The Issue Whether Respondent acted as an agent for a membership organization, International Water Safety Foundation (IWSF), and its insurance underwriter, North American Marine (NAM), that had been ordered to cease and desist transacting insurance related business in this state; if so, whether (and what) discipline should be imposed on Respondent's license to transact business as an insurance agent.
Findings Of Fact The Parties Petitioner is the state agency charged with the licensing and regulation of insurance agents in Florida and is responsible for administrating the disciplinary provisions of chapter 626, pursuant to section 20.121(2)(g) and (h), Florida Statutes. At all times material to this case, Respondent was a licensed general lines insurance agent in the state of Florida. Respondent also is a director and officer of the Marta De La Paz Agency, Inc. (MDLPA), which she has co-owned with her daughter, Jenny Mondaca Toledo, since 2000. Respondent was a "captive agent" of Allstate Insurance Company (Allstate) for the period of 2000 to 2010. During this time, pursuant to an agreement with Allstate, Respondent could only sell Allstate insurance products. If Allstate did not carry a particular insurance product line, Respondent was allowed to sell the products of other carriers to her clients if the other carrier was approved by Allstate. The Events Giving Rise to the Recommended Revocation Insurance agents licensed by the State of Florida are only permitted to sell insurance provided by entities which have a "certificate of authority" and which are authorized to sell in Florida. Agents are fiduciaries of the consumers who use their services. Sales of insurance through unauthorized entities place the consumer at risk because unauthorized entities do not participate in the Florida Insurance Guarantee Fund (FIGA), a fund maintained by the State to protect consumers from losses should an authorized insurance carrier become insolvent or unable to pay claims. IWSF is a membership organization which offers various benefits and services to its members, including watercraft insurance through a master policy with NAM. NAM, an unlicensed and unauthorized insurer, through IWSF, solicited Florida consumers to purchase insurance from NAM. On October 15, 2003, the Office of Insurance Regulation issued a cease and desist order (Order) against IWSF and NAM from conducting insurance related activities in Florida, including but not limited to, "transacting any new or renewal insurance business in this state, and from collecting any premiums from Florida insureds." The unlicensed, unauthorized, and, therefore, illegal transaction of insurance by IWSF and NAM was deemed to present an immediate danger to public health, safety, or welfare of Florida residents. On or about April 14, 2009, Carlos Guzman (Guzman), on behalf of himself and his brother-in-law, Jorge Saez (Saez), sought to purchase watercraft insurance for a boat which they co-own. Guzman went to MDLPA and met with employee, Odayls Chiullan (Chiullan). Chiullan, who has held a 2-20 Florida general lines insurance license for approximately 15 years, worked at MDLPA as an agent for approximately three months during the spring of 2009. Respondent, as the principal agent of MDLPA, had the responsibility to supervise Chiullan during the period she worked for MDLPA. In April 2009, Allstate was not providing watercraft insurance for customers in Florida. To determine which carrier, if any, could provide the insurance sought by Guzman and Saez, Chiullan referred to a list maintained in the office of MDLPA. Chiullan found the name of IWSF on the list and assumed that it was approved by Allstate as a licensed entity with which MDLPA could do business. Chiullan was unaware of the 2003 Order against IWSF and NAM. Chiullan contacted IWSF and secured an insurance price quote for Guzman and Saez. Chiullan arranged for Guzman and Saez to become members of IWSF, thereby enabling their boat to become insured under the master policy of IWSF with NAM for the initial period of May 6, 2009, through May 6, 2010, which was subsequently renewed for an additional year. Chiullan contacted Standard Premium Finance Company (Standard) on behalf of Saez and Guzman to assist them in financing the premium payments for their boat insurance. Respondent was on a cruise and not in contact with Chiullan during the period when Chiullan assisted Saez and Guzman with securing boat insurance or the financing for their premium payments. Although correspondence to and from IWSF and MDLPA was on MDLPA letterhead and fax transmittal sheets, Respondent had no contact with Saez, Guzman, IWSF, or NAM regarding this May 2009 transaction. Respondent became aware of the purchase of insurance from IWSF by Saez and Guzman when she was asked by Chiullan to sign the premium finance agreement with Standard as the owner of MDLPA. That was the full extent of Respondent's connection to this particular transaction which is at issue. Saez and Guzman renewed their policy through MDLPA with IWSF and NAM for the period of May 6, 2010, through May 6, 2011. Saez and Guzman made no claims against the policy or policies in effect from May 6, 2009, through May 6, 2011. Prior to receipt of the Administrative Complaint, Respondent was unaware of the Order against IWSF and NAM. Respondent was also unaware that neither entity was authorized to transact business in Florida. Respondent received no notice of the Order from Petitioner, Allstate, IWSF, NAM, or Standard. While serving as a captive agent for Allstate, Respondent did not receive alerts from Petitioner regarding unauthorized insurers. Although Respondent was aware of her obligations under Florida to stay apprised of which entities were authorized to issue insurance in Florida, she did so by maintaining a list in MDLPA, provided by Allstate, which she presumed was vetted and approved as state-authorized insurers. In fact, Respondent sold her son, Osmany Mondaca, insurance for his boat through IWSF and NAM for the period of November 26, 2007, through November 26, 2008, and this policy was renewed for two additional years. Respondent also sold boat insurance through IWSF and NAM for the coverage period of June 24, 2010, through June 24, 2011, to her boyfriend for a boat which they co-own. Prior to purchasing insurance through IWSF for her boyfriend and son, Respondent checked with Petitioner regarding the status of IWSF and was told there was no problem. As recently as December 2013, Respondent checked again with Petitioner and was advised there was no problem writing insurance through IWSF and NAM. Respondent credibly testified that, had she known about the Order, she certainly would not have sold policies through IWSF and NAM for a boat she co-owns with her boyfriend or for her son's boat. Although Petitioner offered evidence that it regularly provides updates on its website and in newsletters alerting agents to unauthorized insurers attempting to do business in Florida, including but not limited to alerts about IWSF and NAM, no evidence was provided that these communications were sent to, received, or reviewed by Respondent or Chiullan. Further, Respondent's testimony, that this information was not available by telephone from Petitioner, was not contradicted.1/
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Insurance Agents and Agency Services, enter a final order which dismisses the Administrative Complaint filed against Respondent. DONE AND ENTERED this 28th day of March, 2014, in Tallahassee, Leon County, Florida. S MARY LI CREASY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of March, 2014.
Findings Of Fact The Respondent has been licensed by the Department of Insurance as an insurance agent since 1966. Prior to the initiation of this proceeding, he has not been the subject of any disciplinary action by the Department. The Respondent has had a successful career as an insurance agent, and has been an active member of his community. During 1977 the Respondent actively marketed membership in a program known as the National Business Conference Employee Benefit Association (NBCEBA). The program offered by NBCEBA constituted a health insurance plan, and as such was subject to regulation under the Florida Insurance Code. The NBCEBA program operated as if it were exempt from state regulation under the Federal Employee Retirement Income Security Act (ERISA), Chapter 18, United States Code, Sections 1001, et seq. Qualified plans under ERISA were not subject to regulation under state insurance codes. The plan offered by NBCEBA did not qualify as an ERISA plan. Such plans could only be offered by employee organizations. NBCEBA solicited members who were employed by diverse employers, and who participated in diverse occupations. Membership in NBCEBA thus lacked the commonality of employment status among members required of employee organizations under ERISA. Since the plan offered by NBCEBA did not qualify as an ERISA plan, it was subject to regulation by the State of Florida as a program of insurance. Indeed, the essence of the NBCEBA plan was to offer a program of insurance to its "members." NBCEBA has never held a certificate of authority to transact an insurance business in the State of Florida. The Department of Insurance became aware of the plan being offered by NBCEBA to Florida citizens. The Department came to the conclusion that the plan constituted Insurance program not subject to exemption from state regulation under ERISA. By letter dated September 26, 1977, the Department advised Florida agents who were selling memberships in the NBCEBA program of its opinion that the program did not qualify for exemption from state regulation under ERISA, and that NBCEBA was acting as an unauthorized insurer in Florida. The letter requested that the agents cease and desist from further solicitation of prospective members of the plan. This letter was sent to the Respondent. The Respondent received it in the ordinary course of the mail. Shortly after sending this letter, the Department requested an opinion from the United States Department of Labor as to whether the NBCEBA program was exempt from state regulation. During March, 1978, the Department received a response in which the United States Department of Labor advised that in its opinion, NBCEBA was not a qualified program under Chapter 18, United States Code, and that the NBCEBA plan was subject to regulation by the State of Florida. After receiving the letter from the Department advising him of its opinion that the NBCEBA plan was not a qualified insurance program, the Respondent discussed the letter with Mr. Robert Klein, the owner of Planned Marketing Systems. Planned Marketing Systems was the general agent for the NBCEBA program in Florida. Mr. Klein advised the Respondent that the plan would eventually be approved in Florida. The Respondent did not cease marketing the NBCEBA plan. On or about October 31, 1977, he completed an application and accepted a premium payment for membership in the plan on behalf of Mr. Rafael Sanchez. Sanchez had been a friend of the Respondent and had used the Respondent as his insurance agent. The premiums on Sanchez's health insurance policy had increased dramatically during 1977. Membership in the NBCEBA plan was considerably cheaper than premiums that Sanchez needed to pay for other health insurance programs. Sanchez did not appear as a witness at the hearing, and the evidence would not support a finding as to what, if any, representations were made by the Respondent to Sanchez respecting the failure of NBCEBA to qualify as an insurance plan under the laws of the State of Florida. The evidence would not support a finding as to whether Respondent advised Sanchez as to his correspondence from the Department relating to NBCEBA. During May, 1978, Sanchez made an application to NBCEBA for benefits. NBCEBA did not honor the claim, and has since filed for bankruptcy in the United States District Court for the District of Oregon. Sanchez has thus been left liable to pay medical expenses that should have been covered under the NBCEBA plan.
