The Issue Whether Respondent's insurance agent's license and eligibility of licensure should be disciplined for alleged violations, set forth hereinafter in detail, as contained in the Administrative Complaint.
Findings Of Fact Based on my observation of the witnesses and their demeanor while testifying, documentary evidence received and the entire record compiled herein, I hereby make the following relevant factual findings: Respondent, Robert Phillip Wolf, is currently licensed and has been eligible for licensure in Florida as a life and health insurance agent and as a general lines insurance agent during times relevant to these proceedings. On or about January 17, 1989, Church Insurance Program (CIP), an incorporated general lines insurance agency, was organized under the laws of Florida. Respondent was vice president of CIP at all times relevant. During times material, an agency agreement was in effect between CIP (herein Respondent or CIP) and North Atlantic Speciality Insurance Company (NAS) whereby CIP agreed to solicit insurance products on behalf of NAS. Respondent executed the agency agreement on behalf of CIP. That agreement provides, in relevant part: SECTION I. AGENT'S AUTHORITY. 3. Agent shall have authority to collect and receive premiums on insurance contracts placed with the company by or through the agent and to retain out of the premiums so collected commissions as provided in Section III of this Agreement on all contracts of insurance, except those subject to procedures specified in Section IV of this Agreement. SECTION II. PREMIUM COLLECTION AND REMITTANCE. 2. Agency billed policies. a. Agent assumes full responsibility for prompt payment to the company of all premiums, less commissions, on all contracts of insurance placed with the company, by or through the agent, whether or not such premiums are collected from the insured. However, the agent shall be relieved of responsibility to pay premiums with respect to an insurance contract which is legally terminated and agent furnishes the company proper evidence of such termination along with a written statement that the agency cannot collect the premium. The evidence and statement must be received within 30 days following the original inception date of the contract. Policies so termin- ated shall not be subject to commission. Failure of the agent to give the company such written notice of his inability to collect such premium shall constitute acceptance by the agent of responsibility to pay such premiums. c. The agent agrees to remit any premium balance to the company so as to reach the company's office no later than 45 days after the end of the month for which the account or statement is rendered. All premiums collected or received by the agent shall be held by him as a fiduciary in trust for the company until paid to the company, and the privilege of retaining commissions as authorized else- where in this agreement shall not be construed as changing such fiduciary relationship. III. COMMISSION 1. The agent is authorized to retain commissions out of premiums collected on agency billed policies as full compen- sation on business placed with the company. Pursuant to the agency agreement, CIP and Respondent were due twenty percent (20 percent)of net written premiums (NWP) as commission. Respondent was agent of record for NAS at CIP during times material. During 1993, NAS became increasingly aware of and concerned about (1) Respondent's failure to notify the company of coverages it had solicited and bound and to timely remit premiums due NAS on policies issued, and (2) the subsequently increasing debt balances on the agency's account current. Demands by NAS for payment of premiums were unheeded by Respondent. On or about March 31, 1993, NAS terminated its agency agreement with CIP for, inter alia, CIP's failure to remit premiums. After several communications and two termination letters, CIP accepted NAS's termination as of April 30, 1993. Thereafter, NAS demanded that CIP provide an accounting which was done. As of April 30, 1993, Respondent owed NAS total premiums of $130,966.03. This sum represented premiums received by CIP and due NAS after retention of the 20 percent commission on approximately 140 policies previously issued but which premiums remained unremitted (by CIP). NAS demanded that CIP remit the premiums that were due. Respondent failed to remit the premium funds as demanded by NAS. In an attempt to recover the premium funds, NAS filed a civil suit in Pinellas County against Respondent. CIP admitted to NAS at the time that it was withholding at least $109,661.91 in premium funds but would not make any payment to NAS in light of a counter-claim that it filed. During the pendency of the civil suit and following settlement negotiations, a settlement was reached between Respondent and NAS. Pursuant to the settlement, Respondent agreed to pay to NAS $130,931.25. This amount constituted the total amount of premiums billed and collected by Respondent for NAS policies or binders of coverage less commissions which represented 20 percent of the premiums billed ($273,579.50) as per an accounting attached to the stipulation less any amount previously paid. In return, NAS agreed to pay Respondent $42,000 in consideration for Respondent withdrawing any counter-claim it may have had against NAS. The upshot of the settlement was that Respondent would pay, and in fact paid, an approximate amount of $88,431, to NAS. During times material, an agency agreement was in effect between Respondent and Atlantic Mutual Insurance Company (herein AMI) whereby Respondent agreed to solicit insurance products on behalf of AMI. That agency agreement provided in relevant part: The agency agrees: To render monthly accounts of money due to the company on business placed by the agent with the company, other than customer-billed business so as to reach the company's office no later than the 15th day of the following month and to pay to the company the balance therein shown to be due to the company not later than the 15th day of the second month following the month for which the account is rendered. To be responsible for any additional premiums developed by audit or by report of values, or any renewal premiums on non- cancelable bonds unless the agent notifies the company within sixty (60) days of company billing date of such additional premiums that such item has not been collected and cannot be collected by the agent. The company agrees: b. On commissions: The agent shall receive or retain commissions on net paid premiums at the rate set forth in the company's commission schedule. It is mutually agreed that: a. This agreement supersedes all previous agreements, whether oral or written, between the company and the agent, and shall continue until terminated by ninety (90) days written notice of cancellation by either party to the other. Pursuant to the agency agreement with AMI, Respondent was due, as commission, seventeen and one-half percent (17-1/2 percent) of net paid premiums. During times material, Respondent was agent of record for AMI. On August 1, 1992, the agency agreement between AMI and CIP was terminated by mutual agreement. After the termination of the agency agreement, AMI became aware of and became increasingly concerned about Respondent's failure to notify it of coverages Respondent had previously solicited and bound and to timely remit premiums due on policies issued by Respondent and the subsequently increasing debit balance on the company's account current. Demands by AMI for payment of premiums due were unheeded by Respondent. As of October, 1992, the amount owed to AMI totalled $92,781.61. This sum represented insurance premiums, after retention of commission, due on insurance policies previously issued by Respondent and for which it had received $120,486 in premiums, and not remitted to AMI. As noted, despite AMI's demand that Respondent remit the premiums, they were not remitted either in whole or in part. However, Respondent admitted to AMI that it had received, as of September 4, 1992, $103,421.33 in premium funds. After termination of the agreement with AMI, Respondent claimed that it was entitled to retain $86,111.86 from premium funds received from the AMI policies, as annualized commissions or as commissions received in advance on premiums that had not been paid by the insured. Prior to the termination, CIP had attempted to gain authorization from AMI to withhold commissions, on an annualized basis. AMI refused to authorize these deductions and was steadfast in keeping consistent with its policy of allowing deduction of commissions when premiums were actually received. AMI does not allow agents to retain annualized commissions or to take advance commissions on policies. Despite Respondent's contention to the contrary, this has always been AMI's policy and that policy was communicated to Respondent in writing when Respondent attempted to initiate the policy of annualizing or deducting commissions in advance. Additionally, the agency agreement clearly provides that commissions were to be retained from paid premiums. Countersignature fees, if required, were paid by the insurance company and were thereafter deducted from the agent's commission. Respondent expended a great deal of money and time in start-up costs on items such as office equipment, supplies, preparation of forms, institution of office policies and procedures, to commence writing insurance business on behalf of AMI. Respondent knew, or should have known, that certain start-up costs were expected in order to commence writing insurance on behalf of AMI. Respondent was not authorized to deduct up-front expenditures or related start-up costs from premiums which were not collected. As of the date of hearing, the funds which represented premiums due AMI remain unaccounted for and were not paid (to AMI) by Respondent. When Respondent collected premiums for companies, those funds were fiduciary funds. Respondent's policy of spending "operating expenses" as a set off or charge against uncollected premiums was not permissible pursuant to the agency agreement in effect between the parties. The Am South Bank account which Respondent utilized to maintain his banking account for AMI had a balance, as of August 30, 1992, of $74,894.58; as of March 31, 1993, of $12,702.05; and as of April 30, 1993, of $8,561.13. The account was closed on December 2, 1993.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law it is RECOMMENDED that: Petitioner enter a final order finding that the Respondent, ROBERT PHILIP WOLF, be found guilty of violations set forth in the Conclusions of Law portion of this Order, and that his licenses and eligibility for licensure be SUSPENDED for a period of eighteen (18) months pursuant to Rule 4-231.080, Florida Administrative Code, and that, pursuant to Section 626.641(1), Florida Statutes, the Respondent be required to pay satisfactory restitution to Atlantic Mutual Insurance Company prior to the reinstatement of any insurance license. DONE and ORDERED this 2nd day of June, 1994, in Tallahassee, Leon County, Florida. JAMES E. BRADWELL 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 2nd day of June, 1994. APPENDIX Rulings on Petitioner's Proposed Findings of Fact: Paragraph 27 - rejected - argument and conclusions. Rulings on Respondent's Proposed Findings of Fact: Paragraph 1 - adopted as relevant, paragraph 5, recommended order. The remainder is rejected as contrary to the greater weight of evidence, paragraph 4, section III entitled commission is dispositive. Paragraphs 2 and 3 - rejected as argument. Paragraph 4 - rejected, irrelevant and subordinate. Paragraph 5 - rejected, contrary to the greater weight of evidence. Paragraph 6 - adopted as modified, paragraph 30 recommended order. Paragraph 7 - rejected, irrelevant. Paragraphs 8-10 - rejected, argument. Paragraph 11 - rejected, irrelevant. COPIES FURNISHED: Commissioner Tom Gallagher Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Bill O'Neil General Counsel Department of Insurance and Treasurer The Capitol, PL-11 Tallahassee, Florida 32399-0300 James A. Bossart, Esquire Department of Insurance and Treasurer 612 Larson Building Tallahassee, Florida 32399-0333 Elihu H. Berman, Esquire Post Office Box 6801 Clearwater, Florida 32618-6801
Findings Of Fact Petitioner is the state agency charged with licensing insurance agents of all types, regulating licensure status, and enforcing the practice standards of licensed agents within the powers granted by the Legislature in Chapter 626, Florida Statutes. At all times material to the disciplinary action, Respondent Mahle was licensed as an insurance agent in the following areas: Life and Health Insurance and Health Insurance. During the last quarter of the year 1988, New Concept Insurance, Inc. mailed brochures to residents of Naples, Florida, which stated that representatives of the company were willing to provide information about long- term care insurance, including nursing facility benefits, to interested parties. Those who wanted to learn more about the insurance were asked to return their name, address and telephone number to the company on an enclosed card. Eleanor Drown responded to the advertisement, and an appointment was arranged for Thomas DiBello and Respondent Mahle to meet with her regarding the insurance program. On November 10, 1988, Thomas DiBello and Respondent Mahle met with Ms. Drown and discussed the benefits of a long-term care policy with a nursing facility daily benefit of one hundred dollars ($100.00). After the discussion, Ms. Drown completed an application for the insurance and gave it to Respondent Mahle, along with a check for five thousand one hundred and eighty-three dollars and forty-nine cents ($5,183.49). During the insurance transaction on November 10, 1988, Ms. Drown was given a receipt which states: This receipt is given and accepted with the express understanding that the insurance you applied for will not be in force until the policy is issued and the first premium is paid in full. If your application cannot be approved, we will promptly refund your money. Application is made to the company checked (/) on this receipt. On another area of the receipt, it is clearly written, as follows: If Acknowledgement of Application does not reach you within 20 days, write to: Mutual Protective Insurance Company, 151 South 75th Street, Omaha, Nebraska 68124. The Respondent Mahle did not forward the application and the check completed by Ms. Drown to Mutual Protective Insurance Company. The check issued by Ms. Drown to Mutual Protective Insurance Company was deposited into the account of New Concept Insurance, Inc. A cashier's check for the same amount of money was issued by New Concept Insurance, Inc. to Ms. Drown on March 7, 1989. The letter from New Concept that was mailed with the check represented that the check was the refund of the money paid to Mutual Protective Insurance Company by Ms. Drown. Mitigation An application for long-term care insurance from a different insurance company was sent to Ms. Drown by Respondent Mahle on March 2, 1989. Although this course of conduct was not directly responsive to the duties owed by the Respondent to Mutual Protective Insurance Company or his customer, Ms. Drown, it does demonstrate a concern about the insurance needs requested by the customer. This conduct also reveals that there was no intention to convert the funds received to the Respondent's own use, and it explains some of the delay in the return of the premium funds to the customer. The Respondent has been an insurance agent for twenty years. This was the only complaint against the Respondent the Hearing Officer was made aware of during the proceedings. The allegations in the Complaint involve a single insurance transaction.
Recommendation Accordingly, it is RECOMMENDED: That the Respondent be found guilty of one violation of Section 626.561(1), Florida Statutes, and one violation of Section 626.611(7), Florida Statutes, during a single insurance transaction. That the Respondent pay an administrative penalty of $500.00 for the two violations of the Insurance Code within thirty days of the imposition of the penalty. That the Respondent be placed upon six month's probation. During this probation period, he should file a report with the Department demonstrating the manner in which he intends to keep accurate business records which assure him, the insurance company, and the customer that he is continuously accounting for premium funds and promptly carrying out his fiduciary responsibilities. That the Respondent's requests for licensure dated October 10, 1989 and May 18, 1990, be granted. DONE and ENTERED this 12th day of September, 1990, in Tallahassee, Leon County, Florida. VERONICA E. DONNELLY 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 12th day of September, 1990. APPENDIX TO RECOMMENDED ORDER IN CASE No. 89-6040 The Petitioner's proposed findings of fact are addressed as follows: Accepted. See HO #2. Accepted. See HO #2. Accepted. Accepted. See HO #5. Accepted. See HO #5. Accepted. See HO #5. Accepted. See HO #5. Rejected. Conclusion of Law. Rejected. See HO #6. Accepted. See HO #7. Accepted. See HO #7. Accepted. See HO #7. Accept that Ms. Drown's funds remained in the insurance agency's financial accounts for four months. Reject that the interest bearing ability of these funds is relevant in any manner to this case. Respondent's proposed findings of fact are addressed as follows: Accepted. See HO #3 and #4. Accepted. See HO #5. Accepted. See HO #5. Accepted. See HO #5. Accepted. Rejected. This testimony was rejected by the hearing officer as self serving. It was not found to be credible. Rejected for the same reasons given immediately above. Accepted, but not particularly probative. Rejected. Contrary to the testimony of Ms. Drown which was believed by the hearing officer. Accepted. Rejected. Contrary to the testimony of Ms. Drown which was believed by the hearing officer. Accept that an application for Penn Treaty Insurance was sent to Ms. Drown on this date. Accepted. Rejected. Contrary to the testimony of Ms. Drown which was believed by the hearing officer. Rejected. Self serving. Not believed or found to be credible by the hearing officer. Accepted. See HO #9. COPIES FURNISHED: C. Christopher Anderson III, Esquire Department of Insurance Division of Legal Services 412 Larson Building Tallahassee, Florida 32399-0300 Mark P. Smith, Esquire GOLDBERG, GOLDSTEIN & BUCKLEY, P.A. 1515 Broadway Post Office Box 2366 Fort Myers, Florida 33902-2366 Honorable Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Don Dowdell, Esquire Department of Insurance The Capitol, Plaza Level Tallahassee, Florida 32399-0300 =================================================================
The Issue The issue for determination is what amount of attorney's fees and costs should be awarded to Petitioner for costs incurred in prosecuting the rule challenge case, Security Mutual Life Insurance Company of Lincoln, Nebraska vs. Department of Insurance and the Treasurer, DOAH Case No. 97-1132RU.
Findings Of Fact On March 11, 1997, Security Mutual Life Insurance Company, filed a Petition challenging three statements of Respondent, the Department of Insurance and the Treasurer, as unpromulgated rules. See Security Mutual Life Insurance of Lincoln, Nebraska vs. Department of Insurance and Treasurer, DOAH Case No. 97-1132RU. According to the Petition, the first statement concerned the Department's requiring that annuity contracts contain a table of guaranteed values. The second statement alleged to be an unpromulgated rule was that the Department disapproved contract forms labeled as "single premium annuity" contracts which permit additional contributions after the initial premium is made. The third statement challenged by Security Mutual as an unpromulgated rule involved a requirement of the Department that annuity contracts include a demonstration of compliance with Actuarial Guideline 33 to avoid form/rate denial. Throughout the proceeding below and in the Final Order issued pursuant thereto, the second and third challenged agency statements were referred to as the "Single Premium Statement" and the "Guideline 33 Statement." At the commencement of the final hearing in the proceeding below, pursuant to a stipulation, Security Mutual withdrew its challenge to the Department's alleged statement requiring that annuity contracts contain a table of guaranteed values. On May 19, 1997, the Final Order in the proceeding below, dismissed Security Mutual's petition as to the "Single Premium Statement," but determined that the "Guideline 33 Statement" should have been adopted by the rulemaking process. See Security Mutual Life Insurance of Lincoln, Nebraska vs. Department of Insurance and Treasurer, DOAH Case No. 97-1132RU. In the proceeding below, Security Mutual was represented by Sharon A. DiMuro, Esquire, of Ganger, Santry, Mitchell, and Heath, P.A. (law firm). The hourly rate of Ms. DiMuro and one other lawyer who worked on the rule challenge case was $175.00. The hourly rate of two other lawyers in the firm who worked on the case was $150.00. Ms. DiMuro expended a total of 180 hours in prosecuting the underlying rule challenge case; 172.2 of these hours were expended on issues on which Security Mutual prevailed. The remaining 7.8 hours were spent on matters related to the "Single Premium Statement" on which Security Mutual did not prevail. Thus, these 7.8 hours are deducted from Ms. DiMuro's total number of hours. The three other attorneys in the law firm expended a total of 12.7 hours on the underlying proceeding, all of which were attributable to work related to the "Guideline 33 Statement," the issue on which Security Mutual prevailed. The attorney, other than Ms. DiMuro, who earned $175.00 an hour worked on the rule challenge case 4.1 hours. The two attorneys, whose hourly rate was $150.00, worked a combined 8.6 hours on the case. With respect to its successful claim in the underlying case, the law firm expended a total of 184.9 hours. Of the total hours expended, 176.3 were billed at $175.00 an hour, and 8.6 were billed at $150.00 an hour. The $150.00 and $175.00 are reasonable hourly rates for the attorneys. Likewise, the time expended in prosecuting the underlying proceeding, 184.9, is reasonable. Based on the foregoing, Security Mutual incurred attorney's fees of $32,142.50 in maintaining and prosecuting the claim on which it succeeded. Security Mutual also incurred reasonable costs of $1,270.29 in connection with the underlying rule challenge proceeding. Moreover, in the instant proceeding, Security Mutual incurred taxable costs in the amount of $1,051.50 for the preparation and hearing time of its expert witness, Kenneth Oretel, of the law firm of Oretel, Hoffman, Fernandez and Cole, P.A. These costs were reasonable and necessary.
The Issue Does Petitioner, Department of Financial Services (DFS), have authority to determine if Respondent, Alberto Luis Sotero (Mr. Sotero) and Respondent, FalconTrust Group, Inc. (FalconTrust), wrongfully took or witheld premium funds owed an insurance company while a civil action between the insurance company and Mr. Sotero and FalconTrust pends in Circuit Court presenting the same issues? Should the insurance agent license of Mr. Sotero be disciplined for alleged violations of Sections 626.561(1), 626.611(7), 626.611(10), 626.611(13), and 626.621(4), Florida Statutes (2007)?1. Should the insurance agency license of FalconTrust be disciplined for alleged violations of Section 626.561(1), 626.6215(5)(a), 626.6215(5)(d). 626.6215(5)(f), and 626.6215(5)(k), Florida Statutes?
Findings Of Fact Based on the testimony and other evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: Mr. Sotero is licensed by DFS as an insurance agent in Florida and has been at all times material to this matter. He holds license number A249545. FalconTrust is licensed by DFS as an insurance agency in this state and has been at all times material to this matter. It holds license number L014424. Mr. Sotero is an officer and director of FalconTrust and held these positions at all times material to this proceeding. Mr. Sotero also controlled and directed all actions of FalconTrust described in these Findings of Fact. Zurich American Insurance Company is a commercial property and casualty insurance company. FalconTrust Commercial Risk Specialists, Inc., and Zurich-American Insurance Group entered into an "Agency-Company Agreement" (Agency Agreement) that was effective January 1, 1999. The Agency Agreement bound the following Zurich entities, referred to collectively as Zurich: Zurich Insurance Company, U.S. Branch; Zurich American Insurance Company of Illinois; American Guarantee and Liability Insurance Company; American Zurich Insurance Company; and Steadfast Insurance Company. The Agreement specified that FalconTrust was an "independent Agent and not an employee of the Company [Zurich.]". . .. The Agency Agreement also stated: All premiums collected by you [Falcontrust] are our [Zurich's] property and are held by you as trust funds. You have no interest in such premiums and shall make no deduction therefrom before paying same to us [Zurich] except for the commission if any authorized by us in writing to be deducted by you and you shall not under any circumstances make personal use of such funds either in paying expense or otherwise. If the laws or regulations of the above state listed in your address require you to handle premiums in a fiduciary capacity or as trust funds you agree that all premiums of any kind received by or paid to you shall be segregated held apart by you in a premium trust fund account opened by you with a bank insured at all times by the Federal Deposit Insurance Corporation and chargeable to you in a fiduciary capacity as trustee for our benefit and on our behalf and you shall pay such premiums as provided in this agreement. (emphasis supplied. The Agency Agreement commits Zurich to pay FalconTrust commissions "on terms to be negotiated . . . ." It requires FalconTrust to pay "any sub agent or sub producer fees or commissions required." The Agency Agreement also provides: Suspension or termination of this Agreement does not relieve you of the duty to account for and pay us all premiums for which you are responsible in accordance with Section 2 and return commissions for which you are responsible in accordance with Section 3 [the Commission section.] The Agency Agreement was for Mr. Sotero and Falcontrust to submit insurance applications for the Zurich companies to underwrite property and casualty insurance, primarily for long- haul trucking. The Agency Agreement and all the parties contemplated that Mr. Sotero and FalconTrust would deduct agreed-upon commissions from premiums and remit the remaining funds to Zurich. On September 14, 2000, Zurich and Mr. Sotero amended the Agency Agreement to change the due date for premium payments and to replace FalconTrust Group, Inc. (FalconTrust) for FalconTrust Commercial Risk Specialists, Inc., and to replace Zurich-American Insurance Group and Zurich Insurance Company, U.S. Branch, with Zurich U.S. Mr. Sotero and Zurich's authorized agent, Account Executive Sue Marcello, negotiated the terms of the commission agreement as contemplated in the Agency Agreement. Mr. Sotero confirmed the terms in a July 20, 1999, letter to Ms. Marcello. The parties agreed on a two-part commission. One part was to be paid from the premiums upon collection of the premiums. The second part, contingent upon the program continuing for five years, was to be paid by Zurich to Mr. Sotero and FalconTrust. The total commission was 20 percent. FalconTrust and Mr. Sotero were authorized to deduct 13 percent of the commission from premiums before forwarding them to Zurich. The remaining seven percent Zurich was to pay to Mr. Sotero and FalconTrust at the end of the program or after the fifth year anniversary date. The letter spelled out clearly that Zurich would hold the money constituting the seven percent and was entitled to all investment income earned on the money. The passage describing the arrangement reads as follows: Our total commission is 20 percent however Zurich will hold and retain the first 7 percent commission where they are entitle [sic] to earn investment income. I understand that FalconTrust will not benefit from this compounded investment income. However you mentioned you would increase our initial commission that is set at 13 percent currently from time to time depending on FalconTrust reaching their goals, but it will never exceed a total commission of 20 percent. It is to our understanding that the difference will be paid at the end of the program or after the fifth year anniversary date being 12/31/2005, but not earlier than five years. I do understand that if Zurich and/or FalconTrust cancels the program on or before the fourth year being 12/31/2004 that we are not entitle [sic] to our remaining commission that you will be holding. If the program is cancelled after 12/31/2004 by FalconTrust and/or Zurich it is understood that all commission being held will be considered earned. (emphasis added.) Until the program ended, the parties conducted themselves under the Agency Agreement as described in the letter. At some point the parties agreed to decrease the percentage retained by Zurich to five percent and increase the percentage initially paid to and kept by FalconTrust to 15 percent. During the course of the relationship FalconTrust produced approximately $146,000,000 in premiums for Zurich. At all times relevant to this matter, all premium payments, except for the portion deducted by sub-agents and producers before forwarding the payments to Mr. Sotero and FalconTrust were deposited into a trust account. The various sub-agents of FalconTrust collected premiums and forwarded them to FalconTrust, after deducting their commissions, which were a subpart of the FalconTrust 13 percent commission. FalconTrust in turn forwarded the remaining premium funds after deducting the portion of its 13 percent left after the sub-agent deduction. This was consistent with the Agency Agreement and accepted as proper by Zurich at all times. All parties realized that the held-back seven percent, later five percent, was money that Zurich would owe and pay if the conditions for payment were met. The parties conducted themselves in keeping with that understanding. Mr. Sotero and FalconTrust described the practice this way in their Third Amended Complaint in a court proceeding about this dispute: "In accordance with the Commission Agreement, Zurich held the contingency/holdback commission and received investment income thereon." (Emphasis supplied.) In 2006 Zurich decided to end the program. In a letter dated December 8, 2006, Tim Anders, Vice President of Zurich, notified Mr. Sotero that Zurich was terminating the Agency-Company Agreement of January 1, 1999. The letter was specific. It said Zurich was providing "notification of termination of that certain Agency-Company Agreement between Zurich American Insurance Company, Zurich American Insurance Co. of Illinois, American Guarantee and Liability Insurance Co., American Zurich Insurance Company, Steadfast Insurance Company . . . and FalconTrust Grup, Inc. . . ., dated January 1, 1999, . . .." Mr. Sotero wrote asking Zurich to reconsider or at least extend the termination date past the March 15, 2007, date provided in the letter. Zurich agreed to extend the termination date to April 30, 2007. At the time of termination FalconTrust had fulfilled all of the requirements under the Agency-Agreement for receipt of the held-back portion of the commissions. Mr. Sotero asked Zurich to pay the held-back commission amounts. He calculated the amount to exceed $7,000,000. Zurich did not pay the held- back commission amounts. As the program was winding down and the termination date approached, FalconTrust continued to receive premiums. As the Agency Agreement and negotiated commission structure provided, FalconTrust deducted its initial commission from the premium payments. But, reacting to Zurich's failure to begin paying the held back commission amounts, Mr. Sotero engaged in "self help." He deducted at least $6,000,000 from the premium payments from customers, received and deposited in the trust account. He took the money as payment from Zurich of earned and held back commissions.3 Nothing in the Agency Agreement or negotiated commission agreement authorized this action. In March of 2007, Mr. Sotero and FalconTrust also brought suit against Zurich in the Circuit Court for the Eleventh Judicial Circuit, Miami, Florida. The issues in that proceeding include whether Mr. Sotero and FalconTrust wrongfully took premiums and how much Zurich owes them for commissions. As of the final hearing, that cause (Case Number 07-6199-CA-01) remained pending before the court and set for jury trial in August 2010. There is no evidence of a final disposition. But the court has entered a partial Summary Judgment determining that FalconTrust wrongfully took premium funds for the commissions that it maintained Zurich owed. The court's Order concludes that the issue is not whether Zurich owed money to FalconTrust, but whether FalconTrust was entitled to take the funds when it did. Like the undersigned, the court determines that it was not. Between December 8, 2006, the date of the cancelation letter, and April 30, 2007, the program termination date, Mr. Sotero and FalconTrust did not remit to Zurich any of the approximately $6,000,000 in premium payments received. Despite not receiving premiums, Zurich did not cancel or refuse to issue the policies for which the premiums taken by Mr. Sotero and FalconTrust were payment. The policies remained in effect.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services suspend the license of Adalberto L. Sotero for nine months and suspend the license of FalconTrust Group, Inc. for nine months. DONE AND ENTERED this 15th day of October, 2010, in Tallahassee, Leon County, Florida. S JOHN D. C. NEWTON, II 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 15th day of October, 2010.
Findings Of Fact Respondent holds a property and casualty insurance license, life and health insurance license, and life insurance license for the State of Florida. She has held her property and casualty license for about 20 years. In 1976, she was employed as an agent for the Orlando office of Commonwealth insurance agency, which she purchased in 1977 or 1978. She continues to own the Commonwealth agency, which is the agency involved in this case. Respondent has never previously been disciplined. In 1979 or 1980, Respondent was appointed to the board of directors of the Local Independent Agents Association, Central Florida chapter. She has continuously served on the board of directors of the organization ever since. She served as president of the association until September, 1991, when her term expired. During her tenure as president, the local association won the Walter H. Bennett award as the best local association in the country. Since May, 1986, Commonwealth had carried the insurance for the owner of the subject premises, which is a 12,000 square foot commercial block building located at 923 West Church Street in Orlando. In July, 1987, the insurer refused to renew the policy on the grounds of the age of the building. Ruth Blint of Commonwealth assured the owner that she would place the insurance with another insurer. Mrs. Blint is a longtime employee of the agency and is in charge of commercial accounts of this type. Mrs. Blint was a dependable, competent employee on whom Respondent reasonably relied. Mrs. Blint contacted Dana Roehrig and Associates Inc. (Dana Roehrig), which is an insurance wholesaler. Commonwealth had done considerable business with Dana Roehrig in the past. Dealing with a number of property and casualty agents, Dana Roehrig secures insurers for the business solicited by the agents. Dana Roehrig itself is not an insurance agent. In this case, Dana Roehrig served as the issuing agent and agreed to issue the policy on behalf of American Empire Surplus Lines. The annual premium would be $5027, excluding taxes and fees. This premium was for the above- described premises, as well as another building located next door. The policy was issued effective July 21, 1987. It shows that the producing agency is Commonwealth and the producer is Dana Roehrig. The policy was countersigned on August 12, 1987, by a representative of the insurer. On July 21, 1987, the insured gave Mrs. Blint a check in the amount of $1000 payable to Commonwealth. This represented a downpayment on the premium for the American Empire policy. The check was deposited in Commonwealth's checking account and evidently forwarded to Dana Roehrig. On July 31, 1987, Dana Roehrig issued its monthly statement to Commonwealth. The statement, which involves only the subject policy, reflects a balance due of $3700.86. The gross premium is $5027. The commission amount of $502.70 is shown beside the gross commission. Below the gross premium is a $25 policy fee, $151.56 in state tax, and a deduction entered July 31, 1987, for $1000, which represents the premium downpayment. When the commission is deducted from the other entries, the balance is, as indicated, $3700.86. The bottom of the statement reads: "Payment is due in our office by August 14, 1987." No further payments were made by the insured or Commonwealth in August. The August 31, 1987, statement is identical to the July statement except that the bottom reads: "Payment is due in our office by September 14, 1987." On September 2, 1987, the insured gave Commonwealth a check for $2885.16. This payment appears to have been in connection with the insured's decision to delete the coverage on the adjoining building, which is not otherwise related to this case. An endorsement to the policy reflects that, in consideration of a returned premium of $1126 and sales tax of $33.78, all coverages are deleted for the adjoining building. The September 30 statement shows the $3700.86 balance brought forward from the preceding statement and deductions for the returned premium and sales tax totalling $1159.78. After reducing the credit to adjust for the unearned commission of $112.60 (which was part of the original commission of $502.70 for which Commonwealth had already received credit), the net deduction arising from the deleted coverage was $1047.18. Thus, the remaining balance for the subject property was $2653.68. In addition to showing the net sum due of $944.59 on an unrelated policy, the September 30 statement contained the usual notation that payment was due by the 12th of the following month. However, the statement contained a new line showing the aging of the receivable and showing, incorrectly, that $3700.86 was due for more than 90 days. As noted above, the remaining balance was $2653.68, which was first invoiced 90 days previously. Because it has not been paid the remaining balance on the subject policy, Dana Roehrig issued a notice of cancellation sometime during the period of October 16-19, 1987. The notice, which was sent to the insured and Commonwealth, advised that the policy "is hereby cancelled" effective 12:01 a.m. October 29, 1987. It was the policy of Dana Roehrig to send such notices about ten days in advance with two or three days added for mailing. One purpose of the notice is to allow the insured and agency to make the payment before the deadline and avoid cancellation of the policy. However, the policy of Dana Roehrig is not to reinstate policies if payments are received after the effective date of cancellation. Upon receiving the notice of cancellation, the insured immediately contacted Mrs. Blint. She assured him not to be concerned and that all would be taken care of. She told him that the property was still insured. The insured reasonably relied upon this information. The next time that the insured became involved was when the building's ceiling collapsed in June, 1988. He called Mrs. Blint to report the loss. After an adjuster investigated the claim, the insured heard nothing for months. He tried to reach Respondent, but she did not return his calls. Only after hiring an attorney did the insured learn that the cancellation in October, 1987, had taken effect and the property was uninsured. Notwithstanding the cancellation of the policy, the October 31 statement was identical to the September 30 statement except that payment was due by November 12, rather than October 12, and the aging information had been deleted. By check dated November 12, 1987, Commonwealth remitted to Dana Roehrig $3598.27, which was the total amount due on the October 30 statement. Dana Roehrig deposited the check and it cleared. The November 30 statement reflected zero balances due on the subject policy, as well as on the unrelated policy. However, the last entry shows the name of the subject insured and a credit to Commonwealth of $2717 plus sales tax of $81.51 minus a commission readjustment of $271.70 for a net credit of $2526.81. The record does not explain why the net credit does not equal $2653.68, which was the net amount due. It would appear that Dana Roehrig retained the difference of $125.87 plus the downpayment of $1000 for a total of $1125.87. It is possible that this amount is intended to represent the earned premium. Endorsement #1 on the policy states that the minimum earned premium, in the event of cancellation, was $1257. By check dated December 23, 1987, Dana Roehrig issued Commonwealth a check in the amount of $2526.81. The December 31 statement reflected the payment and showed a zero balance due. The record is otherwise silent as to what transpired following the issuance of the notice of cancellation. Neither Mrs. Blint nor Dana Roehrig representatives from Orlando testified. The only direct evidence pertaining to the period between December 31, 1987, and the claim the following summer is a memorandum from a Dana Roehrig representative to Mrs. Blint dated March 24, 1988. The memorandum references the insured and states in its entirety: Per our conversation of today, attached please find the copy of the cancellation notice & also a copy of the cancellation endorsement on the above captioned, which was cancelled effective 10/29/87. If you should have any questions, please call. Regardless of the ambiguity created by the monthly statements, which were not well coordinated with the cancellation procedure, Mrs. Blint was aware in late March, 1988, that there was a problem with the policy. She should have advised the insured, who presumably could have procured other insurance. Regardless whether the June, 1988, claim would have been covered, the ensuing litigation would not have involved coverage questions arising out of the cancellation of the policy if Mrs. Blint had communicated the problem to the insured when she received the March memorandum. Following the discovery that the policy had in fact been cancelled, the insured demanded that Respondent return the previously paid premiums. Based on advice of counsel, Respondent refused to do so until a representative of Petitioner demanded that she return the premiums. At that time, she obtained a cashiers check payable to the insured, dated June 1, 1990, and in the amount of $2526.81. Although this equals the check that Dana Roehrig returned to Commonwealth in December, 1987, the insured actually paid Commonwealth $1000 down and $2885.16 for a total of $3885.16. This discrepancy appears not to have been noticed as neither Petitioner nor the insured has evidently made further demands upon Respondent for return of premiums paid. The insured ultimately commenced a legal action against Commonwealth, Dana Roehrig, and American Empire. At the time of the hearing, the litigation remains pending.
Recommendation Based on the foregoing, it is hereby recommended that the Department of Insurance and Treasurer enter a final order finding Respondent guilty of violating Sections 626.561(1) and, thus, 626.621(2), Florida Statutes, and, pursuant to Sections 626.681(1) and 626.691, Florida Statutes, imposing an administrative fine of $1002.70, and placing her insurance licenses on probation for a period of one year from the date of the final order. If Respondent fails to pay the entire fine within 30 days of the date of the final order, the final order should provide, pursuant to Section 626.681(3), Florida Statutes, that the probation is automatically replaced by a one-year suspension. RECOMMENDED this 5th day of February, 1992, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 5th day of February, 1992. COPIES FURNISHED: Hon. Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, FL 32399-0300 Bill O'Neil, General Counsel Department of Insurance The Capitol, Plaza Level Tallahassee, FL 32399-0300 James A. Bossart Division of Legal Affairs Department of Insurance 412 Larson Building Tallahassee, FL 32399-0300 Thomas F. Woods Gatlin, Woods, et al. 1709-D Mahan Drive Tallahassee, FL 32308
Findings Of Fact Charles Lee Armstrong, a/k/a Jack Armstrong, (hereinafter referred to as Petitioner or Armstrong) is licensed by the Florida Insurance Department as a general lines agent to represent Foremost Insurance Company and Fortune Insurance Company (Exhibit 1). Prior to 1976 Armstrong was an Aetna agent. From February 10, 1968 through February 10, 1977 Luigi Sesti carried homeowners policy with Aetna with Armstrong Agency. Armstrong's designation as an Aetna agent was terminated by Aetna termination notice (Exhibit 8) dated August 21, 1975 for low volume of business. The company practice is to terminate the agency relationship ninety days after notice of termination. Thereafter Respondent continued as a limited company agent for one year, during which he was authorized to renew Aetna policies. (Exhibit 7). After that one year extension, Respondent had no agency relationship with Aetna and, to renew an Aetna policy, he would have to have an Aetna agent process the renewal. Luigi Sesti had dealt with Armstrong as Sesti's Insurance agent since 1968 and had maintained an Aetna home-owner's policy which had last been renewed through Armstrong for the year ending February 10, 1977. Upon receipt of notice from Armstrong that his policy would expire February 10, 1977, Sesti sent Armstrong his check in the amount of $165 (Exhibit 3) for renewal of his policy. Although Armstrong was no longer authorized to renew Aetna policies, he deposited Sesti's check but thereafter failed to provide Sesti with insurance coverage on his house or contents. Armstrong advised Aetna that Sesti's policy had been replaced with an Eastern insurance policy, and Aetna failed to notify Sesti that the Aetna policy was not renewed. In August 1977 Sesti's home was burglarized. He lost a television set, radio, watch, spotlight and a ring, and Sesti contacted Armstrong to report the loss. Armstrong visited the home and suggested Sesti submit no formal claim because to do so would make it difficult for Sesti to renew his insurance. In his own explanation, Armstrong testified that he intended to pay Sesti for his loss but Sesti could never establish the value of the ring or establish a price for which he would settle. Armstrong offered Sesti $250 to settle the claim. During the discussions between Armstrong and Mrs. Sesti, Armstrong said he had authority to settle claims for Aetna up to $500 and that he was an attorney. Neither of these statements was true. When Armstrong was unable to agree on the amount of the claim, Mrs. Sesti contacted Aetna and learned that the policy on her her had expired 10 February 1977 and had not been renewed. Because no valid policy had been issued to Sesti, Aetna initially denied liability. When advised by Sesti that Aetna would not pay their claim, Armstrong returned the premium he had received from Sesti for the policy not renewed in one check for $155 dated 9/7/77 and in another check for $10 dated 11/23/77 (Exhibit 5) which Sesti received with a letter from the Insurance Commissioner's office dated November 29, 1978 (Exhibit 14). After further investigation by Aetna revealed the facts as noted above, Aetna issued a policy (Exhibit 15) which effectively renewed Sesti's homeowners policy for one year from February 10, 1977. They deducted the premium and the $100 deductible from the amount they paid Sesti for the loss sustained. Aetna's Regional Manager testified that Aetna paid for the loss because Sesti had been insured by them for several years and they felt a moral obligation for their former agent's failure to provide coverage and for their failure to notify Sesti he was no longer insured by Aetna. Aetna allowed Sesti approximately $450 for the loss of the ring and approximately $350 for the other things stolen. Roseland S. Wood had insured her mobile home with Foremost Insurance Company since 1953, and with Jack Armstrong as Agent since 1964. Policy No. 101-8498757 covered the period 11/3/74 to 11/3/75 (Exhibit 13). By check dated November 5, 1975 made payable to Armstrong (Exhibit 9) Wood forwarded the premium for renewal of this policy. Unbeknownst to Wood the policy was not renewed until July 28, 1976 by policy No. 8498643 (Exhibit 12). This is the policy that Armstrong forwarded to Foremost. Armstrong was in Europe on vacation when this policy was issued by the woman he had hired to keep his office open during his vacation and he professed no knowledge of why the policy was issued at this particular time. In October 1976 Wood wanted additional coverage and Armstrong came out to assist in providing the additional coverage. After discussing increasing personal property coverage, plus garage and contents and boats, Respondent advised Wood that the additional coverage would cost $326. Wood gave Respondent a check that day (Exhibit 10). Thereafter Armstrong issued policy No. 8498518 (Exhibit 11) for the period 10/28/76 to 10/28/77 but the personal property coverage was less than Wood had asked for and the garage and contents were not included. Neither Exhibit 11 nor the premium for this coverage was ever received by Foremost from Armstrong. They became aware of Exhibit 11 after Wood suffered a burglary in July 1977 and came to the Foremost office to file a claim. The costs of coverage on Exhibit 11 are not correct and had this policy been received by Foremost it would have been rejected by the computer due to inaccurate premium charges, the inclusion of boats on this policy and incorrect comprehensive liability coverage. By failing to renew Wood's coverage in November 1975, Respondent left Wood without coverage until Exhibit 12 was issued providing coverage from 7/28/76. This renewal was written by Armstrong Agency, who had authority from Foremost to write this renewal. As noted above, this policy was written while Armstrong was on vacation. The $145 premium paid by Wood for the renewal of the policy was not remitted to Foremost until after July 28, 1976. At the time of Wood's loss in July 1977 she was covered by this policy. When the existence of the above facts regarding the two policies and dates they were issued to Wood were uncovered, Armstrong refunded to Wood $181 of the $326 premium he collected, Foremost refunded the additional $145 of this premium to Wood, and Wood's claim was settled by Foremost to Wood's satisfaction. Foremost has a claim against Armstrong for this $145 Foremost refunded to Wood. Respondent acknowledged writing Exhibit 11 and assumed that it was mailed to Foremost. He does not remit payment to the company until he is billed. Foremost sends a monthly statement to each agent showing policy numbers received. The agent can readily check this list against the policies he has issued to ascertain if a policy was not received by the company. The company also maintains a policy register where policy numbers are recorded. A copy of this is sent to their agents to check against policies the agents have issued. Failure of the agencies to submit policies in sequential numbers will be picked up on the computer, but only after quite a few numbers have been skipped. There was insufficient volume from Armstrong's agency to trigger this information from the computer. With respect to Charge III, failure to keep office open and accessible to the public during office hours, an insurance investigator visited the office on some six occasions in December 1977 and February and March 1978. At these visits the office was open but neither Armstrong nor a secretary was present. A lady working in an office down the hall from Respondent's office came to the office when the inspector arrived and offered to contact Armstrong. Several telephone calls made to Armstrong's office during March 1978 resulted in the phone being answered by an answering service. Respondent has operated a one-man office for many years and has an answering service cover all calls while he is out of the office. He wears a radio pager and claims his answering service can always contact him. The lady who covers office visits for Respondent during his absence from the office has had several years experience working in a general insurance agency. She fills out applications for clients coming into the office, gives receipts for payments, signs Armstrong's name to applications and other documents; and has done so for 4 or 5 years. She is not on any type of regular salary or otherwise employed by Armstrong. Respondent has been a licensed insurance agent since 1961 and Respondent's testimony was unrebutted. This is the first complaint filed against him in his capacity as a licensed insurance agent.
