The Issue The issue in this case is whether Respondents have violated provisions of Section 627.837, Florida Statutes, through payment of alleged monetary inducements to insurance agents for the purpose of securing contracts which finance insurance premiums.
Findings Of Fact Petitioner is the Department of Insurance and Treasurer (Department). Respondents are Puritan Budget Plan, Inc., and Gibraltar Budget Plan, Inc., (Respondents). Findings contained in paragraphs 3- 23, were stipulated to by the parties. Stipulated Facts Common shares in Respondents' corporations were sold to insurance agent/shareholders for between $500.00 and $2,500.00 per share, depending on date purchased. Presently, and for the purposes of this litigation, marketing and/or administrative fees paid by Respondents to agent/shareholders range from $1.00 to $13.00 per contract produced, depending on the number of payments made, and the amount of the down payment. Each per contract marketing and/or administrative fee paid by Respondents to agent/shareholders is completely unrelated to the number of contracts produced by that agent/shareholder, and is based upon the characteristics of each contract, pursuant to the terms of the shareholder purchase agreement. Perry & Co., pursuant to a written agreement, manages the day to day activities of Respondents, including solicitation of new shareholder/agents. Alex Campos is currently President of Perry & Co. Perry & Co., Dick Perry or Alex Campos have no equity ownership, either direct or indirect, in Respondents corporations. No shareholder of Perry & Co. is also a shareholder in either Respondent, and no shareholder of the Respondents is a shareholder in Perry & Co. No officer or director of Perry & Co. is an officer or director of either Respondent, and no officer or director of either Respondent is an officer or director of Perry & Co. The individual management agreements between Perry & Co. and Respondents are terminable with proper notice by either party. Respondent Puritan Budget Plan, Inc., was originally licensed by the Department as a premium finance company in 1984, pursuant to the provisions of Chapter 627, Part XV, Florida Statutes. Puritans' principle office is located at 2635 Century Parkway, Suite 1000, Atlanta, Georgia 30345. Respondent Gibraltar Budget Plan, Inc., was originally licensed by the Department as a premium finance company in 1984, pursuant to the provisions of Chapter 627, Part XV, Florida Statutes. Gibraltar's principle office is located at 2635 Century Parkway, Suite 1000, Atlanta, Georgia 30345. Customers of Respondents are typically financing automobile insurance premiums. There is little if any variation among licensed premium finance companies in the State of Florida as to the interest rate charged to customers. In 1988, the Department inquired of Respondents' activities in relation to agent/shareholder compensation arrangements. After several meetings with representatives from Respondents, the Department closed the matter without taking any action. Also in 1988, the Department proposed the adoption of Rule 4-18.009, which in part would have explicitly made payment of processing fees or stock dividends a violation of Section 627.837, Florida Statutes, but later withdrew the proposed rule. Again in 1994, the Department proposed a rule which would have explicitly made payment of processing fees or stock dividends a violation of Section 627.837, Florida Statutes. After a hearing and adverse ruling by the hearing officer, the Department withdrew proposed Rule 4-196.030(8). Financial consideration paid to insurance agents in exchange for the production of premium finance contracts may result in the unnecessary financing of contracts, and the Department believes Section 627.837, Florida Statutes, was intended to make such conduct illegal. Financial consideration paid to insurance agents in exchange for the production of premium finance contracts may result in insurance agents adding or sliding unnecessary products to make the total cost of insurance more expensive and induce the financing of additional contracts, and the Department believes Section 627.837, Florida Statutes, was intended to make such conduct illegal. An "inducement" is presently defined as "an incentive which motivates an insurance purchaser to finance the premium payment or which motivates any person to lead or influence an insured into financing the insurance coverage being purchased; or any compensation or consideration presented to a person based upon specific business performance whether under written agreement or otherwise." Rule 4-196.030(4), Florida Administrative Code (July 27, 1995). This rule is currently effective but presently on appeal. There is no evidence that Respondents unnecessarily financed any premium finance contracts or engaged in any "sliding" of unnecessary products to induce the unnecessary financing of contracts. Section 627.837, Florida Statutes, does not prohibit the payment of corporate dividends based on stock ownership to shareholders who are also insurance agents. According to the Final Bill Analysis for H.B. 2471, in 1995 the Legislature amended Section 627.837, Florida Statutes, relating to rebates and inducements. This section was amended to clarify that this statute does not prohibit an insurance agent or agents from owning a premium finance company. The statute, as amended, is silent on the issue of how owner-agents may be compensated. Other Facts Approximately 80 percent of Respondents' insureds will turn to the shareholder/agent to handle premium mailing and collection. When a shareholder/agent provides these valuable services and labor to Respondents through the servicing of the premium finance contract with an insured, payment for those services and/or recoupment of the expenses involved with their provision is made, at least in part, in the form of the marketing and administrative fees paid by Respondents to the shareholder/agent. The marketing and administrative fee payment by Respondents to shareholder/agents is made from the net profit of the corporation and represents payment of ownership interest (dividends) to shareholder/agents in addition to payment for shareholder/agent services or expenses. Respondents generally finance "non-standard" private passenger automobile insurance. Such insurance generally covers younger drivers and drivers with infraction points against their license. The average non-standard premium is $500 per year. Thirty percent of non-standard insureds will cancel their insurance prior to the renewal date. Cancellation of policies and financing arrangements by non-standard insurers require the agent to return unearned commissions, about $30 generally. In contrast, payment of an insurance premium in cash guarantees an agent his/her entire commission, an average of $90 per non-standard policy. Consequently, the financial interest of most agents is best served by cash sale of auto insurance as opposed to financing the insurance. The average amount generated by 95 percent of all premium finance contracts executed in Florida would yield an agent/shareholder approximately six dollars per contract.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that a Final Order be entered dismissing the Administrative Complaints. DONE and ENTERED in Tallahassee, Florida, this 28th day of November, 1995. DON W. DAVIS, 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 28th day of November, 1995. APPENDIX In accordance with provisions of Section 120.59, Florida Statutes, the following rulings are made on the proposed findings of fact submitted on behalf of the parties. Petitioner's Proposed Findings 1.-11. Accepted to extent included within stipulated facts, otherwise rejected for lack of citation to the record. 12. First sentence is rejected as not substantially dispositive of the issues presented. Remainder rejected for lack of record citation if not included within stipulated facts. 13.-15. Rejected to extent not included within stipulation, no citation to record. Incorporated by reference. Rejected, no record citation, legal conclusion. 18.-19. Rejected, not materially dispositive. 20. Rejected, no record citation. 21.-23. Rejected, not materially dispositive. Rejected, record citation and relevancy. Rejected, weight of the evidence. Incorporated by reference. Respondent's Proposed Findings 1. Rejected, unnecessary to result. 2.-3. Accepted, not verbatim. 4. Rejected, unnecessary. 5.-7. Accepted, not verbatim. 8.-9. Rejected, unnecessary. 10. Accepted per stipulation. 11.-12. Rejected, unnecessary. 13. Accepted per stipulation. 14.-16. Accepted, not verbatim. Rejected, hearsay. Rejected, relevance. Rejected, unnecessary. 20.-22. Accepted per stipulation. 23. Rejected, unnecessary. 24.-57. Incorporated by reference. 58.-60. Rejected, unnecessary. 61.-62. Rejected, subordinate and not materially dispositive. 63.-67. Rejected as unnecessary to extent not included in stipulated facts. Accepted per stipulation. Rejected, unnecessary. Accepted per stipulation. 72.-76. Rejected, unnecessary. 77. Accepted per stipulation. 78.-79. Incorporated by reference. 80.-87. Accepted per stipulation. 88. Incorporated by reference. 89.-90. Accepted per stipulation. 91.-95. Rejected, subordinate. 96. Accepted. 97.-101. Rejected, unnecessary. 102. Incorporated by reference. COPIES FURNISHED: Alan Liefer, Esquire Division of Legal Services 612 Larson Building Tallahassee, FL 32399-0333 Steven M. Malono, Esquire Cobb, Cole & Bell 131 N. Gadsden St. Tallahassee, FL 32301 Bill Nelson State Treasurer and Insurance Commissioner Department of Insurance The Capitol, Plaza Level Tallahassee, FL 32399-0300 Dan Sumner Acting General Counsel Department of Insurance The Capitol, PL-11 Tallahassee, FL 32399-0300
The Issue The issue in this case is whether Respondent, Margaret Louise Herget, committed the offenses alleged in an Amended Administrative Complaint issued by Petitioner, the Department of Financial Services, on December 9, 2005, and, if so, what penalty should be imposed.
Findings Of Fact The Parties. Petitioner, the Department of Financial Services (hereinafter referred to as the "Department"), is the agency of the State of Florida charged with the responsibility for, among other things, the investigation and prosecution of complaints against individuals licensed to conduct insurance business in Florida. Ch. 626, Fla. Stat.1 Respondent Margaret Louise Herget was, at the times relevant, licensed in Florida as a general lines (property and casualty) insurance agent. Ms. Herget's license number is A117083. At the times relevant to this matter, the Department has had jurisdiction over Ms. Herget's insurance licenses and appointments. At the times relevant to this matter, Ms. Herget was the president and a director of A & M Insurance, Inc. (hereinafter referred to as "A&M"). A&M was incorporated in 1991 and has been operating as an insurance agency in Broward County, Florida. At the times relevant to this matter, A&M had a business bank account with Bank Atlantic of Ft. Lauderdale. Ms. Herget has been an authorized signatory on the account since 1998. At the times relevant to this matter, Ms. Herget maintained a contractual relationship with Citizens Insurance Company (hereinafter referred to as "Citizens"), an insurer. Pursuant to this contractual relationship, all applications and premiums for Citizens's products received by Ms. Herget were to be submitted to Citizens within five business days. Albert Herget. Albert Herget,2 Ms. Herget's husband until their marriage was dissolved in September 2003, also maintained a contractual relationship with Citizens. Mr. Herget, who was licensed as a general lines agent by the Department, was appointed by Citizens to write Citizens' property and casualty insurance. Mr. and Ms. Herget were both authorized signatories on A&M's bank account from 1998 until June 2003. Ms. Herget continued as the sole authorized signatory on the account after June 2003. Mr. Herget was also an officer of A&M until October 6, 2003, when he resigned. A&M was named after "Albert" & "Margaret" Herget. The evidence failed to prove that Mr. Herget was under the direct supervision and control of Ms. Herget. The evidence also failed to prove that Ms. Herget knew or should have known of any act by Mr. Herget in violation of Chapter 626, Florida Statutes. Count I: The Camp Transaction. In June 2002 Michael Camp and Rosemary Mackay-Camp went to A&M to purchase hazard, windstorm, and flood insurance. The Camps met with and discussed their needs with Mr. Herget. On or about June 11, 2002, the Camps paid $2,273.97 by check number 365 made out to "A & M Insurance" for "Flood, Wind & Home Insurance." The premium for the windstorm insurance amounted to $1,026.00. The check was given to Mr. Herget and was deposited in A&M's bank account on or about June 12, 2002. On or about June 11, 2002, the Camps were given a document titled "Evidence of Property Insurance," which indicated that they had purchased insurance on their home for the period June 14, 2002, through June 14, 2003. The windstorm insurance was to be issued by Citizens. Initials purporting to be those of Ms. Herget and a stamp of Ms. Herget's name and insurance license number appear in a box on the Evidence of Property Insurance form titled "Authorized Representative." Ms. Herget testified credibly that the initials were not placed there by her.3 There is also a notation, "Paid in Full Ck # 365" and "Albert," written in Mr. Herget's handwriting on the Evidence of Property of Insurance form. Mr. Herget also gave the Camps the note evidencing the receipt of their payment. The Camps, merchant marines, left the country after paying for the insurance they desired on their home and did not return until sometime in 2003. Upon their return they inquired about why their windstorm insurance had not been renewed and discovered that they had never been issued the windstorm insurance coverage they had paid A&M for in 2002. The Camps attempted several times to contact Ms. Herget by telephone. Their attempts were unsuccessful. They wrote a letter of inquiry to Ms. Herget on October 29, 2003. Ms. Herget did not respond to their inquiry. Having received no response to their inquiry of October 29, 2003, Mr. Camp wrote to Ms. Herget on or about December 5, 2003, and demanded that she either provide proof of the windstorm policy the Camps had paid for or refund the premium paid therefor. By letter dated December 11, 2003, Ms. Herget informed Mr. Camp of the following: We have determined that your policy was submitted to Citizen's (Formerly FWUA) and was never issued due to a request for additional information which was not received. Ultimately the application and funds were returned to our agency. Enclosed please find our agency check for 1026.00 representing total refund of premium paid. Please advise if we can be of further assistance. Enclosed with the letter was a full refund of the premium which the Camps had paid for the windstorm insurance they never received. The Camps accepted the refund. While the hazard and flood insurance purchased by the Camps had been placed by A&M, the windstorm insurance had not been placed, as acknowledged by Ms. Herget in her letter of December 11, 2003. A&M's bank records indicate that a check for the windstorm insurance in the amount of $1,026.00 was written to Citizens on or about June 14, 2002, but that the check had never been cashed. Although this explanation appears contrary to the explanation given by Ms. Herget to the Camps in her letter of December 11, 2003, neither explanation was refuted by the Department. More importantly, regardless of why the windstorm insurance purchased by the Camps was not obtained by A&M, the weight of the evidence suggests that the fault lies not with Ms. Herget, but with Mr. Herget, who actually dealt with the Camps. The evidence also proved that it was not until sometime in late 2003 that Ms. Herget learned of the error and, upon investigating the matter, ultimately refunded in-full the amount paid by the Camps. The evidence failed to prove that any demand was made by Citizens for the premium for windstorm paid by the Camps or that she willfully withheld their premium. Count II: The Cipully Transaction. Carol Cipully began purchasing homeowner's insurance from A&M in 1999. In July 2003 Ms. Cipully refinanced her home. She believed that her homeowner's insurance would continue after the refinancing with her current insurance carrier, Citizens, through A&M. First American Title Insurance Company (hereinafter referred to as "First American") handled the closing of the refinancing. First American was responsible for issuing a check to A&M after closing in payment for the homeowner's insurance policy. Closing took place July 23, 2003. By check dated July 30, 2003, First American paid $1,658.00 to A&M for Ms. Cipully's insurance coverage.4 Of this amount, $1,435.00 was for hazard insurance with Citizens and $223.00 was for flood insurance from Omaha Property and Casualty Insurance Company (hereinafter referred to as "Omaha Insurance"). The check was received and deposited in the bank account of A&M on August 4, 2003. An Evidence of Property Insurance form was issued by A&M for Ms. Cipully's insurance on or about July 25, 2003. The form was initialed by Ms. Herget. A month or so after the closing, a water leak, which had caused property damage, was discovered in Ms. Cipully's home. When she attempted to contact her homeowner's insurer she ultimately discovered that the premium payment made by First American had not been remitted to Citizens or Omaha Insurance by A&M and, therefore, she had no homeowner's insurance. Ms. Cipully contacted Ms. Herget by telephone and was assured by Ms. Herget that she had insurance.5 Ms. Cipully's daughter, Tina Cipully, attempted to resolve the problem with Ms. Herget on behalf of her mother. In response to Tina Cipully's inquiries, Ms. Herget, rather than look into the matter herself, informed Tina Cipully that proof need to be provided to her by or on behalf of Ms. Cipully that would prove that a premium check had been sent to A&M from First American. Tina Cipully attempted to comply with Ms. Herget's request, contacting First American. An employee of First American faxed a copy of the cancelled check for $1,658.00 to Tina Cipully.6 A copy of the Evidence of Property Insurance dated July 25, 2003, from A&M was also faxed by First American to Tina Cipully. Tina Cipully sent a copy of the check she received from First American to Ms. Herget. She also sent a copy of a HUD-1 statement. When she later spoke to Ms. Herget, however, Ms. Herget told her she could not read the documents. The evidence failed to prove that Ms. Herget received a legible copy of the check. The copy of the HUD-1 form, while not totally legible, did evidence that $1,658.00 was to be withheld for payment of insurance premiums. Despite the fact that the check in the amount shown on the HUD-1 statement had been deposited in A&M's bank account, Ms. Herget continued to insist that Ms. Cipully prove her entitlement to redress. Had she made any effort, Ms. Herget should have discovered that a check in the amount of $1,658.00 had been deposited in A&M's bank account on August 4, 2003. Three and a-half months after having received the First American check, Citizens, after verifying that First American had paid for hazard insurance on behalf of Ms. Cipully, contacted Ms. Herget and requested payment of Ms. Cipully's insurance premium. Six months after being notified by Citizens, Ms. Herget paid Citizens the $1,435.00 insurance premium A&M had received in August 2003. The payment was made by check dated May 28, 2004. Ms. Herget did not explain why it took six months after being notified that Ms. Cipully had indeed paid her insurance premium to pay Citizens. Omaha Insurance had not been paid the $223.00 premium received by A&M in August 2003 at the time of the final hearing of this matter. Ms. Herget failed to explain why. Count IV: The Parker Transaction. On March 20, 2004, Elric Parker, who previously purchased homeowner's insurance from Citizens through A&M, went to A&M to renew his policy. He gave Ms. Herget a check dated March 20, 2004, for $1,064.00 in payment of six months of coverage.7 Ms. Herget gave Mr. Parker a receipt dated March 20, 2004, for the payment. The check was endorsed by Ms. Herget and deposited into the banking account of A&M on or about March 22, 2004. After waiting approximately three months for the arrival of a renewal policy which Ms. Herget told Mr. Parker he would receive, Mr. Parker became concerned and decided to contact A&M. He was repeatedly assured, at least on one occasion by Ms. Herget, that the renewal policy would be received. Mr. Parker subsequently contacted representatives of Citizens directly and was informed by letter dated January 8, 2005, that his insurance with Citizens had been cancelled in April 2004 for non-payment of the $1,064.00 premium Mr. Parker had paid to A&M. Rather than attempt to resolve the problem with Ms. Herget and A&M, Mr. Parker continued to deal directly with Citizens. After providing proof to Citizens of his payment of the premium to A&M, Citizens offered to issue a new policy effective April 2004 upon payment by Mr. Parker of the second six-month premium or, in the alternative, to apply his payment in March 2004 to a new policy for 2005. Mr. Parker opted to have his payment applied toward the issuance of a new policy providing coverage in 2005. This meant that he had no coverage for most of 2004 and part of 2005. Citizens notified Ms. Herget that the payment she had received from Mr. Parker should be remitted to Citizens. Ms. Herget investigated the matter and, when she confirmed that she had received his payment, paid Citizens $1,064.00 on or about February 10, 2005. Ms. Herget and A&M failed to remit Mr. Parker's insurance premium payment received in March 2004 until payment was made to Citizens in February 2005. That payment was made only after inquires from Mr. Parker and, ultimately, Citizens. While Ms. Herget speculated that Mr. Parker's file was misfiled and not properly processed, the failure to remit Mr. Parker's premium payment for almost a year was not explained by either party. The evidence failed to prove, however, that Ms. Herget failed to remit the premium to Citizens willfully or that she failed to remit the premium once it was determined that A&M had failed to so and demand was made by Citizens.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department finding that Margaret L. Herget violated the provision of Chapter 626, Florida Statutes (2003), described, supra, and suspending her license for six months. DONE AND ENTERED this 29th day of June, 2006, in Tallahassee, Leon County, Florida. S LARRY J. SARTIN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 29th day of June, 2006.
The Issue Whether Respondent, Rosette Francesca Berban (Respondent), committed the violations alleged in the Administrative Complaint issued against her and, if so, what penalty should be imposed.
Findings Of Fact Petitioner is the state agency charged with the responsibility and authority to regulate insurance and insurance-related activities within the State of Florida. The licenses held by Respondent are included within the Petitioner’s authority. At all times material to the issues of this case, Respondent has been licensed as a life, health and variable annuity insurance agent, and as a life and health insurance agent (licensee). At all times material to the issues of this case, all of Respondent's acts or omission were in the course of her conducting insurance business as a licensee and agent for Penn Life-Senior Solutions, Lincoln Financial Group, or Aviva. Ezelle Smith is a female retiree, who resides in Sanford, Florida. At all times material to this case, Ms. Smith was a "senior consumer," as that term is used in the statutes. Ms. Smith was born in 1922 and makes her permanent residence in Florida. In November 2003, at age 80, Ms. Smith acquired a deferred annuity from Pennsylvania Life Insurance Company by paying a $50,000.00 premium. This annuity guaranteed Ms. Smith a certain monthly income for a certain period of time. Prior to January 25, 2008, Ms. Smith contacted Penn Life-Senior Solutions for the purpose of changing her beneficiary under the previously described annuity. On or about January 25, 2008, Respondent went to Ms. Smith's home purportedly to handle the change of beneficiary. At the time of Respondent's visit, Ms. Smith was 85 years of age. In discussions between Respondent and Ms. Smith, the latter opined that she would like more monthly income. Respondent sold Ms. Smith an equity indexed tax deferred annuity from Lincoln Financial Group (new annuity). The premium for the new annuity was funded, in part, by the Pennsylvania Life Insurance annuity. The total required to fund the new annuity was $56,497.97. In addition to the redeemed annuity, Ms. Smith was required to write a check in the amount of $10,000.00, for the difference in cost. Further, when the annuity was cashed in, Ms. Smith paid a surrender penalty of $3,607.43. It is found, Respondent did not fully explain the surrender penalty that would be incurred in the acquisition of the new annuity. Because Respondent did not make full disclosures regarding the new annuity, Ms. Smith did not understand the transaction and did not have a full accounting of the options available to her. Additionally, when Respondent explained the transaction to Respondent's daughters, she omitted pertinent information regarding the surrender penalty. Although the daughters knew their mother was seeking an increased monthly income, Respondent did not accurately explain the entire transaction. Ms. Smith's right to cancel the new annuity provided a 20-day window after the receipt of the policy within which it was possible to cancel the transaction. Respondent knew or should have known within the cancellation period that Ms. Smith was not agreeable to the transaction. Under the original annuity, Ms. Smith received a monthly income in the amount of $123.00. Under the new annuity, the monthly income was increased to $222.00. Mathematically, an 85-year-old woman would have to wait over three years to recover the amount surrendered when the original policy was cashed in. Although Respondent claimed the new annuity was superior to the original one, Ms. Smith lost the surrender amount, and $10,000.00 was then tied up in the new annuity. An annuity is not "more liquid" than cash. In summary, the new annuity did not afford sufficient benefits to overcome the loss of the surrender penalty and the loss of liquidity of the cash for the consumer. Respondent encouraged Ms. Smith to acquire an inappropriate investment, and thereby failed to protect the consumer's best financial interests. Mary Ann DeVita is a ?senior consumer,? who resides in DeBary, Florida, and is a citizen of the State of Florida. Ms. Devita was born in 1935. Prior to April of 2009, Ms. DeVita acquired two deferred variable annuities from John Hancock Life Insurance Company. The total invested in the annuities was well over $550,000.00. Ms. DeVita was unhappy with the performance of her investments and responded to an advertisement placed by Respondent's company. Ms. DeVita sought information as to how her retirement funds might be better invested to preserve the principle. Respondent visited Ms. DeVita in her home and explained options available regarding a new investment. Respondent proposed that Ms. DeVita invest in two equity indexed deferred annuities with Aviva that would be funded by the John Hancock annuities and Ms. DeVita's stock market account valued in the amount of $475,000.00. In furtherance of her proposal to Ms. DeVita, Respondent visited the home on several occasions. Each visit Respondent pitched the proposal. Respondent filled out the application for the proposed transaction and eventually Ms. DeVita signed the form. Ms. DeVita did not want the transaction to be completed until her children could review the paperwork and sign off on the deal. Respondent claimed she would consult with Ms. DeVita's family and that an additional signature would be needed to complete the transaction. In fact, no additional signatures were needed. Shortly after learning about the proposed transaction, Ms. DeVita's son was contacted by Bill Harrison (Ms. DeVita’s insurance agent). Mr. Harrison was concerned that by surrendering the John Hancock annuities, Ms. DeVita could potentially lose the death benefits that were valued at approximately $286,000.00. As a result of Mr. Harrison's intercession into the matter, Respondent was not able to complete her proposed transaction.
Recommendation It is recommended that the Department of Financial Services enter a final order finding Respondent guilty of the violations alleged in Counts I and II of the Administrative Complaint as set forth above, suspending her license for a period of 180 days, and imposing an administrative fine in the amount of $2,500.00. DONE AND ENTERED this 1st day of June, 2011, in Tallahassee, Leon County, Florida. S J. D. PARRISH 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 1st day of June, 2011. COPIES FURNISHED: Regina M. Keenan, Esquire Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399-0390 Walter A. Ketcham, Jr., Esquire Grower, Ketcham, Rutherford, Bronson, Eide & Telan, P.A. Post Office Box 538065 Orlando, Florida 32853-8065 Julie Jones, CP, FRP, Agency Clerk Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399-0390
The Issue The issue for determination is whether Respondent committed the offenses set forth in the administrative complaint and, if so, what action should be taken.
Findings Of Fact At all times material hereto, Maria Amelia Pou (Respondent) was licensed as a general lines insurance agent. Pursuant to Chapter 626, Florida Statutes, the Department of Insurance (Petitioner) has jurisdiction over Respondent’s insurance license and appointments. At all times material hereto, Respondent was an officer of General Insurance Group, Inc. (GIG), located in Hialeah, Florida. GIG is a Florida incorporated general lines insurance agency. At all times material hereto, Respondent was an officer of Victoria Insurance Agency, later changed to General Insurance Group II, both hereinafter referred to as GIG II, located at 4583 NW 7th Street, Miami, Florida 33126. GIG II is a Florida incorporated general lines insurance agency. Respondent was, and is, personally and fully liable and accountable for the wrongful acts, misconduct, or violations of any provision of the Florida Insurance Code that she knew or should have known were committed by any person, over whom she had direct supervision and control, acting on behalf of GIG II. Respondent was, and is, personally and fully liable and accountable for wrongful acts, misconduct, or violations of any provision of the Florida Insurance Code that she committed. At all times material hereto, Respondent maintained an escrow account, with account no. 008-1027286, at Republic National Bank of Miami in Miami, Florida. Respondent had joint signatory authority over the escrow account. Premiums, returned premiums, and other funds belonging to insureds, insurers, and others received in transactions under Respondent's license are trust funds held by Respondent in a fiduciary capacity. On November 22, 1994, Carlos Vidal and his wife, Teresa Vidal, purchased a new vehicle from Ocean Mazda, a Mazda dealership located on Lejeune Road, Miami, Florida. Before leaving the dealership with his new vehicle, Mr. Vidal attempted to obtain insurance coverage for the vehicle from his insurance company, State Farm. However, when he went to State Farm's office, no one was present and it appeared to be closed. Mr. Vidal returned to the dealership and informed the dealer's salesperson, Mr. Munoz, of his problem. The salesperson called several insurance companies without success before reaching GIG II. Mr. Munoz engaged in all communication over the telephone with GIG II. Neither Mr. Vidal nor Mrs. Vidal spoke with GIG II. Mr. Munoz obtained a quote of $997 from GIG II for the annual premium for the insurance coverage on the vehicle and informed Mr. Vidal of the cost. Mr. Vidal requested his wife to complete a check to GIG in the quoted amount. She complied. The check was given to and accepted by Mr. Munoz. GIG II faxed an insurance binder to Mr. Munoz. He gave the binder to Mr. Vidal. The binder indicated that the insurance was to be issued by Clarendon National Insurance Company. Having obtained the insurance binder, Mr. and Mrs. Vidal left the dealership with their new vehicle. Although the premium was paid in full, GIG II completed an insurance premium finance contract (finance contract) to finance the premium with World Premium Finance Company (WPF), dated November 22, 1994, for Mr. Vidal. Ninety-five percent of Respondent's premiums are premium financed. The finance contract reflects the alleged signatures of Mr. and Mrs. Vidal. However, neither Mr. Vidal nor Mrs. Vidal signed the finance contract. An inference is drawn and a finding is made that GIG II signed the names of Mr. and Mrs. Vidal on the finance contract. Respondent signed the finance contract as the broker or agent. Also, the finance contract reflects GIG II as the agent and the insured as both GIG II and Mr. and Mrs. Vidal, with only GIG II's address as the address for both GIG II and the Vidals. Further, the finance contract reflects a premium of $907, cash down payment of $273, and three monthly payments of $225.18. The monies totaled $948.54 for the finance contract price. The $997 check was deposited into GIG II's escrow account. At all times material hereto, the money remained in the escrow account. GIG II completed an application for the insurance coverage, dated November 22, 1994, with Associated Insurance Brokers, Inc. (AIB) to be issued by Clarendon National Insurance Company. The application reflected a total policy premium of $907. Respondent signed the application as brokering agent. Also, the application reflects the alleged signatures of Mr. and Mrs. Vidal. However, neither Mr. Vidal nor Mrs. Vidal signed the application. An inference is drawn and a finding is made that GIG II signed Mr. and Mrs. Vidal's names to the application. Approximately, two to three days after November 22, 1994, Mr. Vidal brought the vehicle to GIG II for pictures to be taken of it for insurance purposes. A Florida Motor Vehicle Preinsurance Inspection Report, dated November 22, 1994, reflects the alleged signature of Mr. Vidal. To the contrary, Mr. Vidal did not sign the Report. Regarding the premium for the insurance, Respondent utilized computer software to compute the premium. The software requires a vehicle's VIN number. Respondent's software was not current due to her not having received, at the time of the transaction, the updated software which would reflect a recent rate increase. The total premium by the software was lower than the premium should have been. It is customary in the insurance industry to use the computer software used by Respondent for the insurance premiums. Also, it is not unusual for a delay to occur for the updated software to be received by an insurance company after a rate increase is approved and effective. In the insurance industry, it is not unusual for a miscalculation of a premium to occur. No gross miscalculation occurred in this instance which would cause the miscalculation to be unusual and suspect. Due to the miscalculation of the premium, by letter dated January 12, 1995, AIB notified Mr. Vidal that an additional $120 was due on the premium. Further, the letter provided that he had three options: (1) pay the $120 by February 10, 1995; or (2) cancel the insurance policy by February 26, 1995, and demand return of unearned premiums; or (3) take no action and the insurance policy would be cancelled by February 26, 1995. Mr. Vidal decided to cancel the insurance policy. On January 30, 1995, Mr. Vidal went to GIG II and executed a Cancellation Request Form cancelling his insurance. Respondent's signature appears on the Form as the agent. At some point in time, the cancellation form was forwarded by GIG II to AIB. By notice dated February 6, 1995, WPF notified Mr. Vidal, among other things, that he had ten days to pay his monthly installment ($225.18) due on February 1, 1995, 1 plus a late charge of $10, totaling $235.18 and that, if he failed to pay, his insurance would be cancelled. The address for Mr. Vidal on the notice was GIG II's address. By notice dated February 16, 1995, WPF notified Mr. and Mrs. Vidal, among other things, that their insurance policy was cancelled due to nonpayment of the monthly installment. The address for Mr. and Mrs. Vidal on the notice was GIG II's address. By letter dated February 14, 1995, to AIB, Mr. Vidal notified AIB that he had chosen to cancel his insurance policy and had executed a cancellation form on January 27, 1995, 2 and demanded a refund of the unearned premiums. Further, Mr. Vidal indicated in the letter that he had neither heard from AIB or received a refund and that he was notifying it of his cancellation and demand for a refund. As a result of the cancellation by Mr. Vidal, AIB issued WPF a check dated February 22, 1995, in the amount of $549.67. Subsequently, on or about March 1, 1995, WPF issued GIG II a check in the amount of $79.31 Even after Mr. Vidal cancelled the insurance coverage and Respondent had received a refund from WPF, Respondent failed to adjust her conduct to conform with the Vidals' situation which was that the insureds, the Vidals, had paid the quoted premium in full. Not having received a refund, on April 17, 1995, approximately two and one-half months after signing the cancellation form, Mr. Vidal filed a request for assistance with Petitioner. By check dated July 10, 1995, more than five months after Mr. Vidal signed the cancellation form, Respondent issued Mr. Vidal a refund in the amount of $239.33 for insurance coverage that he had in effect for a little over two months. The refund check was issued from GIG II's escrow account. The refund monies included $49 which represented the difference between what the Vidals paid for the coverage ($997) and the finance contract price ($948.54). Consequently, Mr. Vidal was assessed the interest charged on a finance contract which never should have existed in his situation as the quoted premium was paid in full. In a premium finance situation in which a refund is due an insured, it is customary in the insurance industry for a three-step process to take place: (1) the insurance company issues a check to the premium finance company for the refund and forwards the check to the premium finance company which may take at least 30 days; (2) the premium finance company issues a check to the agent for the refund and forwards the check to the agent which may take at least another 30 days; and (3) the agent issues a check to the insured for the refund and sends the check to the insured. The same refund procedure was followed in this situation but with less time involved for steps (1) and (2). Moreover, in this instance, an important factor which makes this situation different is that Respondent had in her escrow account the full premium paid by the insureds, the Vidals. After receiving Mr. Vidal's request for assistance, Petitioner conducted an investigation. At first, Petitioner determined that no violation of the Insurance Code had occurred and Petitioner closed its file. However, subsequently, Petitioner re-opened its investigation which led to the filing of the administrative complaint against Respondent. After filing of the administrative complaint and more than one year after Respondent refunded the $239.33 to Mr. Vidal, Respondent acknowledged that more monies were due Mr. Vidal. Having reviewed the computations with Petitioner, Respondent refunded the additional monies to Mr. Vidal. An individual who is not licensed by Petitioner may qualify for a license by experience. Petitioner prescribes the activities in which an unlicensed person may engage. Over the years, Respondent has had unlicensed employees who were attempting to qualify for licensure by experience. Respondent identified two unlicensed employees, Maria Cancio and Maritza Inclant, who provided premium quotes to customers. Approximately ten percent of Ms. Cancio's time was devoted to providing premium quotes. However, more than ten percent of Ms. Martiza's time was devoted to providing premium quotes. Petitioner presented no evidence as to the time periods, i.e., six months or twelve months to which the percentages were applicable.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Insurance and Treasurer enter a final order Finding in Count I that Maria Amelia Pou violated Subsections 626.561(1), 626.611(4), (5), (7), (10) and (13), 626.621(2) and (12), and 626.9541(1)(k)1 and (o) 1 and 2; Dismissing Count II; and Suspending the license of Maria Amelia Pou for nine months. DONE AND ENTERED this 15th day of April, 1997, in Tallahassee, Florida. ERROL H. POWELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 15th day of April 1997.
Findings Of Fact Respondent, Kathryn Genevieve Saviak, did business as J & J Insurance Agency at all times pertinent to these proceedings. As a general lines insurance agent, she maintained five offices at one time or another in Dade, Broward and Hillsborough counties, for the sale of automobile insurance. Respondent did not deal with customers directly herself. She visited her offices occasionally, perhaps once a month, and spoke to the office managers more frequently by telephone. Some of her employees travelled among offices. Respondent authorized her employees to write insurance policies on behalf of the FJUA under an arrangement with the United States Fidelity and Guaranty Company (USF&G), a servicing carrier for the FJUA. Prior to December, 1978, respondent was the only licensed agent with the J & J Insurance Agency assigned to USF&G. Agents like respondent who represented the FJUA were required to forward to the servicing carrier money thee received in payment of premiums on the date received or, at the latest, on the following day. An agent need not require payment of the entire premium in order to write an insurance policy, so long as the agent collected a specified minimum deposit. Any money actually collected above the amount of the minimum deposit, however, was to be forwarded to the servicing carrier daily. E.R. Milbourne, Jr., the USF&G employee with direct charge of FJUA operations, personally apprised respondent at various times, including prior to 1978, of the requirement that monies be forwarded upon receipt. Agents were first advised of this requirement in writing on or about September 17, 1973. Respondent is one of approximately 250 agents for whom USF&G has been designated the servicing carrier by FJUA. Respondent's offices wrote 60 to 70 policies a month as compared to USF&G's 25,000 FJUA policies a year. The FJUA policies respondent's offices wrote became effective on the date they were written. USF&G then had thirty days in which to issue the policy. In its last audit before the final hearing began, USF&G determined that two percent of its private passenger vehicle policies and four percent of its commercial vehicle policies had not been issued within the thirty-day period. Routinely, USF&G issued a notice of termination if the premium for a policy had not been paid in full within thirty days, but, in some cases, as many as sixty days might have elapsed from the date of application before USF&G issued a notice of termination. On March 30, 1978, Carlene Grigg made application for automobile insurance at respondent's Ft. Lauderdale Office. She made payment of $309.00 at that time. USF&G received the application on May 15, 1978, accompanied by only $200.00. In late July, Carlene's husband, Marvin, received a notice of termination from USF&G dated July 26, 1978, stating that USF&G was owed $188.00. Petitioner's exhibit No. 5. In September, Mr. and Mrs. Grigg paid an additional $73.00 to respondent's Ft. Lauderdale office. On or about November 6, 1978, USF&G received an additional $139.00 from respondent's Ft. Lauderdale office. Together with the initial $200.00, this constituted full payment of the premium for the policy Ms. Grigg applied for on March 30, 1978 (which has subsequently been revised to eliminate physical damage coverage, resulting in a decrease in premium.) (Count I) On August 14, 1978, Constantine A. Ronca made application for an automobile insurance policy at respondent's Ft. Lauderdale office and paid $257.00. USF&G received Mr. Ronca's application later in August, accompanied by $100.00. USF&G sent a notice of termination dated October 26, 1973, to be effective November 9, 1978, for the stated reason of unpaid premium. (Count II) On June 27, 1978, Antonio Vettorazzi purchased automobile insurance at respondent's Ft. Lauderdale office. Against a total premium of $437.00, Mr. Vettorazzi made a down payment of $153.00. The balance of the premium, $284.00, was financed. USF&G received Mr. Vettorazzi's application from respondent's Ft. Lauderdale office accompanied by a check for $284.00. Thereafter Mr. Vettorazzi received a notice of termination from USF&G dated November 15, 1978, threatening to terminate the policy effective November 29, 1978, for alleged nonpayment of a premium balance of $153.00. In late November or early December of 1978, USF&G received a check for $153.00 from respondent's Ft. Lauderdale office. Although Mr. Vettorazzi made his payments to the premium finance company, he made no additional payments directly to respondent after June 27, 1978. (Count III) Also on June 27, 1978, Linda Diane Moray Blair purchased automobile insurance from respondent's Ft. Lauderdale office. Against a total premium of $308.00 she made a cash down payment of $112.00, for which she received a receipt. Petitioner's exhibit No. 2 attached to petitioner's exhibit No. 3. The balance of the premium was financed by Capitol Premium Plan, Inc. Ms. Blair made monthly payments of $29.20 to Capitol Premium Finance in a timely fashion. Subsequently she received a notice from J & J Insurance that another $10.00 was due. In September of 1978, Ms. Blair sent a $10.00 money order to respondent's Ft. Lauderdale office. Thereafter, Ms. Blair received from USF&G a notice of termination dated October 12, 1978, stating that a balance was owed the company of $122.00. On October 27, 1978, USF&G received from respondent's Ft. Lauderdale office a check in the amount of $122.00. (Count IV) On October 18, 1978, David G. Fuerst purchased automobile insurance at respondent's Ft. Lauderdale office. He wrote a check for $210.00, half the annual premium. On November 21, 1978, Mr. Fuerst wrote another check in favor of J & J Insurance for the remainder of the premium in the amount of $210.00. Petitioner's exhibit No. 8. When USF&G received Mr. Fuerst's application, respondent's check in the amount of $150.00 accompanied the application. Eventually USF&G issued a notice of termination dated December 18, 1978, advising Mr. Fuerst that his policy would be terminated on account of an unpaid balance of $270.00. Petitioner's exhibit No. 9. Shortly after receiving the notice of termination, Mr. Fuerst received from respondent's Ft. Lauderdale office a form "Special Notice" stating that the cancellation of the policy "was due to a computer error. Petitioner's exhibit No. 10. On January 9, 1979, USF&G received the $270.00 balance from respondent's Ft. Lauderdale office. (Count XXVIII) On October 30, 1978, William Patrick Pete went into respondent's Ft. Lauderdale office. He purchased an automobile insurance policy for which he paid the entire premium of $170.00. Additionally, he purchased membership in an automobile club for which he paid $30.00. USF&G received Mr. Pete's application on November 8, 1978, accompanied by respondent's check for $50.00. On December 26, 1978, USF&G sent Mr. Pete a notice of termination for the stated reason that he owed $120.00 toward his premium. On January 9, 1979, USF&G received $120.00 from respondent's Ft. Lauderdale office. (Count XXIX) On October 3, 1978, Linda J. Brown purchased insurance from respondent's Ft. Lauderdale office. On that date she made a do payment of $96.00 against a total premium of $275.00. She financed the remainder of the premium, $179.00, under an agreement with Time Premium Company. Petitioner's exhibit No. 15. USF&G received Ms. Brown's application on October 18, 1978, accompanied by a check for $179.00. On December 11, 1978, USF&G directed a notice of termination to Ms. Brown for the stated reason that she owed $96.00 on her premium. Petitioner's exhibit No. 16. On January 2, 1979, USF&G received from respondent a check in the amount of $96.00. (Count xxx) 12. In July, 1978, Robert Charles Oberheim purchased insurance from respondent's Ft. Lauderdale office. He made a down payment of $249.00 against a quoted premium of $711.00. He financed the balance of $462.00, and made regular monthly payments of $63.00. When USF&G issued Mr. Oberheim's policy, it adjusted the premium downward by $40.00 so that the total premium was in fact $671.00. On October 2, 1978, USF&G issued a notice of termination for the stated reason of a balance owing by Mr. Oberheim of $209.00. Thereafter, some time before October 16, 1978, USF&G received respondent's check in the amount of $209.00. Not until August 1, 1979, did J & J Insurance draw a check in favor of Mr. Oberheim in the amount of $40.00, representing the refund he was owed. Petitioner's exhibit No. (Count XXXI) On November 4, 1977, Jean L. Snyder, wife of Paul Snyder, purchased automobile insurance from respondent's Miami office. She was quoted a premium of $1,153.00 and wrote a check for the full amount on November 16, 1977. Petitioner's exhibit No. 20. USF&G received this application on February 13, 1978, accompanied by a check in the amount of $400.00. (Count XXXII) On February 9, 1978, Joseph J. Guido purchased automobile insurance from respondent's Ft. Lauderdale office. He made a down payment of $221.00 against a total premium of $631.00, and financed the balance of $410.00 under an agreement with Time Premium Company. Petitioner's exhibit No. 25. He subsequently sold the vehicle he had insured and, on August 8, 1978, cancelled the policy. On August 28, 1978, Time Premium Company received a $490.00 refund check from USF&G. Brooksie Peeples, Time Premium Company's manager, deposited this check against Mr. Guido's account. The check was enough to pay off Mr. Guide's indebtedness to Time Premium Company in its entirety, with $207.73 remaining. This balance was forwarded to respondent's Ft. Lauderdale office on September 13, 1978. Petitioner's exhibit No. 26. The check was deposited on September 19, 1978. Beginning in November of 1978, Mr. Guido and his wife made repeated demands for the refund. Finally, when Mr. Guide refused to leave the premises until the check was written, on March 29, 1979, the manager of respondent's Ft. Lauderdale office wrote Mr. Guide a check for $207.73. (Count XXXIV) On December 7, 1978, Shirley Payne purchased automobile insurance from respondent's Ft. Lauderdale office. On that date she made a down payment in the amount of $300.32 against a quoted premium of $682.32. She was told she would receive her policy within thirty days, along with a bill for the balance due. In fact, she received her policy in March of 1979. She paid respondent another $100.00 on March 20, 1979, petitioner's exhibit No. 28, and the final $282.00 on March 28, 1979. Petitioner's exhibit No. 29. USF&G received Ms. Payne's application on February 28, 1979, accompanied by a check in the amount of $214.00. (Count XXXVI) Lena Sabel accompanied her daughter, Sylvia Robbins, to purchase automobile insurance at respondent's Hollywood office on July 25, 1978. On that date Ms. Sabel wrote a check in the amount of $556.23 in favor of J & J Insurance Agency. Petitioner's exhibit No. 22. The total premium for the policy she purchased was $406.00. When USF&G received the Robbins' application from respondent it was accompanied by a check in the amount of $150.00. On October 23, USF&G issued a notice of termination for the stated reason that $256.00 was owed for the premium. On receipt of this notice, Ms. Robbins' son sent USF&G a check for $256.00. It arrived shortly after a check in the same amount that respondent's office sent. Having received duplicate checks, USF&G wrote a refund check to the order of Sylvia Robbins in the amount of $256.00 and forwarded the check to respondent. Sylvia Robbins' endorsement was forged and the check was deposited to the J & J Insurance Premium account at the Commercial Bank and Trust Company in Miami. About two weeks before the final hearing began, Ms. Sabel received a refund check in the amount of $256.00. (Count XXXVIII) USF&G drew Check No. 111558 in favor of Robert K. Kaganac in the amount of $44.00 on December 11, 1978, and forwarded the check in care of respondent's Hollywood office. Mr. Kaganac's endorsement was forged and the check was deposited to J & J Insurance Premium account at Commercial Bank and Trust Company in Miami. (Count XXXIX) On December 1, 1978, USF&G drew a check to the order of J. Bruce Garland in the amount of $54.00 and forwarded it to respondent's Ft. Lauderdale office. There Mr. Garland's endorsement was forged and the check was deposited to the J & J Insurance Premium account at the Commercial Bank & Trust Company in Miami. On August 1, 1979, respondent mailed Mr. Garland a check in the amount of $24.00. (Count XLI) Guillermo Citelli purchased automobile insurance at respondent's Hollywood office. On November 22, 1978, USF&G drew its check No. F110271 in favor of Mr. Citelli in the amount of $91.00 and forwarded it to respondent's Hollywood office. Mr. Citelli's endorsement was forged and the check was deposited to the J & J Insurance Premium account at the Commercial Bank & Trust Company in Miami. (Count XLIII) On October 11, 1978, Kevin B. McGuire purchased automobile insurance at respondent's Hollywood office. On that day he paid a premium of $108.00. He later requested that the policy be cancelled. On December 5, 1975, USF&G drew its check No. F110568 in favor of Kevin B. McGuire in the amount of $53.00 and forwarded the check to respondent's Hollywood office. Mr. McGuire's endorsement was forged and the check was deposited to the J & J insurance Premium account at the Commercial Bank & Trust Company in Miami. In January, 1979, Mr. McGuire received a refund from respondent in the amount of $53.00. (Count XLIV) In each instance in which it was shown that USF&G had cancelled a policy for which respondent had failed to forward the entire premium, USF&G later reinstated the policy, effective retroactively to the date of cancellation. Paula Davis, who managed respondent's Hollywood office from March of 1978, until January of 1979, was instructed by respondent to forge endorsements on refund checks and did so. This practice antedated Ms. Davis' employment at the Hollywood office. Marie Vernon, also employed by respondent at her Hollywood office, forged endorsements on refund checks, believing respondent had directed that this be done. Before each forgery, a photostat of the refund check was made and attached to the pertinent file against the possibility that the payee might make demand for the refund. Deborah Goldberg's testimony on this and other points has not boon credited. With respect to certain classes of insurance, respondent instructed Ms. Davis to forward to USF&G only a specified minimum deposit even when the office received more than the minimum deposit toward payment of the premium. With respect to these policies, respondent gave Ms. Davis standing instructions to forward the premium balances only upon receipt of notices of termination from USF&G. These instructions were followed, and monies belonging to USF&G were diverted to a separate account. Respondent also represented an Alabama insurance company to whom she forwarded premiums as promptly as that company required. Many of her employees engaged in no improper conduct of any kind and were completely unaware of what was going on. Both parties have furnished proposed findings of fact which have been considered in preparation of the foregoing findings of fact. Proposed findings of fact inconsistent with the foregoing are hereby expressly rejected.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That petitioner revoke respondent's license and her eligibility for licensure. DONE and ENTERED this 16th day of April, 1980, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings Room 101 Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Patrick F. Maroney, Esquire S. Strom Maxwell, Esquire Department of Insurance The Capitol Tallahassee, Florida 32301 Edward S. Jaffry, Esquire. S. Jack Carrouth, Esquire Suite 300, Barnett Bank Building Tallahassee, Florida 32302
Findings Of Fact Parties Petitioner is the state agency responsible for regulating insurance and insurance related activities in Florida. Petitioner regulates persons engaged in activities prohibited under Chapters 626 and 627, Florida Statutes. 1/ Respondent, Koontz, is licensed as a general lines agent for property, casualty, surety, and miscellaneous insurance. 2/ His agent number is 300429666. Mr. Koontz is the primary agent and vice president for Cash Register Auto Insurance of Polk County, Inc., ("Cash Register"). Cash Register sells insurance and is an insurance agency within the meaning of Section 626.094. Respondent, Davis, is employed by Cash Register. She is licensed under customer service representative number 534548407. Mr. Koontz is the appointing and supervising agent for Ms. Davis. He is responsible for her acts and representations pursuant to Florida Administrative Code Rule 4-213.100. 3/ Cash Register is a Florida corporation wholly owned by Mr. Lloyd Register III and LR3 Enterprises, Inc. ("LR3"). 4/ Cash Register's principal place of business is 2810 South Florida Avenue, Number B, Lakeland, Florida 33803. Background Prior to August, 1994, Mr. Ernest C. Carey maintained automobile insurance on his 1987 Toyota truck through Allstate Insurance Company ("Allstate"). Allstate cancelled the policy. During August, 1994, Mr. Carey obtained replacement insurance. Mr. Carey telephoned five insurance agencies to obtain premium quotes for the minimum insurance required by law. One of the insurance agencies that Mr. Carey telephoned was Cash Register. Mr. Carey sought to finance the insurance premium, make the minimum down payment, and obtain the minimum monthly payment available. The quote given to Mr. Carey was stored in the Cash Register computer. On August 17, 1994, Mr. Carey went to the Cash Register office and discussed the purchase of insurance with Respondent, Davis. Ms. Davis retrieved Mr. Carey's quote from the computer and offered Mr. Carey the same premium, down payment, and terms that were quoted to Mr. Carey by telephone. The quoted premium was $275 for personal injury protection, a $2,000 deductible, and $10,000 in liability insurance. The insurer was Armor Insurance Company ("Armor"). The down payment was $67. The quote was based on Mr. Carey's purchase of two additional policies. One policy was a $1,000 accidental death benefit ("ADB"). The second was hospital indemnification. The additional premium for the ADB policy was $10. The additional premium for the hospital indemnity policy was $100. Mr. Carey had the option of rejecting the two additional policies. His down payment on the cost of automobile insurance alone would have increased to $97.50, and his monthly payment would have also increased. However, the finance charge and total cost would have decreased. Mr. Carey was unhappy with his financing alternatives but did not choose to pay the premium in full rather than finance it. Nor did he choose to reduce his total cost by purchasing automobile insurance only. Mr. Carey chose a lower down payment, lower monthly payment, ADB, and hospital indemnification. Mr. Carey paid $67 to Respondent, Davis, signed the appropriate documents including a premium finance agreement, and left. Premium Financing Respondents are each charged with violating former Sec. 627.8405(3), Fla. Stat. (1994 Supp.)("former Section 627.8405(3)"). 5/ Former Section 627.8405 provided inter alia: No premium finance company shall, in a premium finance agreement, provide financing for the cost of: * * * (3) Any amount in excess of 70 percent of the original premium . . . on any insurance contract . . . of 12 months' or more duration . . . . Respondents did not violate former Section 627.8405(3) in the Carey transaction unless they satisfied three conjunctive requirements. Respondents must have: provided financing; in a premium finance agreement; for more than 70 percent of the original premiums. Respondents satisfied only one of the foregoing requirements. Provided Financing The term "financing" is not defined in Chapter 627, Part XV. The plain and ordinary meaning of the term "finance" is to supply money, credit, or capital ("money or credit"). 6/ Respondents did not supply money or credit to pay insurance premiums in the Carey transaction. Equity Premium, Inc. ("Equity") 7/ provided financing in the Carey transaction. Equity supplied money to the insurer or insurance agent, supplied credit to Mr. Carey, and imposed a finance charge for the money and credit supplied. Equity is a premium finance company, within the meaning of Section 627.826, and, on August 17, 1994, was subject to the provisions of former Section 627.8405(3). However, Equity is not a party to this proceeding. Respondents do not own stock in Equity. Nor do they own stock in Cash Register or LR3. Equity, Cash Register, and LR3 may be related entities because the stock of each corporation may be owned by common shareholders. However, any such relationship does not include Respondents. Petitioner failed to show by clear and convincing evidence that Respondents provided financing as principals. Petitioner failed to show by clear and convincing evidence that Respondents were authorized as agents to bind Equity irrevocably without the subsequent consent and approval of Equity. In A Premium Finance Agreement The financing document used in the Carey transaction was labeled a premium finance agreement. However, a written agreement is not a premium finance agreement merely because of the label affixed to the document. To be a premium finance agreement, a written agreement must satisfy the statutory definition of a premium finance agreement. A premium finance agreement is defined in Section 627.827 8/ as: . . . a written agreement by which an insured promises or agrees to pay to . . . a premium finance company the [amount advanced] . . . to the insurer or insurance agent, in payment of premiums on an insurance contract, [together with a service charge]. . . . [emphasis supplied] In relevant part, a premium finance agreement is a written agreement in which the insured promises to pay the amount advanced together with a service charge A written agreement in which the insured promises to pay the amount advanced without a service charge is not a premium finance agreement. Section 627.826(3) 9/ clearly states: The inclusion of a charge for insurance on a bona fide sale of goods or services on installments is not subject to the provisions of this part Section 627.826(3) makes it clear that financing provided without a service charge was not subject to the prohibition in former Section 627.8405(3). Former Section 627.8405(3) prohibited only financing in a written agreement in which the insured agreed to pay the amount advanced together with a service charge The amount advanced in the Carey transaction was $319.40. The amount advanced was determined by reducing original premiums of $375 by $57 of the down payment and by increasing the $318 remainder by D.O.C. stamps of $1.40. Of the amount advanced, Mr. Carey agreed to pay only $137.69 together with a service charge. The $43.66 service charge was calculated at an annual interest rate of 31.71 percent. 10/ If Mr. Carey had agreed to pay the entire $319.40 together with a service charge of 31.71 percent, he would have agreed to pay a service charge of $101.28. 11/ If Respondents provided financing in the Carey transaction, they provided financing in a premium finance agreement for only $137.69 because that is the only part of the amount advanced that Mr. Carey agreed to pay together with a service charge. Respondents did not provide financing in a premium finance agreement for $181.71 because Mr. Carey agreed to pay that part of the amount advanced without a service charge. 12/ The single written agreement that was labeled a premium finance agreement was, by statutory definition, a dual-use document. That part of the document in which Mr. Carey agreed to pay $137.69 together with a service charge was a premium finance agreement within the meaning of Section 627.827. That part of document in which Mr. Carey agreed to pay $181.71 without a service charge did not satisfy an essential requirement in the statutory definition of a premium finance agreement. Financing provided in that part of the document that was not a premium finance agreement was not prohibited by former Section 627.8405(3). Section 627.826(3) provides that such financing is not subject to the finance provisions of Chapter 627, Part XV, including the prohibition in former Section 627.8405(3). More Than 70 Percent Of The Original Premium If Respondents provided financing in the Carey transaction, they did not violate former Section 627.8405(3) by providing financing in a premium finance agreement for more than 70 percent of the original premiums. The $137.69 that Mr. Carey agreed to pay together with a service charge is only 37 percent of the $375 in original premiums. Respondents failed to show by clear and convincing evidence that a disproportionate share of the $137.69 represented more than 70 percent of the $100 premium for hospital indemnification. Nor did Petitioner show that Mr. Carey agreed to pay the $100 premium together with a service charge. All of the $137.69 and the $43.66 service charge arguably could have been attributable to the $275 automobile premium. Even if the $100 premium for hospital indemnification were actually a charge for products other than insurance, $137.69 comprises only 50 percent of the $275 automobile premium. As the premium finance agreement stated, "FINANCE CHARGES HAVE BEEN CALCULATED ON NO MORE THAN 70 PERCENT OF THE PREMIUM." Automobile Club Section 627.8405(1) 13/ provides, in relevant part: No premium finance company shall, in a premium finance agreement, provide financing for the cost of: A membership in an automobile club. The term "automobile club" means a legal entity which, in consideration of dues, assessments, or periodic payments of money, promises its members or subscribers to assist them in matters relating to the ownership, operation, use, or maintenance of a motor vehicle. . . Respondents did not violate Section 627.8405(1). Respondents did not provide financing in a premium finance agreement for the cost of a membership in an automobile club. Both the ADB and hospital indemnification policies Mr. Carey purchased were issued by Home Insurance Company ("Home") to Colonial Touring Association, Inc. ("CTA") as group policies for CTA members. 14/ CTA is an automobile club within the meaning of Section 627.8405(1). 15/ Ms. Beverly Robinson operates CTA and maintains its books and records. Ms. Robinson is licensed as an insurance agent pursuant to agent number 081505068. On August 17, 1994, Ms. Robinson was authorized to sell ADB and hospital indemnity group insurance for Home. 16/ Respondents did not charge Mr. Carey for the cost of a membership in an automobile club. 17/ Respondents charged Mr. Carey $110 for ADB and hospital indemnification premiums. Respondents paid the entire $110 to CTA. CTA paid Home for the amount owed Home and retained the balance as commissions earned on the sale of group insurance. The ADB and hospital indemnification premiums were high commission items. Of the $10 charged to Mr. Carey for ADB, CTA paid only $1 to Home. CTA retained the remaining $9 as commission. Of the $100 charged to Mr. Carey for hospital indemnification, CTA paid Home only $10 and retained the balance. Neither Respondents, Ms. Robinson, nor the books and records of CTA treat any portion of the $99 commission included in the premiums for ADB and hospital indemnification as the cost of a membership in CTA. Mr. Carey was covered for ADB and hospital indemnification from August 17, 1994, through August 16, 1995. Petitioner failed to show by clear and convincing evidence the portion of the $99 commission, if any, that should be treated as the cost of the CTA membership. Similarly, Petitioner failed to show the portion of the $99 commission that should be treated as commission earned on the sale of insurance. Even if some or all of the $99 commission retained by CTA should be treated as the cost of membership in CTA, Respondents did not provide financing in a premium finance agreement for that cost. Petitioner failed to show by clear and convincing evidence that Mr. Carey agreed to pay the amount advanced for a CTA membership together with a service charge. 18/ ADB Section 627.8405(2) provides, in relevant part: No premium finance company shall, in a premium finance agreement, provide financing for the cost of: * * * (2) An accidental death and dismemberment policy sold in combination with a personal injury protection and property damage only policy. Respondents did not violate Section 627.8405(2). Respondents did not provide financing in a premium finance agreement for the cost of an ADB policy irrespective of whether it was sold in combination with a personal injury protection and property damage policy. The $10 premium for the ADB policy was paid entirely from Mr. Carey's $67 down payment. CTA received the $10 from Cash Register, retained a $9 commission, and transmitted the $1 cost for the group ADB policy to Home. No part of the $10 premium for the ADB policy was financed. Mr. Carey did not agree to pay any part of the amount advanced for the ADB premium together with a service charge. Informed Consent, Unfair Practices, And Deception Respondents did not violate Sections 626.611(7) or (9). Respondents did not demonstrate a lack of fitness or a lack of trustworthiness to engage in the business of insurance. Nor did they commit fraudulent or dishonest practices in their business. Respondents did not violate Sections 626.611(13) and 626.621(2). Respondents did not willfully fail to comply with applicable statutes, rules, or Petitioner's final orders. Respondents did not violate Section 626.611(5). Respondents did not willfully practice deception with regard to an insurance policy. Respondents did not violate Sections 626.621(6) and 626.9541(1) and (2). Respondents did not engage in unfair or deceptive acts or practices including misrepresentation and sliding. Respondents did not otherwise show themselves to be a source of injury or loss to the public or to be detrimental to the public interest. The Insured Mr. Carey made his choices for his own economic convenience. He was interested solely in complying with state requirements for insurance at the minimum down payment and at the minimum monthly cost. Mr. Carey was not interested in the details of the insurance he purchased. He was not interested in reading the documents he signed, and he chose not to do so. Mr. Carey does not travel frequently and has little or no need for the benefits of the ADB and hospital indemnity policies. However, he did have an economic need to obtain automobile insurance for the lowest down payment and for the lowest monthly cost. The Documents Mr. Carey signed a confirmation of coverages form disclosing his purchase of the ADB and hospital indemnity policies. The confirmation of coverage form signed by Mr. Carey expressly states that the ADB and hospital indemnity premiums are high commission items. The confirmation of coverages form made the following disclosure to Mr. Carey concerning his ADB policy: Separate in the price of some of our policies is separate coverage for accidental death and dismemberment resulting from an auto accident. Yours includes 1 THOUSAND DOLLARS coverage for 12 months and the premium is $10 . You may increase this coverage if you desire. Remember coverage is subject to the terms and conditions in the policy. If you do not wish this coverage please advise the agent. This is a high commission item that allows us to sell you auto insurance at the lowest possible premium. We will have to change your options if you do not wish this coverage. The confirmation of coverages form made the following disclosure to Mr. Carey concerning his hospital indemnification policy: Separate in the price of some of our policies is separate coverage for hospital indemni- fication resulting from an auto accident. Yours includes 1 THOUSAND DOLLARS coverage for 12 months and the premium is $100. You may increase this coverage if you desire. Remember coverage is subject to the terms and conditions in the policy. If you do not wish this coverage please advise the agent. This is a high commission item that allows us to sell you auto insurance at the lowest possible premium. We will have to change your options if you do not wish this coverage. Mr. Carey also signed an insurance application for automobile coverage with Armor Insurance, a premium finance agreement with Equity, and CTA forms including a designation of beneficiary form. Respondent, Davis, submitted each document to Mr. Carey separately. He signed each document in her presence in separate "intervals." Ms. Davis did not rush Mr. Carey through the transaction. The premium finance agreement adequately discloses the terms of financing. The agreement discloses: the types of premiums financed; the amount of premiums for each policy; a down payment of $57; an unpaid balance of $318; an amount financed of $319.40; a finance charge of $43.66; total payments of $363.06; a total sales price of $420.06; an annual percentage rate of 31.71; and nine monthly payments of approximately $40.30 each. 19/ Mr. Carey had a reasonable opportunity to read the documents he signed but declined to do so. Mr. Carey understood that by signing the confirmation of coverages form he certified that he understood the insurance he purchased even though he chose not to read the documents. Respondent, Davis, provided Mr. Carey with a copy of all of the documents that Mr. Carey signed except the confirmation of coverages form and the CTA forms. Both were available for Mr. Carey to review at the Cash Register office. 20/ Mr. Carey never requested copies of the confirmation of coverages form or the CTA forms. Nor did he object to not receiving copies of those forms. The Explanation Even though Mr. Carey did not read the documents he signed, Respondent, Davis, explained each document to Mr. Carey. Her explanation was adequate, accurate, and did not misrepresent material facts. Her explanation was consistent with the documents signed by Mr. Carey. Respondent, Davis, discussed the confirmation of coverages form with Mr. Carey, including the ADB and hospital indemnification. She explained to Mr. Carey that the ADB and hospital indemnity policies were optional. She further explained that the premium and down payment would be adjusted if Mr. Carey rejected the ADB and hospital indemnification and that an agent would have to provide a new quote to Mr. Carey. Ms. Davis reviewed the premium finance agreement with Mr. Carey. She explained the total premiums, finance charge, down payment, and monthly payments. She explained that the $100 charged in the agreement was the annual premium for the group hospital indemnity policy from Home. Ms. Davis explained that the premium for the ADB policy would not be financed but would be paid from Mr. Carey's $67 down payment. Mr. Carey recognized that he paid $67 as a down payment but received credit on the premium finance agreement for a down payment of only $57. Mr. Carey understood that the $10 difference paid for the ADB policy. Mr. Carey designated Ms. June Wilson, his mother, as the beneficiary of the ADB policy. Mr. Carey understands the meaning of a beneficiary. Mr. Carey is a high school graduate. 21/ He understands, speaks, and reads English as his primary language. At the time of the transaction, Mr. Carey was alert and was not under the influence of drugs or alcohol. Mr. Carey received his automobile insurance policy from Armor and kept the coverage until his first monthly payment was due. He failed to make the first payment and allowed the policy to lapse. Mr. Carey was covered for ADB and hospital indemnification from August 17, 1994, through August 16, 1995. Supervision Respondents did not violate Rules 4-213.100(1) and (2). Respondent, Koontz, did not fail to properly supervise Respondent, Davis, in her transaction with Mr. Carey. Neither Respondent knowingly aided, assisted, procured, advised, or abetted the other in violating applicable statutes or rules. Respondent, Davis, has extensive experience as a customer representative. She processes approximately six customers a day or approximately 1,000 to 1,500 customers a year. 22/ She has had only two complaints from customers other than Mr. Carey concerning her customary practice. Ms. Davis followed her customary practice in dealing with Mr. Carey. She did not conceal any documents from Mr. Carey, did not misrepresent material facts, and is not trained to do so by Respondent, Koontz. Apparent Authority Respondents did not violate Rule 4-213.130(5). Respondent, Davis, did not allow Mr. Carey to form the impression that she is an insurance agent rather than a customer service representative. Respondent, Koontz, did not allow Ms. Davis to create such an impression or to misrepresent herself as an insurance agent. Ms. Davis stated to Mr. Carey that if he elected to decline the ADB and hospital indemnity policies, an agent would need to quote Mr. Carey's new down payment and monthly payments. She explained to Mr. Carey that she would need to have an agent provide that information.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a Final Order finding Respondents not guilty of the charges in the administrative complaints. RECOMMENDED this 17th day of December, 1996, in Tallahassee, Florida. DANIEL S. MANRY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 17th day of December, 1996.
The Issue The issue for determination is whether Respondent committed the offenses set forth in the Administrative Complaint and, if so, what action should be taken.
Findings Of Fact At all times material hereto, John Morris Ale, hereinafter Mr. Ale, was licensed as a general lines agent in the State of Florida. On or about December 5, 1994, Mr. Ale telephoned Ms. Kristen Stryker informing her that he had started his own insurance business, Doctors Insurance Agency, and inquiring if she wanted to obtain her automobile insurance coverage from him. Mr. Ale was acquainted with Ms. Stryker due to his having obtained her present coverage for her. It was almost time for renewal of her present coverage. Ms. Stryker agreed to obtain her automobile coverage from Mr. Ale. Further, Mr. Ale inquired if Ms. Stryker would allow his son, James Ale, to come to her home and write the coverage. Mr. Ale indicated that his son was learning the insurance business, but assured her that he, Mr. Ale, would review all documents prepared by his son. Relying on that assurance and believing that Mr. Ale's son was a licensed agent, Ms. Stryker agreed for Mr. Ale's son to write her automobile coverage. On the evening of December 5, 1994, James Ale came to Ms. Stryker's home. He completed an automobile insurance application for coverage on her 1993 Jeep Cherokee and explained the coverage to her. Ms. Stryker presented to James Ale a check for $222, made payable to Doctors Insurance, as down payment for the insurance premium. Additionally, James Ale presented to Ms. Stryker an E.T.I. Financial Corporation premium finance agreement to sign. She signed the premium finance agreement. E.T.I. is a premium finance company. The premium finance agreement is dated December 6, 1994. It is signed by Respondent and indicates, among other things, Ms. Stryker's down payment, the total premium, and coverage effective on December 6, 1994, by two insurance companies, Fortune and New Alliance. Ms. Stryker's down payment check for $222 was endorsed and deposited by Doctors Insurance Agency. At no time material hereto was James Ale licensed by the State of Florida to transact insurance. At all times material hereto, Mr. Ale knew or should have known that his son, James Ale, was not licensed by the State of Florida to transact insurance. Subsequently, James Ale forwarded to Ms. Stryker an undated letter, together with additional applications for insurance coverage with insurance companies other than Fortune and New Alliance. In the letter, James Ale requested, among other things, that Ms. Stryker sign the applications and return them to him so that he could forward the applications to the insurance companies. Also, included with the undated letter was a copy of an automobile insurance binder, which indicated, among other things, that her vehicle coverage was with two insurance companies, Armor Insurance and Service Insurance, and that the binder period was from March 10, 1995 through March 10, 1996. The binder, according to the undated letter, could be used for proof of insurance. E.T.I. Financial Corporation authorized Doctors Insurance Agency, by and through Mr. Ale, to finance insurance premiums through E.T.I. Mr. Ale was the licensed agent for Doctors Insurance Agency. As an authorized insurance premium finance agent for E.T.I., Doctors Insurance Agency had possession of blank bank drafts from E.T.I. The process and procedure utilized in financing insurance premiums through an insurance company authorized by E.T.I. to represent it included forwarding blank bank drafts, bearing E.T.I.'s name, to the authorized insurance company. The bank draft is completed by the authorized insurance company, which includes making the drafts payable for the entire premium to the insurance company providing the coverage and is signed by the licensed agent of the authorized insurance company. The completed bank draft is forwarded, along with the premium finance agreement and any down payment, to E.T.I. which forwards the draft to the specified insurance company providing the coverage. If a draft is not signed by the licensed agent, the draft is not honored by E.T.I. and, therefore, is not issued to the insurance company providing the coverage. Consequently, no coverage is provided for a vehicle. No premium finance agreement from Doctors Insurance Agency was received by E.T.I. on behalf of Ms. Stryker. No premium finance agreement was ever received by E.T.I. from Doctors Insurance Agency. No down payment for the insurance premium on behalf of Ms. Stryker was received by E.T.I. from Doctors Insurance Agency. No bank draft from Doctors Insurance Agency was received by E.T.I. on behalf of Ms. Stryker and payable to Fortune or New Alliance. No bank draft from Doctors Insurance Agency was received by E.T.I. on behalf of Ms. Stryker and payable to Armor Insurance or Service Insurance. No bank drafts were ever received by E.T.I. from Doctors Insurance Agency. Due to the failure of Doctors Insurance Agency to submit the proper documents to E.T.I., including the bank drafts, no insurance company, which was to provide automobile insurance coverage to Ms. Stryker, received a premium from E.T.I. Therefore, none of the insurance companies provided Ms. Stryker with coverage for her vehicle. Even though Ms. Stryker had a binder for insurance coverage, unbeknownst to her, she had no automobile insurance coverage in effect. On or about May 24, 1995, Ms. Stryker was involved in an automobile accident. Believing that she had automobile insurance coverage in effect, Ms. Stryker contacted Mr. Ale regarding the accident. Mr. Ale informed her that she did not have insurance coverage with his insurance company and never did. Shortly afterwards, Ms. Stryker spoke with James Ale who informed her that he would attempt to locate her documents. She was not contacted again by James Ale. Because she had no automobile insurance coverage, Ms. Stryker was personally liable for the damages resulting from her accident, which exceeded $3,000. Also, she was exposed to potential personal liability for claims of injuries or damages suffered by the driver of the other vehicle involved in the accident. Neither Doctors Insurance Agency nor Mr. Ale paid any monies to Ms. Stryker for the damages that she suffered. On or about June 7, 1995, Ms. Stryker filed a consumer's assistance request with the Department of Insurance and Treasurer, hereinafter the Department. On or about October 18, 1995, almost 5 months after her automobile accident, Doctors Insurance Company issued a refund to Ms. Stryker of her $222 down payment on the insurance premium. Ms. Stryker had paid the down payment more than 10 months earlier.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Insurance and Treasurer enter a final order: Finding that John Morris Ale violated Subsections 626.611(4), (7), (8), and (13), and 626.621(2) and (12), Florida Statutes (1993), in Count I and violated Subsections 626.561(1), 626.611(7), (8), and (13), and 626.621(2), Florida Statutes (1993), in Count II. Imposing a 21-month suspension of the license of John Morris Ale. DONE AND ENTERED this 29th day of September, 1997, in Tallahassee, Leon County, Florida. ERROL H. POWELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 29th day of September, 1997.
The Issue Whether Respondents committed the violations alleged in the Administrative Complaints, and, if so, what penalties should be imposed on either or both of them.
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: Respondent, Eduardo Enrique Mendez ("Mendez"), at all times material to this matter, was a licensed insurance agent subject to the regulatory jurisdiction of the Petitioner. Petitioner issued Mendez license number A176292. Mendez is licensed as a 2-18 life and health agent and a 2-20 general lines agent for the sale of property and casualty. Mendez first started in the insurance business in 1969 while in Panamá. He came to the United States in 1988. In South Florida, he has been known as "Mr. Panama" in the insurance industry for approximately 20 years. Respondent, Insurance Resources of the Americas, Inc. ("Insurance Resources"), is and was, at all times material in this matter, a corporation registered as a Florida insurance agent subject to the regulatory jurisdiction of Petitioner, having been issued license number R054007. Mendez is the corporation's owner and president. Insurance Resources typically handles all kinds of property and casualty insurance, but for approximately the last six years has specialized in the used car dealer business by providing bonds for the car dealers to open their operation. Bass Underwriters ("Bass") is a managing general agent which works with insurance agents who purchase insurance for their customers. Bass has no direct relationship with the customers only with the retail agent who is responsible for collecting the premium. On January 22, 2003, Insurance Resources, as producer, and Bass signed a producer agreement which allowed Insurance Resources to sell insurance through Bass or certain carriers that Bass obtains as a wholesaler. Insurance Resources received commissions as compensation under the agreement. The agreement contained a provision which guaranteed the collection of additional premiums that might arise as a result of an audit of the insurance customers. The provision provided in relevant part: Producer shall be liable to Bass Underwriters, Inc. for the full amount of premium, fees and applicable sum taxes, less commission, including additional and/or adjustable premiums developed under audits or applicable rating plan on every insurance contract placed by Producer through Bass Underwriters, Inc. Producer shall remit Twenty Five Percent (25%) of the premium upon binding. The full amount of premium, fees and applicable state taxes, less commission is due to Bass Underwriters, Inc. not later than the 15th day of the first (1st) month after the effective date of such contract, audit, rating plan, or other adjustment. During the term of the producer agreement, three policies were issued that Bass determined additional premiums were owed by Insurance Resources. On June 29, 2005, Bass notified Insurance Resources by invoice that an additional premium was owed for the insured, L. Boulevard Café, in the amount of $6,955.00. L. Boulevard Cafe, a restaurant, obtained a Century Surety policy through Insurance Resources effective November 15, 2004. In making the application, the restaurant declared a certain amount of projected sales. The premium was based upon the total sales recorded by the customer. Century Surety did a self audit and determined that the amount of sales was significantly more than the coverage. Subsequently, the carrier went back and assessed additional premiums to make up the difference between the amount of coverage represented and the self reported amount, which totaled $6,955.00. Around August 2005, after receiving the Bass invoice with the additional premiums, Insurance Resources notified L. Boulevard Café about the invoice and explained that the additional insurance premium of $6,955.00 was owed because of the difference in the amount calculated from the audit. Mendez notified Rafael Garcia, prior owner of L. Boulevard Café, about the additional insurance premium but L. Boulevard Cafe was having financial problems. L. Boulevard Café never made the additional premium payment. On July 1, 2005, Bass notified Insurance Resources by invoice that an additional premium was owed for the insured, Winner's Circle, in the amount of $418.00. Winner's Circle obtained a XL Specialty Insurance Company policy through Insurance Resources effective May 23, 2005. An inspection was performed after the policy quote was bound and issued. The subsequent inspection concluded that the construction code of the building was different from the construction code represented on the application. The difference triggered a premium increase of $418.00. When Insurance Resources found out about the additional premium for Winner's Circle, Mendez sent an invoice explaining the increase and requesting payment. Winner's Circle refused to pay the amount because the policy was issued under a lower premium. Winner's Circle decided not to keep the policy when Respondent requested that they make payment of the additional premium amount and the balance of the premium on the policy. Payment was never made. The policy was cancelled. The account was credited and the final total owed was $160.40, which Bass became responsible for with the carrier. On July 11, 2005, Bass notified Insurance Resources by invoice that an additional premium was owed for the insured, Venecar, Inc., in the amount of $1,298.00. Venecar, a small used car dealership, obtained a Century Surety policy through Insurance Resources effective July 18, 2004. The insurance inspectors did an inspection after the policy was issued and determined that one more employee and driver than had been represented in the application existed and that employee generated a change in the rating for the premium, which Bass ultimately decided was an additional premium of $1,298.00. After Insurance Resources learned about the results of the inspection, Mendez called Bass and told Ms. Rodriguez, the accountant, that the premium increase of $1,298.00 was too high and could not be the proper rate for one driver because one driver should be around $400.00. Bass ignored Mendez's proposition. Subsequently, Mendez told Venecar about the outstanding premium amount owed and they refused to pay. Insurance Resources followed up and contacted Venecar several more times requesting the additional premium payment to no avail. Soon thereafter, Venecar closed. Mendez reported his efforts to Bass while he tried to collect the three changed premium amounts. Insurance Resources never collected the additional premium from L. Boulevard Café, Winner's Circle, or Venecar even though Mendez repeatedly sought to get the outstanding premiums from all three insured customers. Despite Respondents best efforts, they never received any of the additional premiums that accrued. Bass still expected Insurance Resources to pay the additional premiums pursuant to the producer agreement. On May 1, 2006, Bass sent Insurance Resources a statement of account. The invoice statement informed Insurance Resources that the premium due for the three different accounts totaled $8,021.39. The statement outlined the amount owed from each insured. After Bass made several demands for the three accounts, Bass submitted the account to collections and the matter ultimately ended in litigation. On November 5, 2007, a final judgment was entered against Insurance Resources in favor of Bass for the principal of $8,021.39, costs of $275.00, and prejudgment interest of $1,298.14, for a total of $9,594.53. The judgment remains unsatisfied. On February 15, 2008, Insurance Resources paid $1,919.00 on the judgment. On February 29, 2008, Insurance Resources paid $640.00 on the judgment. There is a balance owed of $7,035.53. Insurance Resources also had a relationship with AAPCO, a premium finance company that financed the balance of what an insured could not pay. Respondent Insurance Resources was an authorized entity to accept premium finance contracts utilizing AAPCO premium finance. Insurance Resources had the authority to write check drafts on AAPCO's bank account for the entire premium amount owed on a customer's insurance policy and remit it to the insurer. Respondent would then submit the policy application together with the premium down payment received from the consumer to AAPCO, which would finance the rest of the policy premium. In 2009, Insurance Resources was having problems financially. Mendez approached Mrs. Blanco, AAPCO's office manager, and told her Insurance Resources sales had dropped fifty percent. Mendez, on behalf of Insurance Resources requested to make a payment arrangement.1 Blanco refused to make any type of arrangements. She insisted that Insurance Resources pay everything up front. Mendez approached her several more times but she would not negotiate. At one point, Mendez even requested that AAPCO place the $4,000.00 in producers fees owed to Insurance Resources against the monies owed and she refused to pay Respondent the $4,000.00 In 2009, Mendez submitted three checks to AAPCO's as down payments for insureds' accounts. Check number 1347 was for $10,228.47. The check was from account number 2000034377804 Mr. Panama Inc.'s account. Check number 1342 was from the same account in the amount of $2,828.15. However, check number 159 was for $3,368.44 from Insurance Resources account number 2000040742805. Checks 1347, 1342, and 159 totaled approximately $16,425.00. The funds were intended to be premium down payments on insurance policies purchased by Florida insurance consumers. Insurance policies were issued for each of the checks for down payments for insured's accounts Insurance Resources submitted. AAPCO deposited the three checks and they were submitted to the bank for negotiation. Each check was returned for insufficient funds. AAPCO attempted to collect the money for the three checks that were returned for non-sufficient funds. AAPCO demanded payment of the funds and even called Mendez in an effort to collect the funds. Mendez admitted at hearing that the three checks bounced because he had used the funds for his business operating account since the business was doing bad financially. Insurance Resources had not yet repaid AAPCO their monies owed for the three checks. AAPCO has suffered a financial loss due to nonpayment. After nonpayment, AAPCO turned the matter over to AAPCO's legal department. After an investigation, Petitioner charged Respondents with numerous violations by separate Administrative Complaints dated April 21, 2010. The Charges: In Count I of the Administrative complaint filed against Mendez, Petitioner charges Mendez with violations of sections 626.561(1), 626.611(7), (9), (10), and 626.621(4), Florida Statutes, for failing to remit all premiums due to Bass. In Count II, Petitioner charges Mendez with violations of sections 626.561(1),626.611(7), 626.611(9) and (10), and 626.621(4) for submitting the three checks to AAPCO in payment of the policy down payment premiums that were returned for insufficient funds and not repaid after demand. In Count I of the Administrative complaint filed against Insurance Resources, Petitioner charges Insurance Resources with violation of sections 626.561(1),626.6251(5)(a),(d),(f),(j), and (k) for failing to remit all premiums due to Bass.2 In Count II Petitioner charges Insurance Resources with violations of sections 626.561(1), and 626.6251(5)(a),(d), (f),(j), and (k) for remitting three checks to AAPCO in payment of the policy down payment premiums that were returned for insufficient funds and not repaid after demand.
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 that: (a) finds Respondents not guilty as charged in Count I, of the Administrative Complaints; (b) finds Respondents guilty in Count II; (c) suspends Respondent Mendez's license for 12 months with reinstatement conditioned upon repayment to AAPCO; and (d) suspends Respondent Insurance Resources' license for three months with reinstatement conditioned upon repayment to AAPCO. DONE AND ENTERED this 28th day of February, 2011, in Tallahassee, Leon County, Florida. S JUNE C. MCKINNEY 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 28th day of February, 2011.
Findings Of Fact Based upon the oral and documentary evidence adduced at the final hearing and the entire record in this proceeding, the following findings of fact are made: At all times pertinent to this proceeding, Respondent was licensed by the Department as a life and health, and a general lines insurance agent (a 220 license). Respondent was an officer and director of A Aardwolf Discount Corporation, a Florida corporation, and A Aachen of Miami, Inc., a Florida corporation. A Aardwolf was conducting business out of offices on Biscayne Boulevard in Miami, Florida. 1/ A Aachen of Miami, Inc. was operating on office on Alton Road, Miami Beach, Florida. While the evidence is not entirely clear, it appears that both corporations were doing business as Salem Discount Insurance Agency and/or Discount Insurance Agency. Appco Premium Finance Company is licensed in the state of Florida to provide premium financing for insurance policies. Generally, premium finance companies work through an insurance agent. The agent collects a down payment from a customer who is unable or unwilling to pay in advance the full amount due on an insurance policy. A premium finance company such as Appco then finances the unpaid balance of the premium. In a typical premium financing arrangement the down payment is 30 percent of the total premium amount and the agent's commission is 15 percent. The insurance agent collects the down payment, retains his 15 percent commission and forwards the remainder to the premium finance company along with an executed premium finance agreement. The agent contemporaneously forwards the insured's application for insurance to the insurance company along with a draft issued by him on behalf of the premium finance company for the total amount of the premium less his commission. From approximately 1990 through late 1992, Respondent and his agencies utilized Appco to finance insurance premiums for many of their insureds. In August of 1992, Respondent's agencies transmitted a number of premium finance contracts to Appco. There were at least three separate transmittals, each of which was accompanied by a check which represented the remainder of the down payments received from the customers after Respondent retained his commission. The evidence also established that Appco received a fourth check from Respondent's companies during the month of August. The evidence was insufficient to establish whether this fourth check was related to transmittals of premium finance contracts or some other business dealings. In any event, the four checks totaled $4,926.65. Appco attempted to deposit and negotiate the checks, however, all four checks were returned by the bank for insufficient funds. Respondent was an authorized signatory on the Eagle Bank account on which the checks were drawn. At no time during 1992 were there sufficient funds in this account to pay the checks. Appco honored the drafts issued by Respondent in connection with the premium finance contracts covered by the transmittals and none of the policies were cancelled after the checks from Respondent's agencies bounced. Appco has sued Respondent and his business[es] seeking to recover the money which Appco contends is owed to it as a result of the transactions described above. Respondent has contested that law suit and denied that he or his companies owe any money to Appco. As of the date of the hearing in this matter, that civil litigation had not been resolved. As is common in the industry, Appco had a policy of charging back unearned commissions to insurance agents when an insured defaulted on a premium finance contract. In other words, after a policy was cancelled because the insured failed to make the payments due under the premium finance contract, Appco would prorate the commission which had been retained by the agent to reflect the period during which the policy was in effect and charge-back to the agent the amount of the unearned commission. Respondent contends that in August of 1992, he was involved in an ongoing dispute with Appco regarding Appco's charge-back of unearned commissions for insurance contracts that were purportedly cancelled before completion of the financing arrangement. Respondent says that he withheld payments to Appco pending resolution of his dispute as to the amount of the charge-backs. Respondent claims that an executive from Appco agreed that if checks were sent in with the transmittals for new contracts, they would be held without cashing until the dispute regarding the charge-back of unearned commissions was resolved. There is no written evidence that Appco agreed that Respondent could withhold payment of the money due on new premium finance contracts until Respondent was satisfied with a resolution of the unearned commission charge- backs. In fact, there is no written evidence that Respondent was even asserting such a claim until it was raised as an affirmative defense in the lawsuit brought by Appco against Respondent and his agencies. Respondent's assertion that he had a verbal agreement with Appco that is would not cash the checks is rejected as not credible. In any event, Respondent's dispute as to the amounts that Appco had charged back for cancelled policies did not relieve Respondent of his obligations to new customers. After deducting his commission, the down payments received by Respondent from his new customers were received by Respondent in trust to be used for the issuance of premium finance contracts for those customers. Respondent had no right to withhold sums collected on the new contracts in an attempt to resolve his dispute arising from old contracts. His actions unjustifiably placed his new customers at risk that their policies would be cancelled or never issued. Respondent has refused the repeated demands made by Appco to make the checks good. Respondent has never provided an accounting for the funds he collected from the new customers. United States Underwriters, Inc. of Miami ("United States Underwriters") is under contract with Security Insurance Company of Hartford ("Security") to manage and administer Security's automobile insurance policy program in Florida. United States Underwriters receives and processes applications from agents, appoints agents, underwrites and issues policies and performs all other administrative work concerning the policies. In May of 1991, Respondent was appointed as an agent for United States Underwriters. That appointment was approved in the name of Salem Discount Insurance at 7943 Biscayne Boulevard. On April 23, 1992, Respondent obtained an appointment on behalf of Discount Insurance operating at 501 Alton Road in Miami Beach. On or about June 23, 1992, United States Underwriters, as the administrator for Security, terminated Respondent's authority as an insurance agent to solicit and bind insurance coverages on behalf of Security. The termination letter provided that Respondent's authority to bind coverage for Security terminated effective as of June 24, 1992 and provided that "any and all applications bound prior to this termination date are to be submitted with the required payment of net premiums due to be received in our office by Thursday, July 2, 1992....United States Underwriters, Inc. will continue to service existing policies until their expiration upon receipt of endorsement or cancellation request from your office." In response to the demand that he submit all coverages bound through his termination date, Respondent submitted approximately 73 applications (the "Applications") for automobile insurance to United States Underwriters on or about July 2, 1992. The Applications reflected that they had been received by Respondent through his offices at various times between March and June of 1992. The Applications were accompanied by two post-dated checks drawn on Respondent's Republic Bank business bank account in the amounts of $5,961 and $9,202.05. These checks represented the premium payments for the Applications. United States Underwriters' agents are supposed to submit all applications for insurance together with the premium payment to the company within 7 days after receipt. Respondent has provided no explanation as to why these procedures were not followed in connection with the Applications referred to in paragraph 18 above. United States Underwriters, as administrator for Security, issued the policies with Security as the insurer for all of the Applications. The binding dates on the Applications were honored even for those applications taken in March but not submitted until July, 1992. When the policies were issued, United States Underwriters remitted $15,163.11 to Security in payment of the policy premiums. This remittance was made before the checks from Respondent cleared. The checks submitted by Respondent's agencies as payment for the premiums on the Applications were returned by the bank for insufficient funds. Respondent was an authorized signatory on the Republic Bank account on which the checks were drawn. At no time during June, July or August, 1992 were there sufficient funds in the account to pay the two checks. Respondent has refused the demands of United States Underwriters to replace the checks and/or to submit the premium payments for the policies. After the checks from Respondent's agencies were returned and Respondent failed to respond to numerous demands for payment, United States Underwriters cancelled the insurance coverages for nonpayment of premiums on July 24, 1992 with a policy cancellation date effective as of August 3, 1992. At the time the policies were cancelled, United States Underwriters was given a credit by the insurance company for the unearned portion of the premiums. The premiums earned on the policies while they were in effect was approximately $5,123.21. In his post-hearing submittal, Respondent admitted an obligation to repay this sum. However, as of the date of the hearing in this matter, this earned portion of the policy premiums which United States Underwriters was required to pay to the insurance company had not been paid by Respondent. Respondent has provided a confusing and unpersuasive justification for his involvement in the transmittal of the bad checks to United States Underwriters. Respondent contends that his business relationship with United States Underwriters had soured and he desired to transfer all of the business to a new insurance company. This desire on his part does not justify the issuance of bad checks. The money Respondent received from his customers was to be held in trust for the issuance of their policies. Respondent has not provided an accounting of what happened to this money. Respondent also claims that some of the policies originated from offices in which he no longer had an ownership interest. Respondent contends that he was not the agent of record at the Alton Road office in Miami Beach, and, therefore, he has suggested that he can not be held accountable for the policies that were issued out of that office. The evidence established that Respondent was the only principal listed on the questionnaire submitted to United States Underwriters when the appointment for the Alton Road office was approved. Respondent has not provided any compelling evidence that his involvement with this office was terminated. In fact, the evidence established that the checks were sent to United States Underwriters at Respondent's direction and under his name. Furthermore, Respondent signed both of the checks that were returned for insufficient funds and his name appears as the brokering agent on many of the insurance applications. After United States Underwriters cancelled the policies, Respondent obtained new policies for a number of the insureds through Fortune Insurance Company. Some of the customers also obtained refunds. No specific evidence was presented to establish the losses, if any, suffered by the customers. It does appear that some customers were without insurance for at least a few days.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered finding Respondent, Edwin Morales, guilty of the violations alleged in Counts I and II of the Administrative Complaint. As a penalty for the violations, Respondent's licenses and eligibility for licensure should be suspended for eighteen (18) months. As a condition to reinstatement of his insurance licenses, Respondent should be required to make satisfactory restitution to Appco Premium Finance Company and United States Underwriters pursuant to Section 626.641, Florida Statutes. DONE and ENTERED this 20th day of October, 1994, at Tallahassee, Florida. J. STEPHEN MENTON 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 20th day of October, 1994.
