in the face of a quoted cost of $79 for the insurance, she determined that she could only afford PIP. She paid $79 for what she assumed was PIP coverage upon a quote of that amount by an employee in Respondent's office. Only $29 related to automobile insurance coverage, the balance was for motor club membership. No mention was made to Smith on the subject of the purchase of a motor club membership and Smith would not have purchased it in view of the fact that she had a friend who was in the wrecker business. That friend was Robert Griffiths. Smith did sign a slip pertaining to a motor club membership which may be found as Petitioner's Exhibit 8. She does not remember seeing the membership fee of $50 reflected on that form. Subsequently, Smith discovered that she had purchased a motor club membership. Had she realized that the $50 had been spent on motor club membership, she would have utilized that payment to purchase liability insurance in lieu of the motor club membership. After complaining to the Insurance Commissioner's office in Panama City, she was contacted by Friendly Insurance and received a $50 refund related to her purchase of a motor club membership. At the time of the transaction, Smith did not read the entire explanation on documents provided to her. Smith's determination to purchase the no fault deductible in the amount of $8,000 was on the basis of the signing of a form provided by the agency which is known as a rejection of liability coverages. The particular form in question may be found as Respondent's Exhibit 11, admitted into evidence. Smith does not recall checking the block which shows the $8,000 deductible PIP. Nonetheless, one of he items on that form related to the $8,000 deductible and it indicates the significance of the deductible, in that it reduces the amount of PIP benefits paid to the purchaser or resident relatives. The form also indicates that this kind of deductible is not recommended for those persons who do not have other coverages which would respond adequately to payments for injuries received in automobile accidents. In addition to this information, the employee who assisted the customer had asked about hospitalization for the benefit of Linda Smith. Smith did have health insurance or medical insurance at the time of purchasing the automobile insurance policy. In addition that form as signed by Smith, had a portion which stated "I understand the accidental death benefit through the life insurance company is a separate item, that pays in addition to my auto insurance policy. I understand the additional charge to this coverage is included in with my downpayment." Smith did not equate this latter item with motor club membership. COUNT II JACKIE MERCER Jackie Mercer went to the Panama City office of Respondent in order to purchase necessary insurance to obtain a driver's license. This explanation was made to the employee who assisted the customer at Friendly Auto. The amount of quotation for the premium was $581, which was paid by Mercer. An automobile insurance application form was signed by Mercer and a copy of that may be found as Petitioner's Exhibit No. 13 admitted into evidence. The coverage was for one year, commencing April 17, 1982. No mention was made to Mercer of the purchase of a motor club membership and Mercer would not have knowingly accepted that unsolicited membership. Nonetheless, as part of the package of coverage, $25 was charged for each of two vehicles that were being insured for a total of $50 for membership in a motor club. The real automobile insurance policy amounts for the two cars for the one year period was $531. At the time that the purchase was made, Mercer did not understand that he had paid a separate amount for motor club, notwithstanding signing two forms which are constituted as Petitioner's composite Exhibit No. 15 indicating application for motor club membership. Mercer has no recollection of signing the forms related to motor club. Mercer spent 10 to 15 minutes in the office in applying for the insurance coverage and did not read the various documents presented to him in applying for the insurance. As related in Respondent's Exhibit No. 6, Mercer signed that aspect of the rejection of liability coverages pertaining to the fact that accidental death benefits were a separate item from the overall automobile insurance coverage for which there was an additional charge. This related to the motor club membership benefits; however, Mercer was unaware of this. The automobile insurance application, Petitioner's Exhibit No. 13, does not break down the various charges related to premium payments for insurance for the two automobiles. On the other hand, the application which was presented to the insurance company and is found as part of Petitioner's Exhibit No. 14, dated April 16, 1982, carries a quotation for the total premium payments for both cars as being $431. Eventually, Mercer was notified of the cancellation of his coverage with Protective Casualty related to the two automobiles for reason of nonpayment of additional premium. It was at that time that he learned from the Florida Department of Insurance that the overall charge of $581 made by Respondent's Panama City operation included $50 for motor club memberships which were not desired by Mercer. COUNT III RENATA DOTSON On October 26, 1981, Renata Dotson went to the Panama City office of Respondent and purchased automobile insurance by dealing directly with the Respondent. She told James that she wished full coverage and paid the $289 quoted price with the expectation of receiving six months' coverage for automobile insurance. She did not wish to purchase motor club membership which is not part of automobile insurance. The cost of auto coverage was $214. Petitioner's Exhibit No. 17, entered into evidence is a copy of the application form which was used in requesting insurance from Colonial Insurance Company This item was not filled out by Dotson. She did sign the document on the second page. Ms. Dotson did not obtain a copy of the original of the application form upon leaving the agency. Dotson also signed an application for membership in the Nation Motor Club. A copy of that application may be found as Petitioner's Exhibit No. 20, admitted into evidence. She did not fill out the other information set forth on the form. At the time of requesting automobile insurance on October 26, 1981, through James' agency, in addition to not requesting to join a motor club, she recalls no discussion of joining a motor club. She would not have desired membership in the Nation Motor Club because her parents were involved in another motor club that to her understanding would cover her car. Dotson did not understand that she had signed an application for a motor club membership. Likewise, Dotson does not recall the discussion of an $8,000 deductible PIP which eventually was written into the policy or any other discussion related to deductibles. Dotson did not carefully read all papers presented to her at the time she was in Respondent's office on October 26, 1981. Dotson later discovered that she had paid $75 for motor club membership and upon that discovery, Friendly refunded her $75. As reflected in Respondent's Exhibit No. 4, Dotson signed that aspect of the rejection of liability coverages dealing with accidental death benefits and the fact that this was a separate item promoting an additional charge for coverage. She did not equate this as being unrelated to automobile insurance requested by her and related to purchase of a motor club membership. Her understanding was that the questions related to naming a beneficiary for the accidental death benefit was part of the purchase of the automobile insurance. COUNT IV EMMETT FOWLER Emmett Fowler was interested in obtaining less expensive automobile insurance that he presently held and based upon a television advertisement, he purchased automobile insurance from Friendly Auto in Panama City. When he bought the insurance, he was of the opinion that he had paid for a full year when in fact he had paid for six months' coverage. When inquiring about this misunderstanding, it was revealed that he had purchased motor club membership. He had not understood that he had purchased that membership prior to this subsequent inquiry and would not have desired the membership in that he had been a member of another motor club for fifteen years. He was reimbursed $50 for the motor club membership when he informed Friendly that he was not interested in that benefit. The actual automobile insurance premium was $52 and he had paid $102 which had been quoted as the price of automobile insurance. The other $50 was for motor club membership. Fowler had signed the application for the automobile policy, a copy of which is found as Petitioner's Exhibit No. 26 and for the motor club membership, a copy of which is Petitioner's Exhibit No. 28. At the time of purchasing the policy, no discussion was entered into on the question of purchase of a motor club membership. The employee who assisted Fowler in the purchase of the automobile insurance indicated that in view of the fact that Fowler had retired from the military, that the $8,000 deductible on personal injury protection would make the policy cheaper. Having heard this explanation, Fowler chose an $8,000 deductible PIP. The total time involved in the purchase of the automobile insurance was 10-15 minutes. Fowler did not read the documents presented to him in this session very carefully. At the time of purchase, accidental death benefits were discussed; however, Fowler was unaware that this matter pertained to motor club membership and not the insurance policy. Fowler also signed the rejection of liability coverages form which is Respondent's Exhibit No. 7, admitted into evidence. In particular, his signature appears on that portion of the form related to the fact that accidental benefits are a separate item and that there is an additional charge for that coverage. The motor club application which is Petitioner's Exhibit No. 28, does not reflect the fact of the $50 fee related to that membership. A copy of that application produced by the Respondent from his records which is admitted as Respondent's Exhibit No. 8, shows a charge of $50. The conclusion of fact to be drawn from this discrepancy is to the effect that the $50 was placed on the application form subsequent to the time that Fowler made application and without his knowledge. COUNT V MAXIE REEDER On June 4, 1982, Maxie Reeder made an application with Friendly Auto, Panama City, for automobile insurance and paid the $200 which had been quoted as the price of the insurance. Of that $200, $175 actually pertained to the automobile insurance premium and the remaining $25 paid for membership in a motor club. Reeder purchased the insurance based upon a need to have sufficient insurance to obtain a tag for her automobile. Reeder was unaware that she had purchased a motor club membership until she received notification of her membership from the motor club. Reeder also experienced problems with trying to gain benefits of her automobile insurance coverage in that she had difficulty gaining assistance from the Respondent following an automobile accident that she had in late June. The automobile policy was not received by Reeder until August 1982. Eventually, Reeder cancelled the automobile insurance policy. She requested that Friendly Auto provide her a refund for the motor club and received a refund in the amount of $25. Petitioner's Exhibit No. 30 is a copy of the application for automobile insurance which was signed by Reeder on June 4, 1982. It does not reflect the exact cost of the various elements of the automobile insurance policy premium. Those premium amounts are broken out on Petitioner's Exhibit No. 31, which is a copy of the application as completed by someone in the Friendly Auto Insurance Agency and submitted to the insurance company after Reeder left the agency. It reflects the various charges and the total charge of $175. Through this scheme of completing the form later, Reeder was not aware that the full amount of the automobile insurance was $175, not the $200 quoted, nor did she recognize that the remaining $25 of the money that she paid was for motor club membership. Reeder would not have knowingly joined an automobile motor club because she was not financially able. The transaction for the purchase of the automobile insurance on June 4, 1983, took approximately 45 minutes and the customer did not read the documents involved carefully. Reeder was eventually paid $140 related to the automobile insurance premium which represented the amount of premium not yet used at the point of her cancellation. As reflected in Respondent's Exhibit No. 9, admitted into evidence, Reeder signed that portion of the rejection of liability coverages referred to as the accidental death benefit separate item and the fact of additional charge for that coverage. Notwithstanding that signature on the rejection of liability coverage, Reeder and all other customers in this complaint did not understand the separate nature of the automobile insurance coverage and the motor club membership. Moreover, nothing that was done by the employees at Friendly Auto had as its purpose explaining the meaning of the aforementioned statement signed by the customer and the fact that the automobile club membership was not necessary in order to obtain the so-called tag insurance. In the Reeder transaction and the others, even in the face of a separate application for motor club membership and automobile insurance and the purported identification of the separateness of automobile insurance and motor club membership found in the rejection of liability coverage form signed by the customer, the overall technique used in responding to the customer's request for automobile insurance was one of obscuring the distinction between automobile coverage and motor club membership. Actions by Respondent and his employees in dealing with Reeder and the other named customers camouflaged the fact that motor club membership was not necessary to meet the requirements of law for the purchase of a tag. By these actions, Respondent and employees at Friendly Auto were making a misrepresentation to the public related to necessary coverage for obtaining automobile tags and the cost of automobile insurance and motor club membership. COUNT VII ROBERT GRIFFITHS Based upon advertising, Robert Griffiths went to the Friendly Auto to purchase full automobile insurance coverage. This visit was on February 12, 1982. At that time, he paid Friendly Auto in Panama City $168 for what he was led to believe was automobile insurance coverage requested. The copy of the application made on February 12, 1982, may be found as part of composite Exhibit No. 72 by the Petitioner. It does not reflect the exact charges related to the automobile insurance. This is a copy which was obtained by the Griffiths when they purchased the insurance. In actuality, the cost of the insurance was less than $168 paid. Griffiths signed an item requesting an application for membership in Nation Motor Club which is part of Petitioner's composite Exhibit No. 40 admitted into evidence. Notwithstanding the fact that he signed this application form, he did not understand that he had purchased a motor club membership and would not have desired that in that he operated a wrecker and would not need the towing service provided by the motor club membership. At the time of purchase of automobile insurance in February, 1982, Mr. Griffiths and his wife thought that the motor club membership was part of the automobile insurance without charge, in that the copy of the application which was received did not indicate a membership fee. This is seen in a xerox copy of the membership application which is part of composite Exhibit No. 40 as contrasted with the agency's yellow copy of the membership application and part of the composite Exhibit No. 40. The latter item contains a $25 membership fee. It is concluded that the fee quote was placed on the application form submitted to the Nation Motor Club at a time subsequent to the Griffiths' departure from Friendly Auto on the date in February, 1982. Moreover, Petitioner's Exhibit No. 73 is a copy of the basic service contract for the motor club which was received by the Griffiths and the fee amount is whited out further leading the Griffiths to believe that there was no charge for that coverage. There was no discussion on February 12, 1982, between the employee of Friendly and Griffiths on the question of joining a motor club. In the February application process, when Robert Criffiths signed the motor club membership application form and the application for insurance he did not read those matters carefully. Griffiths also signed the rejection of liability coverage acknowledgement form, Respondent's Exhibit No. 10, admitted into evidence, related to separateness of the accidental death benefit and the additional charge for that coverage. Griffiths, in asking for full insurance coverage did not wish to have the $8,000 deductible PIP at the time of purchasing insurance in February. The automobile insurance protection which was requested on the application was shown to be worth $153 and the actual policy amount was finally determined by the insurer to be $150 including the policy fee. This is reflected in Petitioner's Exhibit No. 39, admitted into evidence which is a copy of the application for insurance policy and the statement of policy declarations. The period of coverage was for six months commencing February 13, 1982. In August, Griffiths returned to Friendly Auto Insurance to renew the automobile insurance policy. On this second visit, Griffiths' wife was with him and she concluded the transaction and Griffiths returned to work. When the application for renewal was applied for in August, 1982, and Mr. Griffiths left, he left after revealing to the employee at Friendly that his duties included that of operation of a wrecker. On this second visit in August, 1982, no discussion was entered on the question of continuing the $8,000 deductible PIP which had been purchased at the time that the automobile insurance was obtained from Friendly in February, 1982. Had Mrs. Griffiths known, she would not have applied for an $8,000 deductible PIP at the time of renewal, acting in her husband's absence. She did not feel that she could afford to pay the $8,000 deductible if the insurance was needed. In addition, the automobile insurance policy renewal was not promptly forwarded to the insured even though application was made on August 17, 1982. As a consequence, when Mrs. Griffiths had an accident on August 20, 1982, she was not covered by the policy. The problem with lack of coverage of the accident on August 20, 1982, and the deficit in the coverage related to PIP were rectified by Friendly and the motor club fee was returned. COUNT VIII BRENDA D. HENDERSHOT/BRUMFIELD On January 15, 1982, Brenda Hendershot, now Brumfield, looked the Friendly Auto Insurance Agency up in the phone book and through the telephone process received a quote for insurance and decided to purchase automobile insurance to obtain an automobile tag. The purchase price quoted of $153 included motor club membership, unknown to the customer. Petitioner's Exhibit No. 44, admitted into evidence, is a copy of the application for automobile insurance. It does not reflect a break down of the cost related to the policy, although there are spaces provided for those entries. This document was signed by Brumfield at the time of applying for the policy at the Respondent's office in Panama City. That exhibit is a copy of what was given to Brumfield when she left Respondent's office. Anita Prevost was the employee who took care of Brumfield on the date the automobile insurance was purchased. During this purchase no discussion was made of the motor club. Brumfield did sign the Nation Motor Club application form that is depicted as Respondent's Exhibit No. 2. In addition, she signed the rejection of liability coverage provided by Friendly, to include that portion of the form related to accidental death benefits, being a separate item carrying an additional charge. As with other cases spoken to in this Recommended Order, the accidental death benefit was part of the motor club membership and not part of the automobile insurance coverage requested by Brumfield. Brumfield recalls some discussion about $8,000 related to personal injury protection but did not understand from this conversation at the time of purchase that this $8,000 amount pertained to a deductible. She did not discover this fact until a subsequent time. On that same occasion, Brumfield discovered that she had purchased a motor club membership which she did not request. The copy of the application for insurance which the Respondent's agency in Panama City submitted to the insurance company as shown through Petitioner's Exhibit No. 45, admitted into evidence, reflects the various charges set forth in the premium and demonstrates that the real cost of the automobile insurance was $128 with the other $25 being related to motor club membership. The customer did not carefully consider documents by reviewing them at the time of her purchase. COUNT IX BENNY L. COON On December 31, 1981, Benny Coon went to Friendly Auto Insurance to purchase the necessary automobile insurance to satisfy legal requirements in the State of Florida. He chose this agency because it was the nearest to his residence. A quotation was made to him of $158 and he paid $158 for what he understood to be the necessary automobile insurance coverage. This quote, unknown to Coon, contained motor club charges. A copy of the application form, for automobile insurance which contains his signature, may be found as Petitioner's Exhibit No. 49, admitted into evidence. Coon's also signed an application for Nation Motor Club as shown in Petitioner's Exhibit No. 52, admitted into evidence which is the copy kept by Friendly insurance. As reflected on that exhibit, $25 was charged for motor club membership unrelated to the automobile insurance requested by Coon. Coon had not requested to join a motor club when be went to the agency, not being interested in that plan, and there was no discussion made about joining the motor club. Eventually, Coon received a copy of the declaration statement related to the automobile policy and it reflected the true charge of $133 as opposed to the $158 which Coon paid, believing that was related to the cost of automobile insurance not automobile insurance and motor club membership. Petitioner's Exhibit No. 50 is a copy of the application submitted to the insurance company and it also shows charges in an amount of $133. The break out of the charges for the automobile insurance was not reflected on the copy of the application provided to the customer on the date he made that application. See Petitioner's Exhibit No. 49. Coon had not carefully read the documents prepared at the time of requesting insurance coverage. Again this customer completed the rejection of liability coverages form which is found as Respondent's Exhibit No. 5 admitted into evidence. He signed that aspect of the form related to accidental death, i.e. death benefit being a separate item and the additional charge related. COUNT XI DAVID B. PERMENTER David Permenter went to the Friendly Auto Insurance office in Panama City on March 15, 1982, to purchase basic automobile insurance coverage required by the State of Florida. He was quoted a price with a premium of $346 and he paid that price. This price included motor club membership without his knowledge. At the time the application was made, he signed a form related to membership in Nation Motor Club and was provided the customer's copy. This is found as Petitioner's Exhibit No. 63, admitted into evidence. It does not reflect the amount of charge for this protection. He also executed an application form related to the automobile insurance, a copy of which is found as Petitioner's Exhibit No. 60. This item does not display the break out of the cost related to the automobile insurance which ultimately was determined to be $321 with the balance of the amount he paid being $25 utilized for membership in Nation Motor Club. The declarations document related to the automobile insurance policy was received by the customer subsequent to the purchase of the insurance. That document reflects the cost of automobile insurance to be $321 and it was received as evidence, Petitioner's Exhibit No. 61. At the time the automobile insurance was purchased, no request was made to join a motor club and no inquiry was made of the customer if he desired to join a motor club. The purchaser thought that he was buying automobile insurance and did not recognize that motor club membership was envisioned in the sale. He would have joined the motor club if it was part of the policy payment and not a separate charge but did not wish to pay additional money to join the motor club. Permenter did not discover that he had joined a motor club until a date subsequent to the time of the purchase of insurance. No specific discussion was entered into about the features of coverage being purchased, the principal emphasis of the sale being related to the total price. The customer was in the insurance agency for approximately 15 minutes and he did not complete the application forms other than to sign them. This customer did not read the documents carefully at the time of the purchase. The amount of money paid for the motor club membership was refunded. This customer completed a rejection of liability coverages to include a signature on that aspect of the sheet which indicated that accidental death benefit was a separate item for which a charge would be placed. This document is found as Respondent's Exhibit No. 1, admitted into evidence.
The Issue Whether the Respondent committed the acts alleged in the Amended Administrative Complaint filed by the Petitioner on October 6, 1997, and, if so, the penalty which should be imposed.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: The Department of Insurance is the state agency responsible for regulating the business of insurance in the State of Florida. Section 624.307, Florida Statutes. This power extends to the licensing and discipline of insurance agents. Sections 626.291, .611, and .621, Florida Statutes. Howard Irvin Vogel ("Respondent") is, and was at all times material to this action, licensed as a general lines agent (2-20) and a health insurance agent (2-40); Respondent is also currently licensed as a Florida Property and Casualty Joint Underwriting Association representative (0-17). Respondent is, and was at the times material to this action, the president of Federal Auto Ins., Inc., 1/ ("Federal Insurance"), an incorporated general lines insurance agency located in Lake Worth, Florida. He is, and was at the times material to this action, the only officer of the corporation who is a licensed insurance agent. In 1993, 1994, 1995, and 1996, Respondent was a director of the corporation and its designated primary agent. Respondent is, and was at the times material to this action, also the only licensed insurance agent who has the authority to sign checks drawn on the Federal Insurance trust account. At the times material to this action, Federal Insurance employed at least two licensed insurance agents in addition to the Respondent. The Respondent regularly worked full-time in the Federal Insurance office during 1993, 1994, and 1995, and he was aware of the way in which the agents he employed sold insurance. All monies received by the agents were turned over to the agency, and the Respondent approved all refunds and signed all refund checks. The Respondent ran the day-to-day operations of the insurance agency and supervised the agents who worked there. At the times material to this action, it was the practice at Federal Insurance to impose a service charge for the preparation of certificates of insurance 2/ if a customer indicated he or she would need certificates prepared throughout the year. It was also the practice not to charge customers for the preparation of the first three certificates, but the agents employed there had the option, depending on the person and on the amount of the premium, of charging $5 for each certificate prepared in excess of the three free ones or of charging a flat fee of $100 per year. The charge was imposed to cover the costs of preparing the certificates. The agents employed by Federal Insurance were expected to explain the charge to the customer and to make it clear that the $100 was an additional charge and not part of the insurance premium. The fees received for the preparation of certificates of insurance were deposited in Federal Insurance's trust account. Some insurance agencies do not charge for the preparation of certificates of insurance on behalf of their customers. At the times material to this action, Federal Insurance sold automobile towing coverage provided by L.N.V., Inc., a Florida corporation whose directors since its incorporation in 1987 have been Howard and Alicia Vogel. L.N.V., Inc., reimburses its members for the expense of towing an insured vehicle if an accident occurs during the period the customer's automobile insurance policy is in effect. Federal Insurance had, at the times material to this action, a separate application for the towing coverage, which applicants for the coverage were required to sign. The agents employed by Federal Insurance were expected to explain the nature of the coverage and to make it clear to the customer that the charge for the towing coverage was separate from the premium charged for the underlying automobile insurance policy. The membership fees received for the towing coverage were deposited into a separate account for L.N.V., Inc. The Respondent is the only licensed insurance agent authorized to sign checks on this account. Michael Clark On December 19, 1993, Michael J. Clark went to the office of Federal Insurance to purchase a commercial general liability insurance policy and to renew his commercial automobile insurance policy. He met with Lee Vogel, who was a licensed general lines agent employed by Federal Insurance. Lee Vogel quoted Mr. Clark an annual premium of $776 for the renewal of his commercial automobile insurance policy for a vehicle used in his business, Eastern Electric. Mr. Clark applied for the policy, which was written by the Granada Insurance Company ("Granada"); $776 was the correct premium for the coverage Mr. Clark requested. Mr. Clark paid Federal Insurance a down payment of $330 and signed a Premium Finance Agreement and Disclosure Statement in order to obtain financing for the balance of the premium. When Mr. Clark signed the premium finance agreement, the portion identified as the Federal Truth-in-Lending Disclosure Statement had not been completed by Lee Vogel, so the form did not reflect the amount of the down payment. Mr. Clark and Lee Vogel used a worksheet when they were discussing the coverage and the cost of the policy. The worksheet Lee Vogel prepared during these discussions shows that he added $100 to the $776 premium for the commercial automobile insurance policy and stated a total of $876 on the worksheet. Mr. Clark signed the worksheet on which the $100 charge is shown, and he apparently did not question at that time the purpose of the additional $100 charge. Several weeks after he purchased the commercial automobile insurance policy, Mr. Clark received the documents and payment book from the premium finance company. These documents reflected that he had been credited with a down payment of only $230 rather than the $330 down payment Mr. Clark thought he had made on the policy. At the same time he purchased the commercial automobile insurance policy, Mr. Clark purchased a commercial general liability insurance policy. Lee Vogel quoted Mr. Clark a premium of $281 for a policy which would be written by the American Surety and Casualty Insurance Company ("American Surety"). Mr. Clark applied for this policy and paid Federal Insurance $381 as payment in full for the general liability policy. The worksheet prepared by Lee Vogel shows a $100 charge added to the $281 premium quoted to Mr. Clark. Although Mr. Clark claims that Lee Vogel did not explain the $100 charge to him, Mr. Clark did not question Lee Vogel about the additional $100 charge. He signed the worksheet and paid Federal Insurance $381 for the general liability coverage even though he was quoted $281 as the premium for the coverage. Lee Vogel added the $100 charge to the $776 and $281 premiums for the automobile and general liability policies as a service charge to cover the costs of preparing any certificates of insurance Mr. Clark might request during the policy year. According to Lee Vogel, customers are not charged for the preparation of certificates for commercial automobile insurance policies because certificates of insurance are not usually prepared for such policies. If they are, it is in conjunction with certificates of insurance prepared to confirm commercial general liability coverage. At the time he purchased the policy, Mr. Clark requested that four certificates of insurance be prepared, and, on December 20, 1993, Howard Vogel signed four certificates of insurance verifying that Eastern Electric had general liability coverage with American Surety. During the 1993-94 policy year, Federal Insurance prepared a total of seventeen certificates of insurance on behalf of Eastern Electric, which certified that Eastern Electric had general liability coverage with American Surety. Five of the seventeen certificates of insurance confirmed both that Eastern Electric had general liability coverage with American Surety and that Eastern Electric had automobile insurance coverage with Granada Insurance Company. No separate certificates of insurance were prepared by Federal Insurance for the commercial automobile insurance policy written by Granada Insurance Company. Mr. Clark testified that he was not informed of the $100 service charge added to the premiums for the commercial automobile insurance policy and the commercial general liability insurance policy. He was in a hurry when he purchased these policies, and, when Lee Vogel gave him two or three papers to sign, he signed the papers without really reading them. Except for his signature appearing on several of the certificates of insurance prepared by Federal Insurance for Eastern Electric, the Respondent's only direct involvement with Mr. Clark's case was a letter the Respondent wrote to the Department, dated June 20, 1994, in which he complained about the way in which the investigation of Mr. Clark's complaint was being handled. Cheryl Lee Andrews On February 23, 1994, Cheryl Andrews purchased a commercial general liability insurance policy for her husband's lawn care business, Tropic Green Lawn Care, through Federal Insurance. After having spoken with him on the telephone, Ms. Andrews met with Bryan Sanders, a licensed general lines insurance agent employed by Federal Insurance, who quoted Ms. Andrews a premium of $673 for a policy written by American Surety. The wholesale broker in this transaction, with whom Federal Insurance had a contract, was Amelia Underwriters, Inc. Ms. Andrews made a down payment of $271 on the policy, and she was given a receipt which indicated that she had paid a $271 payment on a "GL" policy with "Amelia." When she paid the down payment on the policy, Ms. Andrews also signed a Premium Finance Agreement to finance the remainder of the premium through Del Rio Discount Corp. When Ms. Andrews signed the premium finance agreement, the portion identified as the Federal Truth-in-Lending Disclosure Statement had not been completed by Mr. Sanders; the premium finance agreement contained only the number of payments, the amount of each payment, and the date the first payment was due. Soon after, Ms. Andrews spoke with the Respondent on the telephone and requested a copy of the premium finance agreement with a completed disclosure statement. The Respondent sent her a copy of the agreement by facsimile transmittal, but it was not legible. Ms. Andrews telephoned the Respondent again and requested that he send her a copy by mail. When she did not receive another copy from Federal Insurance, she contacted American Surety, which contacted Amelia Underwriters, and the underwriters provided a completed copy of the Premium Finance Agreement. The down payment identified in the agreement was $171. On the day she purchased the insurance policy, Mr. Sanders asked if she wanted any certificates of insurance. At that time, Ms. Andrews did not know what this was, and Mr. Sanders told her it was proof of insurance. She asked that he prepare one certificate of insurance for Tropic Green Lawn Care on February 23, 1994. A second certificate of insurance was prepared by Federal Insurance for Tropic Green Lawn Care on March 28, 1994. Mr. Sanders did not discuss with Ms. Andrews at any time a charge for preparation of certificates of insurance. When she questioned the Respondent during a telephone conversation about the additional $100 she had paid Federal Insurance, he told her that it was a charge for certificates of insurance and other service charges and that, if she wanted any information, she should ask in writing. She then wrote a letter to the Respondent, dated June 10, 1994, requesting a breakdown of these charges, but she did not receive a response. In a letter dated July 26, 1996, written to the Department, Mr. Sanders confirmed that Federal Insurance charged $100 Ms. Andrews for preparation of certificates of insurance. Tropic Green was reimbursed $100 by Federal Insurance by a check drawn on the Federal Insurance trust account and dated January 8, 1996. Virginia Davidson On August 17, 1994, Virginia Davidson applied for personal automobile insurance through Federal Insurance. She dealt with a woman whose name she does not remember and who has not been identified in these proceedings. The policy was to cover a 1985 Chrysler, and she told the woman that she wanted insurance only for a short time because she intended to sell the car in the near future. At the time of this transaction, Ms. Davidson was in her late sixties. Ms. Davidson was told she needed to buy a one-year policy, and she recalled being quoted a price of $386 for an automobile insurance policy written by Armor Insurance Company ("Armor"). She paid the $386 by check dated August 17, 1994, and made payable to Federal Insurance; she was given a receipt that indicated that she had paid in full the premium on the Armor automobile insurance policy for one year. In fact, the premium for this policy was initially computed as $281 on the Brokerage Auto Application form. Although Ms. Davidson signed the application form on which this quote appeared, her signature appeared only on the reverse of the application form, while the quote appeared on the front. Ms. Davidson does not recall that anyone on August 17, 1994, explained that the $386 quoted to her included a separate $100 charge for towing coverage to be provided by L.N.V., Inc. At the time she purchased the insurance policy, Ms. Davidson was a member of AAA and would not have knowingly purchased towing coverage. Ms. Davidson's signature appears on a separate application form which clearly displayed the terms "Towing Coverage" and "LNV Corp." The "membership fee" for this coverage was shown on the form as $100. Ms. Davidson was asked to sign a number of documents when she applied for the automobile insurance policy, and she does not recall signing the application form for towing coverage. In a notice from Armor dated September 16, 1994, Ms. Davidson was notified that she owed an additional premium of $116 on her automobile insurance policy. The additional premium was due as a result of Armor's investigation of Ms. Davidson's driving history. In a letter to Armor dated October 11, 1994, Ms. Davidson requested that the policy be cancelled and that she receive a refund of unearned premium. Armor sent Federal Insurance a check dated October 31, 1994, in the amount of $163.70, representing the unearned premium on Ms. Davidson's automobile insurance policy. Mr. Vogel signed a check to Ms. Davidson on the Federal Insurance trust account, dated November 11, 1994, for $163.70. Ms. Davidson did not receive this check, and a replacement check was prepared, dated December 5, 1994. Ms. Davidson does not recall receiving this check, and neither of these checks has cleared Federal Insurance's account. The Respondent refused to issue another replacement check unless Ms. Davidson waited six months for the checks to clear the bank or paid Federal Insurance the $25.00 fee charged by the bank to stop payment on the replacement check. During December 1994, the Respondent recalculated the amount of the refund owing Ms. Davidson, including for the first time the agency's unearned commission and a pro rata refund of the $100 fee for the towing coverage. The Respondent issued a check to Ms. Davidson, drawn on the Federal Insurance trust account and dated December 26, 1994, in the amount of $117.20. The check specified that it was for "cancellation in full" of Ms. Davidson's automobile insurance policy. Ms. Davidson did not cash this check because she disputed that it was the full amount of the refund owed to her. Armor subsequently issued a check to Ms. Davidson in the amount of $184.80, which included the $163.70 and an additional amount of unearned premium which Armor had neglected to include in its calculations. Ms. Davidson does not recall receiving this check. All of the checks were sent to Ms. Davidson at her correct address in West Palm Beach, Florida. The Respondent was involved in the transaction involving Ms. Davidson only after she cancelled her automobile insurance policy. The Respondent signed the refund checks issued in her name, and, after Ms. Davidson filed a complaint with the Department, he responded to the Department's inquiry regarding the refund due to her. After having reviewed the files of Mr. Clark, Ms. Andrews, and Ms. Davidson, the Respondent was satisfied with the way the agents employed by Federal Insurance transacted business with these individuals. Summary The evidence is uncontroverted that the employees of Federal Insurance are supervised on a daily basis by and are under the direct control of the Respondent. The evidence presented by the Department is not sufficient to establish with the requisite degree of certainty that Michael Clark was unaware that he was charged $100 in addition to the premiums quoted on the commercial automobile insurance policy and commercial general liability insurance policy he purchased through Federal Insurance. Although he may not have been told the purpose of the extra charge, Mr. Clark was quoted premiums of $776 and $281, respectively, for the insurance policies. The worksheet he signed clearly shows that $100 was added to each of these premiums; in fact, Mr. Clark paid $381 as payment in full for the commercial general liability insurance policy when he knew that the premium for the policy was $281. On the other hand, the evidence presented is sufficient to establish that Lee Vogel deducted a $100 service charge for certificates of insurance from Mr. Clark's down payment of $330 on the commercial automobile insurance policy even though this charge was not imposed on commercial automobile insurance policies because separate certificates of insurance are not prepared for such coverage. The evidence presented by the Department is sufficient to establish that Bryan Sanders did not inform Cheryl Andrews of the $100 service charge added to the premium for the general liability insurance policy she purchased for Tropic Green Lawn Care and to establish that Ms. Andrews could reasonably believe that the entire down payment of $271 would be applied to the insurance premium. However, the evidence is uncontroverted that, when she spoke to the Respondent by telephone, he told her that the charge was for preparation of certificates of insurance and other services. The evidence presented by the Department is sufficient to establish that, even though she signed an application form for towing coverage to be provided by L.N.V. Corp., Ms. Davidson was not told of the purpose of the application, the nature of the coverage, or the $100 fee for the coverage. In fact, the receipt for $386 that she received from Federal Insurance did not make any reference at all to the towing coverage or to L.N.V. Corp. The evidence presented by the Department is, however, not sufficient to establish that the Respondent refused to refund the monies owing to Ms. Davidson; under the circumstances presented, it was not unreasonable for Federal Insurance to refuse to issue a second replacement check. The evidence presented by the Department is sufficient to establish that the Respondent instituted the practice of charging a $100 service fee for the preparation of certificates of insurance for commercial general liability insurance purchased through Federal Insurance. The evidence presented by the Department is not sufficient to establish that Federal Insurance was prohibited by agreement or contract from imposing a service charge for the preparation of certificates of insurance. The evidence presented by the Department is not sufficient to establish that the Respondent instituted a policy at Federal Insurance requiring customers to purchase towing coverage from L.N.V., Inc., as a condition of purchasing an automobile insurance policy or that the Respondent developed a sales scheme whereby the application for and explanation of the towing coverage was hidden. The evidence is sufficient to establish only one instance in which an unidentified person employed at Federal Insurance failed to disclose the particulars of the towing coverage. The evidence presented by the Department is not sufficient to establish a pattern at Federal Insurance of agents failing to disclose the $100 service charge for preparing certificates of insurance, of agents imposing the service charge to policies for which no certificates of insurance are prepared in the normal course of business, or of failing to inform customers of the nature of and charge for ancillary coverage such as towing coverage. Finally, the evidence presented by the Department does not establish that the Respondent or the agents involved in the transactions at issue in this proceeding failed to remit any portion of the premiums owing to the insurance companies for the policies sold to Mr. Clark, Ms. Andrews, or Ms. Davidson. In the case of Mr. Clark and Ms. Andrews, the premiums quoted to them were correct and the premiums set forth on the premium finance agreements were correct; it is irrelevant in this respect that Mr. Clark and Ms. Andrews may have believed that their $330 and $271 down payments were to be applied solely to the premiums owed on the policies. Likewise, the full amount of the premium initially calculated for Ms. Davidson's automobile insurance policy was paid to the insurance company by Federal Insurance.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Insurance enter a final order dismissing all three counts of the Amended Administrative Complaint filed against Howard Irvin Vogel. DONE AND ENTERED this 16th day of September, 1998, in Tallahassee, Leon County, Florida. PATRICIA HART MALONO Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 16th day of September, 1998.
The Issue Whether the Respondent committed the violations alleged in the Administrative Complaint dated October 24, 2008, and, if so, the penalty that should be imposed.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: The Department is the state agency responsible for licensing, regulating, and imposing discipline on insurance agents in Florida. See §§ 626.016(1); 626.601, Fla. Stat. Ms. Sykes was licensed as a 2-14 "life including variable annuity agent" and as a 2-20 general lines agent in January 1998. At the times pertinent to this proceeding, Ms. Sykes worked at an insurance agency owned by David J. Heiny ("Heiny Agency"). Deena Buell also worked for the Heiny Agency, and Ms. Sykes, Ms. Buell, and Mr. Heiny were the only three employees who were licensed as 2-20 general lines agents. The remaining two employees of Heiny Agency during the times pertinent to this proceeding held 4-40 licenses as customer service representatives. Certificate of Liability Insurance The Heiny Agency marketed the insurance products of the Allstate Insurance Company ("Allstate") and also the products of other insurance companies at the times material to this proceeding. In 2003, Mr. Heiny decided to expand his business to include workers' compensation insurance. In July 2003, he submitted an application to the Florida Workers' Compensation Joint Underwriting Association ("FWCJUA"), the insurer of last resort in Florida for workers' compensation insurance, for authority to submit applications to it for workers' compensation insurance. Mr. Heiny was notified by the FWCJUA in a letter dated July 29, 2003, that he was authorized to submit workers' compensation insurance applications to the FWCJUA until July 29, 2004. Mr. Heiny did not have authority to bind coverage for the FWCJUA, nor did he have authority to issue certificates of liability insurance showing workers' compensation insurance coverage through the FWCJUA. Under his agreement with the FWCJUA, Mr. Heiny was required to meet with and explain the workers' compensation insurance coverage to applicants and to sign all of the application forms. Mr. Heiny was unfamiliar with workers' compensation insurance, and he intended for Ms. Buell to handle all of the workers' compensation insurance business because she had experience at another agency with workers' compensation insurance. Mr. Heiny's office submitted one application for workers' compensation insurance, which was rejected, and he decided that the FWCJUA required too much paperwork. Mr. Heiny decided that he did not want to be involved with workers' compensation insurance, and he did not apply to renew his authorization to submit workers' compensation insurance applications to the FWCJUA. As a result, his authority to submit workers' compensation insurance applications to the FWCJUA expired on July 29, 2004. Mr. Heiny informed both Ms. Sykes and Ms. Buell that he did not intend to renew his authorization with the FWCJUA. Ms. Sykes is fluent in Spanish and was the only licensed agent at the Heiny Agency who spoke Spanish at the times pertinent to this proceeding. Because of her fluency in Spanish, Ms. Sykes worked with the Heiny Agency's Spanish- speaking customers, and most of her business consisted of referrals from these customers. One of Ms. Sykes' long-standing customers was Mayola Campos, who owned Form Construction, Inc. ("Form Construction"), with her husband, Fortino Campos, and Ms. Sykes handled the commercial insurance for Form Construction. Mrs. Campos came into the Heiny Agency's office regularly to pay premiums and to discuss with Ms. Sykes's the corporation's various insurance policies and changes in coverage. As a result, Ms. Sykes and Mrs. Campos were well-acquainted, and Ms. Sykes received a number of referrals from Mrs. Campos. Form Construction was a trim and roofing company working in the construction industry. According to Ms. Sykes, Mrs. Campos came to her in or around July 2004 seeking workers' compensation insurance. Ms. Sykes was not familiar with workers' compensation insurance because she had never sold that type of insurance, and it was not a product normally sold through the Heiny Agency. Nonetheless, she completed an application and submitted it to Ms. Buell for processing. At the time, Ms. Sykes was aware that Mr. Heiny did not intend to renew his authority to submit applications for workers' compensation insurance to the FWCJUA and that the authority would expire at the end of July 2004. Ms. Sykes cannot recall hearing anything further about Form Construction's July 2004 application for workers' compensation insurance. She was going through a particularly difficult divorce proceeding and was not working full-time at the agency. In addition, Ms. Buell was working from her home so she could care for her infant and young daughter, and Ms. Sykes and Ms. Buell were not in regular communication. Without confirming that the FWCJUA had issued workers' compensation insurance to Form Construction, Ms. Sykes signed a Certificate of Liability Insurance for Form Construction and sent it to that company. The certificate, dated October 12, 2004, reflected that, in addition to general liability and automobile insurance, Form Construction had workers' compensation insurance through the FWCJUA that was effective from October 16, 2004, to October 16, 2005. The certificate holder was identified on the certificate as Gold Construction. Ms. Sykes was aware of the purpose of a Certificate of Liability Insurance since she routinely prepared and signed them for insurance companies whose products were marketed by the Heiny Agency. A Certificate of Liability Insurance is used to establish that a person or company has liability, automobile, and/or workers' compensation insurance. Although some insurance companies allow insurance agents to issue certificates of liability insurance, only the FWCJUA issues certificates of liability insurance for the workers' compensation insurance coverage it provides. The only exception to this policy is when an agent requests authority to issue a certificate of liability insurance for a specific insured for a specific purpose. The agent must request this authority in writing and specify the purpose of the certificate; the FWCJUA must give approval in writing to the agent before the agent can issue the certificate. The agent must then send a copy of the certificate to the FWCJUA for its records. In the construction industry, a certificate of liability insurance is presented to a contractor to establish that a company working on a project as a subcontractor has workers' compensation insurance. If a general contractor hires a subcontractor that does not have workers' compensation insurance, the general contractor is responsible for providing workers' compensation insurance for the employees of the uninsured subcontractor who worked on the contractor's job. See § 440.10(a), (b), and (c), Florida Statutes. Form Construction presented the Certificate of Liability Insurance signed by Ms. Sykes to Gold Construction, which was, at the times pertinent to this proceeding, a qualified contractor business. Gold Construction hired general contractors, which, in turn, hired subcontractors to work on its projects. The subcontractors were paid by Gold Construction, and it required all subcontractors to present a certificate of liability insurance showing that they had general liability and workers' compensation insurance at the time the subcontractors were hired. Sometimes, the subcontractor would provide the certificate directly to Gold Construction, and sometimes Gold Construction would call the subcontractor's insurance agency and request that the certificate be sent to it, directly. The Certificate of Liability Insurance signed by Ms. Sykes was presented to Gold Construction as evidence that Form Construction had liability and workers' compensation insurance, and, in November 2004, Gold Construction hired Form Construction to do truss work on two construction projects. Gold Construction was subsequently audited by its workers' compensation insurance carrier, and the auditor determined that that Form Construction did not, in fact, have workers' compensation insurance and that the Certificate of Liability Insurance was bogus. Gold Construction was, therefore, assessed an additional $12,000.00 in workers' compensation insurance premium to add coverage for Form Construction's employees. The only records the FWCJUA has relating to Form Construction is an application for workers' compensation insurance for Fortino and Mayola Campos, d/b/a Form Construction, which was signed by Mr. Heiny and dated August 27, 2003; a date stamp on the application shows that it was received by the FWCJUA on September 17, 2003. In a letter dated October 16, 2003, the FWCJUA notified Mr. Heiny that the application for Form Construction was being returned with no coverage having been bound, and there is nothing in the records of the FWCJUA showing that it received another application for workers' compensation insurance for Form Construction or that it provided compensation insurance for Form Construction. Automobile insurance endorsement The Heiny Agency wrote commercial automobile insurance through Allstate. Ms. Sykes joined the agency in 1995, after having worked for another agency that marketed Allstate insurance products. Ms. Sykes was recommended by one of Allstate's district managers, and her familiarity with the Allstate computer system and her fluency in Spanish were considered by Mr. Heiny to be very important contributions to his agency. Form Construction had commercial automobile insurance coverage with Allstate, which was written through the Heiny Agency. Ms. Sykes was the only agent at the Heiny Agency that worked with Mrs. Campos on insurance matters. Mrs. Campos visited the Heiny Agency's office frequently to pay premiums and to discuss the various insurance policies issued to Form Construction. Mrs. Campos always spoke with Ms. Sykes when she came into the office because none of the other agents or employees of the agency spoke Spanish. Form Construction's commercial automobile insurance policy came up for renewal in April 2005. When Mrs. Campos came in to pay the renewal premium, she and Ms. Sykes discussed raising the policy's bodily injury liability limits from $25,000.00 per person and $50,000 per occurrence. Mrs. Campos told Ms. Sykes that she needed to speak to her husband before she could raise the liability limits. Ms. Sykes did not hear anything from Mrs. Campos until June 2005, when Mrs. Campos came into the office and requested that Ms. Sykes add another vehicle to Form Construction's commercial automobile insurance policy. Ms. Sykes again advised Mrs. Campos that she should consider raising the policy's bodily injury liability coverage limits to at least $250,000. Mrs. Campos asked Ms. Sykes how much such an increase in coverage would cost, and Ms. Sykes went into the Allstate computer system and partially prepared an endorsement to the automobile insurance policy showing the increased limits so she could get a quote for Mrs. Campos on the price. Ms. Sykes did not submit the endorsement at that time, and it remained pending in the Allstate computer system. On or about July 12, 2005, Mrs. Campos visited the Heiny Agency's office and reported to Ms. Sykes that Mr. Campos had been involved in an automobile accident while driving a vehicle owned by Form Construction and that he had hit a person on a bicycle. Ms. Sykes advised her that her commercial automobile bodily injury liability coverage limits were $25,000.00 per person and $50,000.00 per occurrence. Ms. Sykes also reminded Mrs. Campos that she had advised her several times to raise the Form Construction's bodily injury liability limits. Ms. Sykes immediately submitted the claim to the Allstate claims Department, where it was assigned to Thomas Burger. On July 15, 2005, Mrs. Campos contacted Ms. Sykes and told her to raise the bodily injury liability limits in Form Construction's automobile insurance policy to $500,000.00 per person and $500,000.00 per occurrence. Ms. Sykes went into the Allstate computer system and prepared and submitted the endorsement to Allstate. The endorsement submitted by Ms. Sykes on July 15, 2005, carried an effective date of July 10, 2005, two days prior to the date on which Mrs. Campos reported the claim relating to Mr. Campos's automobile accident. A copy of the endorsement was sent to Mrs. Campos on July 16, 2005, and Mrs. Campos visited the Heiny Agency's office several days later with a check for the additional premium attributable to the increase in bodily injury liability limits. The Allstate claims department was, at the times pertinent to this proceeding, separate from the department handling commercial automobile insurance policies. The information available to Mr. Burger at the time the Form Construction claim was submitted showed bodily injury liability limits of $25,000.00 per person and $50,000.00 per occurrence on the Form Construction policy. On July 29, 2005, Allstate tendered a check to the person injured by Mr. Campos for the policy limit of $25,000.00. This check was not cashed. Mr. Burger did not learn until October 2005 that a policy endorsement raising the bodily injury liability limits had been submitted July 15, 2005, with an effective date of July 10, 2005. According to Ms. Sykes, someone from Allstate contacted her in August 2005 to question her about the endorsement, and she explained that the retroactive increase in bodily injury liability limits was a mistake and that the policy limits were $25,000.00 per person and $50,000.00 per occurrence at the time of the accident on July 12, 2005. Mr. Burger interviewed Ms. Sykes and Mr. Heiny on January 13, 2006, regarding the endorsement, and Ms. Sykes told Mr. Burger that she could not recall why she would have back-dated the endorsement. Ms. Sykes told Mr. Burger of the problems she had experienced with endorsements to automobile insurance policies being lost in the Allstate computer system. On January 26, 2006, the attorney representing the person injured by Mr. Campos wrote Allstate demanding disclosure of the policy limits of Form Construction's automobile insurance policy. In a letter dated February 3, 2006, Allstate notified Mr. Heiny and Ms. Sykes that it might seek indemnification from the Heiny Agency because it attributed the back-dated increase in bodily injury liability limits to agent error. Shortly thereafter, Mr. Heiny asked if Allstate could change the limits back to the original $25,000.00 per person and $50,000.00 per occurrence as of the date of the accident, but Allstate had already determined that the increased limits were effective July 10, 2005, because of the effective date on the endorsement and because of Mrs. Campos's payment of the premium for the additional coverage. In a letter dated February 17, 2006, Mr. Burger advised the attorney representing the injured person of the increase in the bodily injury liability limits, and, on March 2, 2006, Allstate tendered a check to the injured person's attorney in the amount of $500,000.00. Ms. Sykes attributed the back-dating of the endorsement to a glitch in the Allstate computer system by which the endorsement she submitted July 15, 2005, was automatically back-dated to July 10, 2005. Ms. Sykes had complained to Mr. Heiny on numerous occasions about problems with endorsements disappearing from the system, which required her to resubmit the endorsements. Ms. Sykes was not, however, aware of any endorsements being automatically back-dated by the system except for the July 2005 endorsement to Form Construction's commercial automobile insurance policy. Under the Allstate computer system, there are only two ways in which an endorsement's effective date can be established. The usual procedure requires the agent to complete the endorsement and submit it into the system; the system then automatically records on the endorsement the date it was submitted and the effective date of the endorsement. The other alternative is for an authorized agent to manually back-date the effective date of an endorsement and then submit it into the system. Mr. Heiny tested the Allstate computer system repeatedly, trying to determine whether the system would automatically back-date an endorsement. None of the test endorsements prepared by Mr. Heiny was automatically back-dated, and Mr. Heiny is aware of no instance in which an endorsement was automatically back-dated except for the Form Construction endorsement at issue herein. Findings of ultimate fact Certificate of Liability Insurance The evidence presented by the Department is sufficient to establish with the requisite degree of certainty that, when she signed the Certificate of Liability Insurance on October 12, 2004, showing that Form Construction had workers' compensation insurance issued by the FWCJUA with effective dates of October 16, 2004, through October 15, 2005, Ms. Sykes knew that Form Construction did not have workers' compensation insurance placed by the Heiny Agency through the FWCJUA and knew that Gold Construction would rely on the Certificate of Liability Insurance as evidence that Form Construction had workers' compensation insurance. Ms. Sykes' action demonstrates her lack of fitness and trustworthiness to engage in the business of insurance, and Ms. Sykes caused injury to Gold Construction because, as a result of its reliance on the Certificate of Liability Insurance, it was required to pay additional premium to its workers' compensation insurance carrier. Ms. Sykes's testimony regarding the circumstances in which she signed the Certificate of Liability Insurance was replete with inconsistencies and improbabilities and was wholly insufficient to support her contention that, when she signed the Certificate of Liability Insurance, she had a good faith belief that Form Construction had workers' compensation insurance issued by the FWCJUA. Mr. Heiny told Ms. Sykes that he did not intend to renew his authorization to submit workers' compensation insurance applications to the FWCJUA after it expired in July 2004, and, because she was the only agent at the Heiny Agency that dealt with Mrs. Campos, Ms. Sykes would necessarily have known if Form Construction had been issued a workers' compensation insurance policy by the FWCJUA. It is reasonable to infer, therefore, that Ms. Sykes was aware on October 12, 2004, that Form Construction was not, and had never been, covered by workers' compensation insurance issued by the FWCJUA as a result of an application submitted by Mr. Heiny. Finally, Ms. Sykes' testimony that, before signing the Certificate of Liability Insurance, she reviewed the Form Construction file and saw a check and a Federal Express receipt showing that "it all went out to the FWCJUA"2 directly conflicts with her testimony that Form Construction's records were destroyed when the Heiny Agency's office flooded in September 2004.3 Although the evidence presented by the Department is sufficient to establish that Ms. Sykes demonstrated a complete lack of knowledge about workers' compensation insurance, she was not authorized to submit applications to the FWCJUA and did not engage in any transactions involving workers' compensation insurance except for signing the Certificate of Liability Insurance for Form Construction. This act is not sufficient to establish that Ms. Sykes engaged in transactions involving workers' compensation insurance. Automobile insurance endorsement The evidence presented by the Department is sufficient to establish with the requisite degree of certainty that Ms. Sykes' deliberately back-dated an endorsement to Form Construction's commercial automobile insurance policy increasing the bodily injury liability policy limits so that the increased limits were effective two days before Mr. Campos was involved in an accident while driving a vehicle owned by Form Construction. Ms. Sykes' action constitutes willful misrepresentation of the coverage limits actually in effect on the date of the accident, and it demonstrates Ms. Sykes' unfitness and untrustworthiness to engage in the business of insurance. Ms. Sykes' explanation that the endorsement was automatically back-dated by the Allstate computer system is rejected as not credible. The evidence presented by the Department is not sufficient to establish that Ms. Sykes lacked in any respect adequate knowledge of or technical competence in commercial automobile insurance. Finally, the evidence presented by the Department is sufficient to establish by the requisite degree of certainty that, because Ms. Sykes committed misconduct relating to the signing of the Certificate of Liability Insurance, she engaged in dishonest practices while engaging in the business of insurance when she back-dated the endorsement to the Form Construction commercial automobile insurance policy.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services enter a final order Finding Madeline Hernandez Sykes guilty of one count of having violated Sections 626.611(7) and 626.621(6), Florida Statutes; Finding Ms. Sykes guilty of one count of having violated Section 626.611(5), (7), and (9), Florida Statutes; and Suspending Ms. Sykes' license to engage in business as a general lines insurance agent for a period of 15 months. DONE AND ENTERED this 30th day of April, 2009, in Tallahassee, Leon County, Florida. PATRICIA M. HART Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of April, 2009.
