The Issue Whether Respondent owes payment to Petitioner in the amount of $60,748.78 for watermelons sold by Petitioner to Respondent.
Findings Of Fact Between May 18 and June 5, 1990, Petitioner James G. Young sold a total of 40 truckloads of watermelons to Respondent Maddox Brothers Produce, Inc. Petitioner was to have received a price of five cents per pound through May 26, 1990 and four cents per pound through the remainder of the shipping season. Respondent has failed to pay $60,748.78 of the amount owed to Petitioner for such produce. At no time did Petitioner received any complaint that the watermelons were unsatisfactory. Respondent is a licensed agricultural dealer engaged in the business of brokering agricultural products, Florida license #0030. Respondent is subject to regulation by the Department. Respondent has posted a Fireman's Fund Insurance Company surety bond #11141308327 in the amount of $50,000 with the Department. Respondent did not appear at the hearing. No evidence was presented to contradict the testimony of the Petitioner.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that The Florida Department of Agriculture and Consumer Services enter a Final Order requiring Maddox Brothers Produce, Inc., to pay to Petitioner the sum of $60,748.78. DONE and RECOMMENDED this 26th day of April, 1991, in Tallahassee, Florida. WILLIAM F. QUATTLEBAUM Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 26th day of April, 1991. COPIES FURNISHED: The Honorable Bob Crawford Commissioner of Agriculture The Capitol, PL-10 Tallahassee, Florida 32399-0810 Richard Tritschler General Counsel 515 Mayo Building Tallahassee, Florida 32399-0800 Brenda Hyatt, Chief Bureau of Licensing and Bond Department of Agriculture 508 Mayo Building Tallahassee, Florida 32399-0800 James G. Young Route 3 Box 272-A Wildwood, Florida 34758 Patricia M. Harper, President Maddox Brothers Produce, Inc. 2124 Forest Avenue Knoxville, Tennessee 37916 Fireman's Fund Insurance Company Surety Claims Center Post Office Box 193136 San Francisco, Florida 94119-3136
The Issue The issue in this case is whether Petitioners' rate filing numbered FCP 07-08928 should be approved.
Findings Of Fact FFB Casualty and FFB General are both stock insurance companies which are domiciled in Florida. FFB General is a wholly-owned subsidiary of FFB Casualty, which in turn is a wholly-owned subsidiary of Southern Farm Bureau Casualty Insurance Company of Jackson, Mississippi (SFB Casualty). FFB is headquartered in Gainesville, Florida, and its insurance products are sold exclusively in Florida. FFB only insures members of the Florida Farm Bureau Federation, a non-profit organization. On June 8, 2006, FFB made a rate filing for their homeowners' line of business seeking a significant rate increase with an effective date of December 1, 2006, in OIR file number 06-07515. Due to the size of the requested rate increase a public hearing was held on August 16, 2006, in Gainesville, Florida, in accordance with the requirement of Section 627.0629, Florida Statutes (2006), which provides that "[a]ny rate filing that is based in whole or in part on data from a computer model may not exceed 15 percent unless there is a public hearing." § 627.0629(7), Fla. Stat. (2006). At the public hearing, Burt Gindy, FFB's vice president of Government Affairs and Compliance, commenced the presentation of FFB by stating: "Okay, then, simply put, this filing is all about catastrophe reinsurance cost." Later in the public hearing, Mr. Gindy stated: "The homeowners' rate filings before you, FCP 06-07515, seeks to recognize the increase in profit catastrophe reinsurance costs that have escalated due to increasing hurricane activity." Mr. Gindy talked about the typical amount of reinsurance sought by FFB, stating: "We typically insure to a 250 year event, this year we've only been able to insure capacity and cost wise to about 160 year capacity. We know AM Best looks at that and we want to keep our AM Best ratings." Insurers, including FFB, generally measure and evaluate their potential losses from hurricanes and other extreme events in terms of probable maximum loss (PML), an estimate of the dollar amount of losses that an insurer will experience at a given probability. For example, a one-percent probability of experiencing a loss greater than a certain amount equals a 100 year or one-in-100 year PML. This does not mean that the insurer is expected to incur the 100 year PML only once every 100 years; it means that in any given year there is a one-percent chance of the insurer incurring a loss of that magnitude. When Mr. Gindy indicated that FFB had typically insured to a 250 year event, he meant that FFB insured for a 0.25 percent chance of loss of a certain magnitude occurring in any given year. On September 25, 2006, the Office approved a rate increase for FFB of +43.8 percent with an effective date of December 1, 2006. Because rate filings are prospective, the rate increase, with an effective date of December 1, 2006, appeared calculated to pay for FFB's 2007 reinsurance program. Since the mid-1990's, FFB has purchased a portion of its reinsurance coverage from the Florida Hurricane Catastrophe Fund (CAT Fund), as required by law.1/ The CAT Fund is a public entity which provides a statutorily specified layer of reinsurance at a substantially lower cost than the private market because of the CAT Fund's non-profit structure and tax exempt status. The effective date of CAT Fund coverage is June 1. FFB normally purchased the remainder of its reinsurance from private reinsurers for one-year terms, which are generally effective on January 1. Through 2006, FFB purchased a significant portion of its reinsurance from its parent company, SFB Casualty, and purchased other layers of coverage from American Ag. Starting in 2007, SFB Casualty no longer provided reinsurance for FFB, and FFB purchased coverage in the global market with the assistance of AON with whom FFB had worked for many years as SFB Casualty's broker. FFB generally begins planning in the summer for its purchase of reinsurance to be effective for the next January 1 by gathering FFB's exposure date (i.e., how many houses FFB insured, where they are located and how much they cost, etc.), which data FFB runs through its own and Alliance Insurance Research (AIR) computer models to estimate FFB's anticipated hurricane losses and PML's. FFB then determines its desired reinsurance structure, including its retention (i.e., amount of losses that could be absorbed by FFB), and sends this information to reinsurance markets in the Fall. After receiving and vetting quotes seeking the most advantageous terms, FFB negotiates its reinsurance program, and most of its reinsurance agreements are bound by December for a January 1 effective date. FFB sometimes makes adjustments to its reinsurance program after January 1 to obtain additional coverage at more favorable prices, subject to market conditions, or to make adjustments due to changes in the CAT Fund. However, the general goal of the company is to always place the lion's share of the reinsurance program by the beginning of the year. By January 1, 2007, FFB had placed the majority of its reinsurance program for 2007. The cost for FFB private reinsurance in January 2007 was $65,984,426. Recognizing a crisis in homeowners' insurance premiums, on January 9, 2007, the Florida Legislature issued a Joint Proclamation to convene a special session pursuant to Article III, Section (3)(c), Florida Constitution, and Section 11.011, Florida Statutes (2006), to commence on January 16, 2007, for the "sole and exclusive purpose" to consider the following: Legislation to reduce current property insurance premiums in Florida; Legislation to reduce the future growth of property insurance premiums in Florida; Legislation to improve availability and stability of property insurance in Florida; Legislation relating to building codes in Florida. The special session convened on January 16, 2007, and on January 22, 2007, the Legislature enacted Chapter 2007, Laws of Florida (Chapter 2007-1), which was signed into law by the Governor on January 25, 2007. One of the primary features of the legislation was a massive expansion of the CAT Fund. Prior to the enactment of Chapter 2007-1, the CAT Fund had an industry-wide capacity of approximately $16 billion for those carriers writing property insurance in the State of Florida. As a result of the enactment of Chapter 2007-1 and the expansion of the CAT Fund, industry-wide coverage went from approximately $16 billion to approximately $28 billion. It was the intent of the Legislature that the expansion of the CAT Fund would result in a rate filing that reflected "savings or reduction in loss exposure to the insurer." Chapter 2007-1 required the Office to issue an order specifying the date or dates on which the required rate filings were to be made and be effective "in order to provide rate relief to policyholders as soon as practicable." By March 15, 2007, the Office was required to calculate a presumed factor or factors to be used in the rate filings required by Chapter 2007-1 to reflect the impact to rates based on the changes to the CAT Fund. The Office issued Informational Memorandum OIR-07-06M, which describes the procedure for the rate filings required by Chapter 2007-1 and provides in relevant part: The purpose of this memorandum is to provide guidance regarding filing procedures for the "Presumed Factors" filing and the subsequent "True-Up" filing. During the 2007 Special Session, the Florida Legislature passed House Bill 1A (HB 1A) requiring every residential property insurer to make a filing with the Office of Insurance Regulation (Office) to reflect the savings or reduction in loss exposure to the insurer. On February 19, the Office issued an order advising residential insurers to make rate filings to include the new discount factors mandated by HB 1A. The new discount factors required in HB 1A have been calculated by the Office and all residential property insurers must make a rate filing incorporating the new savings on or before March 15, 2007. Information related to the presumed factors can be found at http://www.floir.com/HotTopics.htm. The procedure for submitting the "Presumed Factors" filing as prescribed in Section 3 of HB 1A and the True-Up" filing as prescribed in the Office's "Presumed Factors" order can be found in the applicable attachments and are summarized below. A filing adopting the Office's "Presumed Factors" (Short Form). This filing shall reflect the effects of the "Presumed Factors" on the rates currently in effect and shall be made on a "file and use" basis. The filing shall be limited to the effects of the "Presumed Factors" on rates currently in effect, and the elimination of the 25% rapid cash buildup portion of the insurer's Florida Hurricane Catastrophe Fund premium.[2/] The procedures for submitting this type of "Presumed Factors" filing can be found in Attachment A. A filing that uses, but does not strictly adopt the "Presumed Factors" (Long Form). A "Presumed Factors" filing that uses the factors to reflect a rate decrease to take into account the "Presumed Factors" shall be made on a "use and file" basis and shall provide all the information used in preparing the filing including copies of all reinsurance treaties. Such a filing is subject to credits and refunds if the rate reductions are determined inadequate. This type of filing shall also be limited to the effects of the "Presumed Factors" on the rates currently in effect and the elimination of the 25% rapid cash buildup portion of the insurer's Florida Hurricane Catastrophe Fund premium and must be accompanied by a sworn statement from the chief executive officer or chief financial officer and actuary responsible for preparing the filing. The procedures for submitting this type of "Presumed Factors" filing can be found in Attachment B. A "True-Up" Filing as required by the Office's "Presumed Factors" order. After making the "Presumed Factors" filing, insurers shall make a "True-Up" filing pursuant to the "file and use" provisions of s. 627.062(2)(a)1, Florida Statutes, that is a complete rate filing to reflect the savings or reductions in loss exposure to the insurer due to all the provisions of HB 1A and the anticipated 2007 reinsurance program. The procedure for submitting the "True Up" filing is identical to the annual rate filing procedures in I-file, except the appropriate selections now read as "Rates Only Including 'True Up' Filings Pursuant to the 'Presumed Factors' Order" or "Rate & Rule Including 'True Up' Filings Pursuant to the 'Presumed Factors' Order." On March 1, 2007, the Office issued its "Presumed Rating Factors" report, which estimated an overall statewide savings of 24.3 percent attributed to the changes to the CAT Fund made in Section 2 of Chapter 2007-1. The Presumed Factors included the savings from the new reinsurance made available to insurers under Chapter 2007-1 and the savings due to the elimination of the 25 percent rapid cash buildup provision of prior law. On March 15, 2007, FFB made their Presumed Factors filing using the "short form" process described in Informational Memorandum OIR-07-06M. FFB requested and received approval of an overall homeowners' insurance rate decrease of -24.5 percent. The effective date of the filings was to be June 1, 2007. On May 9, 2007, FFB made their "True Up" filing, which is at issue in this case. The first filing sought a rate increase of +26.8 percent, which when combined with the Presumed Factor filing would have resulted in a rate decrease for their policyholders of -3.6 percent. The effective date selected by FFB for their "True-Up" filing was October 1, 2007. On May 14, 2007, the Office acknowledged receipt of FFB's rate filing. In return, the Office asked 51 questions seeking catastrophe model support information in accordance with Section 627.0628, Florida Statutes (2006). The Office also requested that FFB update its statewide rate indications. On May 21, 2007, FFB responded to the Office's May 14, 2007, request by providing a document prepared by Applied Insurance Research (AIR) concerning the AIR model, which FFB had used in its calculations supporting its rate filing. On May 25, 2007, FFB updated the statewide indications and further amended their filing to divide the HO forms and the HXL Form 9. On June 22, 2007, FFB revised the May 9, 2007, filing, claiming that the revision had resulted from the "delay of Florida Farm Bureau Filing 07-15 (OIR Filing FCP 07-03807), the renegotiation of [their] 2007 reinsurance program, a systems restraint not previously accounted for, and to follow up after the March 15, 2004, effective rate filing." The effect of the amendment was that FFB was now seeking a +30.3 percent rate increase, which when combined with their Presumed Factor filing would have resulted in a rate decrease for their policyholders of -1.6 percent. Following its review of the amended filing, the Office asked a number of questions on July 2, 2007. FFB provided additional information in response to the questions on July 8, 2007. On July 10, 2007, a public hearing was held in Tallahassee, Florida, in accordance with Section 627.0629, Florida Statutes (2007),3/ to discuss the rate increase requested by FFB. By letter dated July 17, 2007, and forwarded to FFB on July 19, 2007, the Office issued its Notice of Intent to Disapprove the filing of FFB. The Office listed 12 deficiencies as its grounds for denying the rate filing. The parties have stipulated that items 7, 8, 11, and 12 of the NOI are no longer in issue. The remaining reasons for denial are listed below: The rate filing and requested rate fail to reflect a reduction in policyholder premiums consistent with the expansion of the Florida Hurricane Catastrophe Fund coverage contrary to the intent and requirements of HB1A. Company has not provided sufficient support that the reinsurance cost in the filing reflecting coverage levels, reinsurance premium amounts and expected recoveries does not result in excessive reinsurance cost related to services rendered not permitted per Section 627.062, F.S. Company has not provided sufficient support that Florida Hurricane Catastrophe Fund cost filing is consistent with tax exempt status of the fund. Company failed to completely respond to the Office questions for required disclosure of all assumptions and factors used by the Hurricane model as required by Section 627.0628, F.S. Company has failed to support use of model for Catastrophe losses other than hurricane. Company has failed to support that loss trend is not excessive. * * * Company has failed to support the trend procedure used to adjust hurricane model losses is appropriate and consistent with premium trending in the indications. Company has failed to support the allocation of reinsurance cost to territory in their territorial indications. DEFICIENCY 1: FAILURE TO REFLECT A REDUCTION IN POLICYHOLDER PREMIUMS CONSISTENT WITH THE EXPANSION OF THE CAT FUND FFB received a healthy rate increase in December 2006, ostensibly to alleviate the industry-wide increase in the reinsurance premiums. FFB had the majority of its reinsurance coverage in place by January 2007, and the reinsurance placed FFB at a one-in-190 year PML. FFB had intended to purchase additional reinsurance during 2007 in order to get the PML level closer to the one-in-250 year PML, which had been its goal in previous years. In January 2007, FFB had reinsurance with the CAT Fund, American Ag, and other private reinsurance providers brokered through AON. Chapter 2007-1 provided that the rate change had to consider the available coverage options provided by the expansion of the CAT Fund and provided that any additional cost for private reinsurance that duplicates the coverages offered by the CAT Fund could not be factored in determining the change in the rate. FFB estimates that $25,127,526 of its January 1, 2007, reinsurance premium duplicated the less expensive coverage available from the newly expanded CAT Fund. The estimated premiums for the CAT Fund coverage available after the enactment of Chapter 2007-1 were $7,555,058. The reinsurance treaty between FFB and American Ag contained a provision which allowed FFB to essentially cancel coverage which was duplicative of coverage provided by the CAT Fund as a result of legislative changes. FFB did not have such a provision in its treaties with its other private reinsurers. FFB's Third Master layer of reinsurance was placed with American Ag who, in turn, reinsured that coverage in the private reinsurance market. FFB was able to renegotiate the Third Master layer to remove the CAT Fund overlap because the contract required American Ag's reinsurers to amend the contract if the CAT Fund was amended. The First High reinsurance layer was placed through FFB's broker, AON, with a number of other private reinsurers. Since the treaties with these private reinsurers did not contain a provision similar to the American Ag treaty, these private insurers were unwilling to reduce the coverage with FFB to eliminate duplication from the CAT Fund. FFB had contracted to pay $15,750,000 for it First High coverage. The CAT Fund coverage would have eliminated all but $1.75 million of that premium. FFB had already paid a portion of the $15.75-million premium to it private insurers, and the reinsurers were resisting refunding the premium. FFB offered to purchase a third event coverage for the First High and to add a new top layer of $50 million coverage in return for a reduction of First High premium of several million dollars. The effective date of the renegotiated First High and the new Third High reinsurance contracts were made retroactive to January 1, 2007. FFB purchased a $30 million aggregate following the enactment of Chapter 2007-1 and the renegotiation of their reinsurance program. The increased reinsurance coverage resulting from the renegotiations with the private reinsurers brought FFB's PML more in line with its one-in-250 year goal. In order to determine the amount of reinsurance to purchase to bring it to its one-in-250 year goal, FFB used a near term sensitivity analyses on the AIR model "as a benchmark for its PML determinations and reinsurance program purchases." The near term sensitivity analysis was used in "response to requirements from rating agencies, such as A.M. Best." According to FFB, the use of the near sensitivity analyses "exceeds that of the normal '10K standard' event set and is used in preparation for A.M. Best's annual rating agency review, as required." FFB "believe[d] the version 8.2 representation of near term sensitivity to be overstated, but use[d] this analysis as required by A.M. Best." The use of the near term sensitivity model would result in an increase of the amount of reinsurance needed to reach the one-in-250 year PML. The increase in reinsurance coverage is being borne by the policyholders. As stated by Mark Crawshaw, FFB's expert witness: Generally, the more reinsurance FFB buys, the greater financial security FFB offers its policyholders. However, this greater security comes at a cost of greater reinsurance premiums which are passed on to the policyholders. In other words, there is a trade-off between the level of financial security and the cost of that security to policyholders. The Best's Financial Strength Ratings provide an objective basis for quantifying and evaluating this trade- off. FFB has failed to comply with the intent of the Legislature in Chapter 2007-1. It has failed to reflect in its rate filing the savings in the form of reduction in premiums to the policyholders that would be realized from the expansion of the CAT Fund and the reduction in CAT Fund premiums. DEFICIENCY 2: FAILURE TO PROVIDE SUPPORT THAT REINSURANCE COSTS DOES NOT RESULT IN EXCESSIVE REINSURANCE COST Item 2 addresses the Office's assertion that FFB has not provided sufficient support that the reinsurance cost in the rate filing reflecting coverage levels, premium amounts and expected recoveries does not result in excessive reinsurance cost related to services rendered. In reviewing the rate filing of FFB, the Office determined that FFB's reinsurance costs were significantly higher than the rest of the market. More significantly, the amount of catastrophe recoveries was both unsupported and understated. FFB's support for recoveries in the filing was reliance upon the AIR model, with the only information based on FFB's data for one month. Although believing that a recovery percentage of less than ten percent was an inadequate return given the cost of the reinsurance, the actuary for the Office was unable to independently verify the recoveries. FFB has failed to demonstrate that its reinsurance costs are not excessive related to the services rendered by the reinsurers. DEFICIENCY 3: FAILURE TO PROVIDE SUPPORT THAT THE CAT FUND COST IN THE FILING IS CONSISTENT WITH THE TAX EXEMPT STATUS OF THE CAT FUND Item 3 addresses the Office's assertion that FFB has not provided sufficient support to show that the CAT Fund cost is consistent with the tax exempt status of the CAT Fund. The CAT Fund makes no profit and as a tax exempt entity, has a very large investment income credit. The result is that the CAT Fund will basically pay more for losses to the insurance companies than they will collect in reinsurance premiums. In its rate filing, FFB did not consider the larger recoveries from the CAT Fund that would result from the CAT Fund's tax exempt status and did not provide sufficient support why the tax exempt status of the CAT Fund was not considered. DEFICIENCY 4: FAILURE TO DISCLOSE ALL ASSUMPTIONS AND FACTORS RELATING TO THE USE OF THE AIR MODEL Item 4 addresses the Office's assertion that FFB failed to provide access to all assumptions and factors in the AIR model which FFB used in its rate filing. Section 627.0628, Florida Statutes, provides that an insurer may use a model in a rating filing to determine hurricane loss factors when the model has been determined by the Florida Commission on Hurricane Loss Projection Methodology (Commission) to be accurate and reliable to determine hurricane loss factors, and the Office and the Consumer Advocate appointed, pursuant to Section 627.0613, Florida Statutes, have "access to all the assumptions and factors that were used in developing the . . . model . . . and are not precluded from disclosing such information in a rate proceeding." The AIR model 8.0 used by FFB has been determined acceptable by the Commission for projecting hurricane loss costs in rate filings. Thus, the issue remaining is whether the Office and the Consumer Advocate had access to the assumptions and factors used in developing the model. On May 14, 2007, after the Office received FFB's initial rate filing, the Office sent FFB a standard questionnaire consisting of 51 questions concerning the AIR model which FFB utilized. The same questionnaire is sent to all insurers who use models in their rate filings. As of the final hearing, no insurer has ever answered all the questions to the satisfaction of the Office. In other words, no insurer has physically given the Office all the assumptions and factors that were used in developing the model. This information is proprietary and is not given to the insurer by the company providing the model. The information is available only from the company providing the model. FFB asked AIR to respond to the questions. FFB provided the response prepared by AIR to the Office on May 24, 2007. Some of the responses provided that AIR would make the information available to the Office for review and would work with the Office to provide the information in an acceptable format. Because much of the information is proprietary and confidential, AIR was not willing to relinquish possession of the information to the Office. AIR has an office in Tallahassee, and staff of the Office could review the materials at the Tallahassee Office. By letter dated July 3, 2007, the Office advised FFB that the responses to the catastrophe model questionnaire were incomplete. On July 9, 2007, FFB provided the following response concerning the catastrophe model information requested: Florida Farm Bureau has provided the Office with all the formulas and functions available to us by AIR Worldwide, Inc. The catastrophe models are proprietary by their very nature and require extreme care in disclosure. The AIR model used in this filing was reviewed and accepted by the Florida Commission on Hurricane Loss Projection Methodology (Commission). Additionally, the AIR models are widely used and accepted in the insurance, reinsurance, and capital markets. Reasonability measures are taken and maintained by AIR and Florida Farm Bureau as explained in the IFILE Catastrophe Model Questionnaire. AIR Worldwide, Inc. has worked with and will continue to work with and will continue to be available to the Office regarding their catastrophe models. In complete cooperation with the Office, AIR has extended the availability of their personnel and models to the Office for review, including all formulas and functions, at their Tallahassee office. It is not the intent of AIR or Florida Farm Bureau to conceal any relevant or necessary information from the Office; the proprietary nature of the information simply demands that all protections are in place to keep trade secret information inside the AIR office and out of the public domain. Florida Farm Bureau has submitted its exposure data as requested by the Office to run in the public hurricane model. Although we do not have access to the inner workings of this model and cannot validate its results or methodologies, the Office seems comfortable with its results and has used its results as a reasonability check versus our results in past filings. The Office takes the position that making the information available at the Tallahassee office of AIR is not sufficient and does not provide access to the assumptions and factors requested by the Office. Thus, the Office did not avail itself of the opportunity to go to the AIR office in Tallahassee and review the information. The Office takes the position that FFB did not provide to the Consumer Advocate access to the assumptions and factors used in developing the AIR model. There was no evidence presented that the Consumer Advocate requested such information. In past filings, where no insurer has supplied the requested proprietary information concerning the catastrophe models used, the Office has used the Public Model to test the reasonability of the losses projected by the insurer using a vendor model such as AIR. In the instant case, the Office did submit the data provided by FFB to be inputted in the Public Model. The results of the Public Model showed approximately $5 million more in potential losses than FFB indicated in its rate filing based on the AIR Model. DEFICIENCY 5: FAILURE TO SUPPORT USE OF MODEL FOR CATASTROPHE LOSSES OTHER THAN HURRICANE The Office objected to the modeled figures used by FFB as support for its non-hurricane losses. The expert for FFB provided an analysis for non-hurricane catastrophe losses using FFB's actual historical losses without relying on the results of the model. The actuary for the Office conceded that FFB's expert used a reasonable analysis and the more common method of supporting the non-hurricane catastrophe losses. FFB has provided support through its expert at final hearing for the non-hurricane catastrophe losses. Therefore, the fifth deficiency is not viable and cannot serve as a basis for disapproving the rate filing. DEFICIENCY 6: FAILURE TO SUPPORT THAT LOSS TREND IS NOT EXCESSIVE In its Proposed Recommended Order the Office conceded that the methodology used by FFB's expert at the final hearing with respect to the loss trend was appropriate. Therefore, FFB has provided support that its loss trend is not excessive. DEFICIENCY 9: FAILURE TO SUPPORT THAT THE TREND PROCEDURE USED TO ADJUST HURRICANE MODEL LOSSES IS APPROPRIATE AND CONSISTENT WITH PREMIUM TRENDING IN INDICATIONS In its Proposed Recommended Order, the Office conceded that the methodology used by FFB's expert at the final hearing with respect to premium trending was appropriate. Therefore, FFB has provided support for a zero-percent loss ratio trend by assuming that the hurricane loss trend and the reinsurance premium trend were equal. DEFICIENCY 10: FAILURE TO SUPPORT THE ALLOCATION OF REINSURANCE COST TO TERRITORY IN TERRITORIAL INDICATIONS The tenth deficiency deals with FFB's allocation of the cost of reinsurance on a county-by-county basis. FFB allocated their cost of reinsurance by using the largest 200 storms in their model, rather than the entire 10,000 storm set. The 200 largest storms would invariably be in the more coastal counties and could lead to the coastal counties subsidizing the inland counties, which would be unfair discrimination. The use of the 200 largest storms as opposed to the 10,000 storm set does not support FFB's allocation of reinsurance cost to territory in their indications. In its Amended Petition, FFB alleges that the Office relied on an unadopted rule as a basis to support the NOI. Specifically, FFB alleges that the Office is interpreting Chapter 2007-1 [T]o essentially freeze insurers' reinsurance coverage levels and costs at whatever was already filed and approved for such insurers at the time HB 1A became effective (essentially the reinsurance coverage levels and costs for 2006), unless the change in 2007 reinsurance coverage levels or costs would result in a rate decrease. The Office does not interpret Chapter 2007-1 in the manner asserted by FFB. Chapter 2007-1 does not prohibit an insurer from having a greater amount of reinsurance in 2007 than it did in 2006, but Chapter 2007-1 does require that any savings that resulted from the expansion of the CAT Fund and reduced premiums of the CAT Fund be passed along to the policyholders.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered disapproving FFB's rate filing. DONE AND ENTERED this 1st day of April, 2008, in Tallahassee, Leon County, Florida. S SUSAN B. HARRELL 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 1st day of April, 2008.
The Issue The issues to be resolved in this proceeding concern whether the Respondent, Above All Lawn Care & Landscaping, Inc. (Above All), should be required to pay the sum of $7,129.05 to the Petitioner for landscape plants and materials allegedly purchased by the Respondent from the Petitioner, and, with regard to the Hartford Fire Insurance Company, whether it should be obligated for the payment of the plants and materials in question to the extent of its surety bond number 2 1BSBBU 6765 (the Bond), in the bonded amount of $4,999.00.
Findings Of Fact The Petitioner, Skinner Nurseries, Inc. (Skinner), is a corporation whose address is 2970 Hartley Road, Suite 302, Jacksonville, Florida. The Respondent Above All is a corporation whose address is Post Office Box 2772, Ocala, Florida. The Respondent was licensed as a dealer in agriculture products at times pertinent hereto and was supported by surety bond number 2 1BSBBU 6765, in the amount of $4,999.00. The surety bond was issued by the co- Respondent, Hardford Fire Insurance Company, as surety. The conditions and provisions of the bond were to assure proper accounting and payment to producers, their agents or representatives for agricultural products purchased by the Respondent, Above All. On July 23, 2003 through August 1, 2003, Skinner Nurseries, Inc. sold the Respondent certain nursery plants as an agent for Florida producers, totaling $7,129.05. That amount remains unpaid to Skinner. The subject complaint was filed with the Department within six months of the dates of sale. The only response to the complaint by the Respondent was that to the effect that it agreed that amounts were owed to Skinner, but it disagreed with the amounts Skinner was claiming. The testimony of Chris Diaz establishes that invoices in the amount of $7,129.05 represent the number of trees, shrubs, and various nursery stock or materials sold and shipped to the Respondent. The Petitioner sent statements on a monthly basis, as well as certified letters, to the Respondent and received no payment at all in return, not even as to an undisputed amount. The amount of $7,079.05 referenced in the Administrative Complaint does not include freight charges. The goods and materials in question were shipped from the Bunnell nursery site of Skinner to the Respondent's location in Ocala, Florida. The Respondent did not appear at either hearing scheduled and presented no testimony or evidence. The facts that are established by the Petitioner are thus undisputed. The Respondent has never paid any of the amounts represented by the subject invoices contained in Petitioner's Composite Exhibit 1 in evidence.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, and the candor and demeanor of the witness, it is, therefore, RECOMMENDED that a final order be entered by the Department of Agriculture and Consumer Services requiring that Above All Law Care & Landscaping, Inc., pay the complainant Skinner Nurseries, Inc., the amount of $7,129.05, to be paid within fifteen days from the date of entry of a final order in this matter. In the event that the Respondent does not comply with that order then the surety, Hartford Fire Insurance Company, should be ordered to provide payment under the conditions and provisions of the applicable bond. DONE AND ENTERED this 27th day of December, 2004, in Tallahassee, Leon County, Florida. S P. MICHAEL RUFF 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 27th day of December, 2004. COPIES FURNISHED: Honorable Charles H. Bronson Commissioner of Agriculture Department of Agriculture and Consumer Services The Capitol, Plaza Level 01 Tallahassee, Florida 32399-0810 Richard D. Tritschler, General Counsel Department of Agriculture and Consumer Services The Capitol, Plaza Level 01 Tallahassee, Florida 32399-0810 Brenda D. Hyatt, Bureau Chief Department of Agriculture and Consumer Services Bureau of License and Bond 407 South Calhoun Street, Mayo Building Tallahassee, Florida 32399-0800 Daniel I. Lawrence, President Above All Landscaping Post Office Box 2772 Ocala, Florida 34471 Chris Diaz Skinner Nurseries, Inc. 2970 Hartley Road, Suite 302 Jacksonville, Florida 32257 Scott Cochrane Hartford Insurance Company Hartford Plaza, T-4 Hartford, Connecticut 06115
The Issue The issue in this case is whether Petitioner, H.P. Sod, Inc., is entitled to payment from an Agricultural Bond issued to Respondent, PLS Landscape Services, Inc., and, if so, the amount owed to Petitioner.
Findings Of Fact Petitioner is a licensed producer of an agricultural product, i.e., sod. Petitioner is a duly incorporated for-profit corporation in the State of Florida and is in good standing. Horacio Pereira is the putative owner of the company, referring to himself at final hearing as “the boss, the guy who tells people what to do.” Respondent is a duly incorporated Florida corporation. Its business address is 6132 Snook Court, Port St. Lucie, Florida. The only officer or director of the corporation is George J. Kijewski. Respondent is a landscaping business. From the period July 23, 2012, through October 16, 2012, Respondent purchased quantities of Bahia sod from Petitioner on numerous occasions. The dates of purchase, quantity of sod purchased, and ticket numbers for each purchase are as follows: 23 – Ticket 36930 – 10 pallets 23 - Ticket 36983 – 16 pallets 30 – Ticket 37185 – 10 pallets 1 – Ticket 36818 – 16 pallets 1 – Ticket 37276 – 16 pallets 1 – Ticket 37283 – 16 pallets 6 – Ticket 36872 – 16 pallets 8 – Ticket 37319 – 16 pallets July July July August August August August August August 10 – Ticket 37339 – 16 pallets September 4 – Ticket 37727 – 16 pallets October 15 – Ticket 38712 – 16 pallets October 16 – Ticket 38720 – 16 pallets Petitioner issued the following invoices to Respondent concerning the aforementioned purchases of Bahia sod: Invoice 6615 – July 26 – Tickets 36930, 36983 $620.20 Invoice 6640 – August 2 – Tickets 36818, 37185, 37276, 37283 - $1,420.96 Invoice 6671 – August 16 – Tickets 36872, 37319, 37339 - $1,104.24 Invoice 6735 – September 6 – Ticket 37727 - $445.12 Invoice 6875 – October 18 – Tickets 38712, 38720 - $890.24 TOTAL - $4,481.11 Respondent did not remit payments on any of the aforementioned invoices. Respondent contends that some of the sod which it purchased from Petitioner was of inferior quality or was in less quantity than ordered. Specifically, Respondent said some of the sod was wet and fell apart when being installed. He also said the wet sod resulted in some pallets containing 370 to 390 square feet of sod rather than the 400 feet that is standard on a pallet. Respondent’s testimony was general in nature, not specific to any particular shipment, and flies in the face of his on-going purchases of sod from Petitioner. Further, there was no credible evidence presented at final hearing that Respondent ever complained to Petitioner about the quality or quantity of the sod. Had he done so, Petitioner said it would have corrected the problem. Respondent did reportedly tell one of his drivers, Mr. Calloway, on occasion that the sod was wet or otherwise not up to par. However, that complaint was never provided to Petitioner so that action could be taken. Respondent acquired a bond in the sum of $5,000.00 through TD Bank, N.A. (also referred to in this matter as United States Corporation Company, as Surety). The bank was not represented at the final hearing held in this matter. No defense was raised by the bank concerning Petitioner’s attempt to attach the bond. Petitioner paid a fee of $50.00 to the Department of Agriculture to bring this action. Petitioner hired an attorney to represent its interest in this matter. The attorney charged $175.00 per hour and, as of the date of the final hearing, had billed approximately five hours of time or $875.00 in fees. Subsequent to the final hearing, the attorney submitted a post-hearing proposed order on behalf of Petitioner. The attorney expended $180.00 in costs for service of a subpoena and witness fees. The total sum demanded by Petitioner in its action against Respondent is $5,586.11. Respondent’s PRO filed in this matter asserts a number of “facts” which were not established by competent testimony at the final hearing. Those facts were not considered in the preparation of this Recommended Order.
Recommendation Based upon the findings of fact and conclusions of law set forth above, it is hereby RECOMMENDED that a Final Order be entered by the Department of Agriculture and Consumer Services as follows: Respondent shall pay to Petitioner, within 15 days of the entry of the Final Order, the sum of $5,586.11; or If Respondent fails to timely make the aforementioned payment, the Department shall call upon TD Bank, N.A., to pay over to the Department the full amount of Respondent’s bond; and The Department shall then turn the entire proceeds of the bond over to Petitioner. DONE AND ENTERED this 8th day of March, 2013, in Tallahassee, Leon County, Florida. R. BRUCE MCKIBBEN 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 8th day of March, 2013.
Conclusions THIS CAUSE, arising under Florida’s “Agricultural License and Bond Law” (Sections 604.15-604.34), Florida Statutes, came before the Commissioner of Agriculture of the State of Florida for consideration and final agency action. On October 21, 2008, the Petitioner, Ricky A. Branch, III, a producer of agricultural products as defined by Section 604.15(9), Florida Statutes, timely filed an administrative claim pursuant to Section 604.21, Florida Statutes, to collect $31,296.18 for eggplants they sold to Respondent, a licensed dealer in agricultural products. Respondent’s license for the time in question was supported by a surety bond required by Section 604.20, Florida Statutes, written by Fidelity and Deposit Company of Maryland in the amount of $100,000. On January 7, 2009, a Notice of Filing of ‘an Amended Claim was mailed to Respondent and Co-Respondent. On January 27, 2009, the Respondent filed an ANSWER OF RESPONDENT with attachments wherein they denied the claim as being valid, admitted no indebtedness and requested a hearing. Therefore, this matter was referred to the Division of Administrative Hearings (DOAH) for an administrative hearing in accordance with the provisions of Section 120.57(1), Florida Statutes. An administrative hearing was scheduled in this matter for April 17, 2009. Attached to the NOTICE OF HEARING was an ORDER OF PRE-HEARING INSTRUCTIONS with instructions for the parties to follow prior to and at the hearing. On March 30, 2009, the Respondent filed a ' MOTION TO CONTINUE FINAL HEARING. The Administrative Law Judge (“Judge”) issued an ORDER GRANTING CONTINUANCE (“Order”) on April 3, 2009. In the Judge’s Order, he asked the parties to confer and advise him on the status of the matter among other things. An ORDER RE-SCHEDULING. HEARING was issued on April 16, 2009 and a new hearing date was set for June 9, 2009. Prior to the hearing, on June 5, 2009, the Respondent filed a RESPONDENT’S MOTION TO DISMISS claiming their efforts to contact the Claimant have been futile. Additionally, Respondent asserts that Claimant failed to comply with the ORDER GRANTING CONTINUANCE, the ORDER RE-SCHEDULING HEARING and the ORDER OF PRE-HEARING INSTRUCTIONS issued by DOAH. For the aforesaid reasons, the Respondent feels the Claimant’s claim should be denied and the claim dismissed with prejudice. On June 16, 2009, the Judge issued a RECOMMENDED ORDER OF DISMISSAL, a copy of which is attached hereto as EXHIBIT “A”, to which neither party filed written exceptions with this Department. . Upon the consideration of the foregoing and being otherwise fully advised in the premises, it is ORDERED: Based on the fact that the Claimant failed to appear at the final hearing with DOAH on June 9, 2009 and failed to meet his burden of proof in presenting evidence in support of his claim, the Department adopts the Judge’s RECOMMENDED ORDER OF DISMISSAL. The Department hereby dismisses the captioned claim and the file is closed without further action. Any party to these proceedings adversely affected by this Final Order is entitled to seek review of this Final Order pursuant to Section 120.68, Florida Statutes (2002) and Rule 9.110, Florida Rules of Appellate Procedure (2003). Review proceedings must be instituted by filing a petition or notice of appeal with the Agency Clerk, 5" Floor, Mayo Building, Tallahassee, FL 32399-0800. A copy of the petition for review or notice of appeal, accompanied by the filing fees prescribed by law must also be filed with the appropriate District Court of Appeal within thirty (30) days of the date this Final Ondet yas filed with the Agency Clerk. DONE AND ORDERED this77_ day of , 2009. ES H. BRONSON TERRY/L. RHODES Assi Commissioner of Agriculture Ke Filed with Agency Clerk this? _ day of , 2009. (pL Vb AM Agency Clerk COPIES FURNISHED TO: Judge Daniel Manry Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (Certified Receipt No. 7160 3901 9848 2604 4626) Mr. Gary Wishnatzki, Registered Agent Wishnatzki, Inc., d/b/a Wishnatzki Farms 100 Stearn Avenue Plant City, FL 33566 (Certified Receipt No. 7160 3901 9848 2605 1259) Mr. Ricky A. Branch, IIT Post Office Box 42 Webster, FL 33597 (Certified Receipt No. 7160 3901 9848 2605 1266) Ms. Kathy Alves, Claims Specialist Fidelity & Deposit Company of Maryland Post Office Box 87 , Baltimore, MD 21203-0087 (Certified Receipt No. 7160 3901 9848 2605 1273) (Claim No. 6380046897) Thomas F. Munro, Esquire FOLEY & LARDNER LLP 100 North Tampa Street, Suite 2700 Tampa, FL 33602 (Certified Receipt No. 7160 3901 9848 2605 1280) . Mr. Bedford Wilder General Counsel Staff Mayo Building, M-11 Tallahassee, Florida 32399-0800 Ms. Stephenie Butscher and Mr. Mark Moritz, Field Representatives
The Issue The central issue in this case is whether the Respondent is indebted to the Petitioner for agricultural products and, if so, in what amount.
Findings Of Fact Based upon the testimony of the witnesses and the documentary evidence received at the hearing, I make the following findings of fact: Petitioner, Oglesby Nursery, Inc., is a commercial nursery providing a variety of landscape agricultural products. The principal office for Petitioner is located at 3714 SW 52nd Avenues Hollywood, Florida. Respondent, Garden of Eden Landscape and Nursery, Inc., is an agricultural dealer with its office located at 3317 So. Dixie Highway, Delray Beach, Florida. Respondent, Garden of Eden, is subject to the licensing requirements of the Department of Agriculture and Consumer Services. As such, Garden of Eden is obligated to obtain and to post a surety bond to ensure that payment is made to producers for agricultural products purchased by the dealer. To meet this requirement, Garden of Eden delivered a certificate of deposit from Sun Bank of Palm Beach County to the Department. On or about August 22, 1986, Garden of Eden ordered and received delivery of $7673.40 worth of agricultural products from Petitioner. This purchase consisted of nine may pan coconuts and thirty green malayans trees. All of the trees were accepted and no issue was made as to their condition. On or about September 2, 1986, Garden of Eden ordered and received delivery of $1190.00 worth of agricultural products from Petitioner. This purchase consisted of seven coconut malayans dwarf trees. All of the trees were accepted and no issue was made as to their condition. The total amount of the agricultural products purchased by Garden of Eden from Petitioner was $8863.40. The total amount Garden of Eden paid on this account was $5000.00. The balance of indebtedness owed by Garden of Eden t o Petitioner for the purchases listed above is $3863.40. Petitioner claims it is due an additional sum of $247.77 representing interest on the unpaid account since the assessment of interest to an unpaid balance is standard practice in the industry and since Respondent took delivery of additional products knowing interest on past due accounts to be Petitioner's policy. No written agreement of acknowledgment executed by Garden of Eden was presented with regard to the interest claim.
Findings Of Fact Based upon all of the evidence, including the stipulation of the parties, the following findings of fact are determined: Petitioner, Charles W. Ward, Jr., is a co-owner, with other members of his family, of a cattle ranch in south Hendry County known as Ward Farms. Respondent, Maddox Brothers Produce, Inc., is a licensed agriculture dealer engaged in the business of brokering agriculture products in the State of Florida. As an agriculture dealer, respondent is subject to the regulatory jurisdiction of the Department of Agriculture and Consumer Services (Department). One such requirement of the Department is that all dealers post a surety bond with the Department's Division of Licensing and Bond. To this end, respondent has posted a $50,000 surety bond with Fireman's Fund Insurance Company as the surety. In addition to raising livestock, petitioner also grows watermelons on his property. Pursuant to an agreement by the parties, between April 16 and May 15, 1990, respondent harvested and then transported petitioner's watermelons to other destinations outside the state. The parties have stipulated that respondent still owes petitioner $53,980.92 as payment for the watermelons. Respondent has agreed to pay petitioner the above sum of money on or before February 15, 1991, or within fifteen days after the agency's order becomes final, whichever is later. Otherwise, payment shall be made from respondent's bond posted by the surety, Fireman's Fund Insurance Company.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be entered finding that respondent, a licensed agriculture dealer, is indebted to petitioner in the amount of $53,980.92, and that such debt be satisfied in accordance with the time limitations set forth in this recommended order. Otherwise, Fireman's Fund Insurance Company shall be obligated to pay over to the Department the full amount of the bond, or $50,000. DONE and ENTERED this 24th day of January, 1991, in Tallahassee, Leon County, Florida. DONALD R. ALEXANDER 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 24th day of January, 1991. COPIES FURNISHED: Charles W. Ward, Jr. Star Route, Box 72 LaBelle, Florida 33440 Patricia Maddox Harper 4253 Kingston Pike Knoxville, Tennessee 37919 Barbara J. Kennedy, Esquire Fireman's Fund Insurance Company Post Office Box 193136 San Francisco, California 94119-3136 Bob Crawford Commissioner of Agriculture The Capitol Tallahassee, Florida 32399-0810 Richard D. Tritschler, Esquire General Counsel Department of Agriculture 515 Mayo Building Tallahassee, Florida 32399-0800 Brenda D. Hyatt, Chief Bureau of Licensing & Bond 508 Mayo Building Tallahassee, Florida 32399-0800
The Issue Whether Respondent committed the acts alleged in Petitioner’s ten-count Second Amended Administrative Complaint, and, if so, what penalty, if any, should be imposed upon Robert Gordon DeWald’s (Respondent) insurance agent licenses.
Findings Of Fact Respondent is currently licensed in Florida as a resident Life Including Variable Annuity (2-14), Life Including Variable Annuity & Health (2-15), Life (2016), and Life & Health (2-18) insurance agent. At all times pertinent to the dates and occurrences referred to herein, Respondent was licensed in this state as an insurance agent and has been a licensed insurance agent in Florida for over 21 years. Prior to being licensed in Florida, Respondent was a licensed insurance agent in the state of New York. Petitioner has jurisdiction over Respondent’s insurance agent licenses and appointments, pursuant to Chapter 626, Florida Statutes (2008).1 National Foundation of America The National Foundation of America (NFOA) is a registered Tennessee corporation that was formed on January 27, 2006, and headquartered in Franklin, Tennessee. NFOA Corporate Resolution, dated April 19, 2006, provides for the corporate authority to “liquidate stocks, bonds, and annuities . . . in connection with charitable contributions or transactions. ” This same resolution also provides for the corporate ability to “enter into and execute planned giving or charitable contribution transactions with donors, including executing any and all documentation related to the acceptance or acquisition of a donation, . . . given in exchange for a charitable gift annuity. ” On September 18, 2006, the State of Washington Office of Insurance Commissioner issued an Order to Cease and Desist: In the Matter of: National Foundation of America, Richard K. Olive, and Susan L. Olive, Order No. D06-245. The Order, among other things, was based on NFOA doing business in the state and not having been granted a certificate of authority as an insurer in the state of Washington and not having been granted tax exempt status under Section 501(c)(3) of the IRC. On April 13, 2007, the Florida Office of Insurance Regulation (OIR) issued an Immediate Final Order (IFO) In the Matter of: National Foundation of America, Richard K. Olive, Susan L. Olive, Breanna McIntyre, and Robert G. DeWald, Case No. 89911-07, finding that the activities of NFOA, et al., constituted an immediate danger to the public health, safety or welfare of Florida consumers. OIR further found that, in concert, NFOA, et al., were “soliciting, misleading, coercing and enticing elderly Florida consumers to transfer and convey legitimate income tax deferred annuities for the benefit of themselves and their heirs to NFOA in exchange for charitable term-certain annuities”; and that NFOA, et al., had violated provisions of the Florida Insurance Code, including Sections 624.401 and 626.901, Florida Statutes. NFOA has never held a license or Certificate of Authority to transact insurance or annuity contracts in Florida, nor has NFOA ever been registered, pursuant to Section 627.481, Florida Statutes, for purposes of donor annuity agreements. NFOA was never a registered corporation with the Florida Department of State, Division of Corporations. On May 11, 2007, NFOA appealed OIR’s IFO to the First District Court of Appeal of Florida (1st DCA). The 1st DCA dismissed NFOA’s appeal on July 24, 2007. Therefore, NFOA operated an as unauthorized insurer in Florida. On May 17, 2007, the IRS sent a letter to the Texas Department of Insurance stating that NFOA was not classified as an organization exempt from Federal Income Tax as an organization described in Section 501(c)(3) of the IRC. On May 23, 2007, the DCI filed a Verified Petition for Appointment of Receiver for Purposes of Liquidation of National Foundation of America; Immediate and Permanent Injunctive Relief; Request for Expedited Hearing, in the matter of Newman v. National Foundation of America, Richard K. Olive, Susan L. Olive, Breanna McIntyre, Kenny M. Marks, and Hunter Daniel, Chancery Court of the State of Tennessee (Chancery Court), Twentieth Judicial District, Davidson County, Case No. 07-1163-IV. The Verified Petition states, at paragraph 30: NFOA’s contracts reflect an express written term that is recognized by the IRS as a charitable non-profit organization under Section 501(c)(3) of the Internal Revenue Code (Prosser, attachment 4), and the NFOA represents in multiple statements and materials that the contract will entitle the customers to potential generous tax deductions related to that status. The IRS states that it has granted NFOA no such designation. The deceptive underpinning related to NFOA’s supposed tax favored treatment of its contracts permeates its entire business model and sales pitch. This misrepresentation has materially and irreparably harmed and has the potential to harm financially all its customers and the intended beneficiaries of the contracts. These harms are as varied in nature and degree as the circumstances of all those individual’s tax conditions, the assets turned into NFOA, and the extent to which they have entrusted their money and keyed their tax status and consequences to reliance on such an organization. On August 2, 2007, the Commissioner for the Tennessee DCI, having determined that NFOA was insolvent with a financial deficiency of at least $4,300,000, filed a Verified Petition to Convert Rehabilitation by Entry of Final Order of Liquidation, Finding of Insolvency, and Injunction, in the matter of Newman v. National Foundation of America, et al. On September 11, 2007, pursuant to a Final Order of Liquidation and Injunction entered in the matter of Newman v. National Foundation of America et al., the Chancery Court placed NFOA into receivership after finding that the continued rehabilitation of NFOA would be hazardous, financially and otherwise, and would present increased risk of loss to the company’s creditors, policy holders, and the general public. On February 6, 2008, the IRS sent a letter to the court appointed Tennessee DCI Receiver (Receiver) for NFOA stating that NFOA does not qualify for exemption from Federal income tax as an organization described in Section 501(c)(3) of the IRC. The IRS, in determining that NFOA did not qualify for tax exempt status, stated that the sale of NFOA annuity plans has a “distinctive commercial hue”, and concluded that NFOA was primarily involved in the sale of annuity plans that “constitute a trade or business without a charitable program commensurate in scope with the business of selling these plans.” The IRS letter also provides that consumers may not take deductions on their income tax returns for contributions made to NFOA. Insurance Agent’s Duties An insurance agent has a fiduciary duty to his clients to ensure that an insurer is authorized or otherwise approved as an insurer in Florida by OIR prior to the insurance agent selling the insurer’s product to his clients. There are several methods by which an insurance agent could verify whether or not an insurer was authorized or otherwise approved (hereinafter: “authorized”) as an insurer in Florida by OIR. It is insufficient for an insurance agent to depend on the assurances of his insurance business peers as to whether an insurer needs to be authorized in Florida. Due to the importance of income tax considerations in a consumer’s decision making process as to whether or not to purchase an insurance product, an insurance agent has a fiduciary duty to his clients to verify the validity of any representations that an insurer’s product has an IRS 501(c)(3) tax exempt status, prior to the insurance agent selling the product to his clients. There are several methods by which an insurance agent could verify whether or not an insurer has an IRS 501(c)(3) tax exempt status. Respondent admitted, in his testimony, that he had depended on the assurances of others and assumed that NFOA did not need to be authorized as an insurer in Florida. Respondent testified it was his understanding that only insurance companies sell annuities; that NFOA was not an insurer; and therefore, NFOA did not need to be licensed as a Florida insurer. Respondent did not inquire of the Florida OIR whether or not NFOA was authorized to do business in the State of Florida. However, Respondent admitted that the NOFA product he sold “mirrored” an annuity product. Respondent testified that he had verified (by phone, in writing, and the Internet) with the IRS that NFOA had applied for 501(c)(3) tax exempt status. However, Respondent was aware that the tax exempt status had not been granted to NFOA. Respondent knew income tax considerations were materially important to his clients. However, none of the NFOA materials or any Florida consumer contracts signed by Respondent and his clients contain any disclaimer language informing consumers that the 501(c)(3) tax exempt status had been applied for but had yet to be granted by the IRS. Respondent testified that he made use of the Internet to obtain information. However, Respondent failed to use the Internet to find out that the State of Washington Office of Insurance Commissioner entered an Order of Cease and Desist on September 18, 2006, against NFOA based on NFOA not having a certificate of authority as an insurer and because NFOA did not have a 501(c)(3) tax exemption. As is noted below, the filing date of the Washington Order to Cease and Desist, preceded in time all but two of Respondent’s NFOA sales to Florida consumers. Respondent received commissions totaling $171,328.18 for selling NFOA annuities to Florida consumers. Respondent failed to disgorge any of these commissions to the Receiver for NFOA in the state of Tennessee. Re: Count I: Consumer – Yvette Potvin On November 30, 2006, Respondent solicited and induced Yvette Potvin of Casselberry, Florida, then age 81, to transfer or otherwise surrender ownership of her existing annuity contract with Allianz Life Insurance Company in return for an NFOA annuity. The NFOA agreement that the consumer entered into, and which was signed by Respondent, is dated subsequent to the State of Washington Order to Cease and Desist that was filed against NFOA. Respondent knew or reasonably should have known that NFOA was not an authorized insurer in Florida. Respondent, by use of the NFOA installment plan agreement, knowingly misrepresented to Ms. Potvin that NFOA was a charitable non-profit organization under Section 501(c)(3) of the IRC, even though Respondent knew that NFOA had not been approved for tax exempt status by the IRS. Based upon Respondent’s transaction of insurance, Ms. Potvin transferred to NFOA and is anticipated to lose approximately $10,410.42. This amount includes a surrender penalty incurred for transferring her original Allianz annuity to NFOA, and after receiving partial refunds by the Receiver. Based upon Respondent’s transaction of insurance with Ms. Potvin, Respondent was paid a commission of $3,682.89 by NFOA. Re: Count II: Consumer – Edna Bishop On January 18, 2007, Respondent solicited and induced Edna Bishop of Orlando, Florida, then aged 89, to transfer or otherwise surrender ownership of her existing annuity contract with American Equity Investment Life Insurance Company in return for an NFOA annuity. The NFOA agreement that the consumer entered into, and which was signed by Respondent, is dated subsequent to the State of Washington Order to Cease and Desist that was filed against NFOA. Ultimately, this transaction did not close. Respondent knew or reasonably should have known that NFOA was not an authorized insurer in Florida. Respondent, by use of the NFOA installment plan agreement, knowingly misrepresented to Ms. Bishop that NFOA was a charitable non-profit organization under Section 501(c)(3) of the IRC, even though Respondent knew or should have known that NFOA was not a tax exempt corporation. Based upon Respondent’s transaction of insurance with Ms. Bishop, Respondent was paid a commission of $8,185.35 by NFOA, even though the transaction was not completed. Re: Count III: Consumer – Genevieve McCann On December 14, 2006, Respondent solicited and induced Genevieve McCann of Fern Park, Florida, then aged 85, to transfer or otherwise surrender ownership of her existing annuity contract with American Equity Investment Life Insurance Company in return for an NFOA annuity. The NFOA agreement that the consumer entered into, and which was signed by Respondent, is dated subsequent to the State of Washington Order to Cease and Desist that was filed against NFOA. Respondent knew or reasonably should have known that NFOA was not an authorized insurer in Florida. Respondent, by use of the NFOA installment plan agreement, knowingly misrepresented to Ms. McCann that NFOA was a charitable non-profit organization under Section 501(c)(3) of the IRC, even though Respondent knew or should have known that NFOA was not a tax exempt corporation. Based upon Respondent’s transaction of insurance, Ms. McCann is anticipated to lose approximately $6,100.23. The loss consists of $20,933.04, the amount transferred to NFOA, less $1,742.85 (installment payments made by NFOA to Ms. McCann); $12,473.62 (the first payment sent by Receiver); and $2,686.63 (the second payment sent by Receiver). Ms. McCann lost $2,070.29 through surrender charges incurred for transferring her original American Equity annuity to NFOA. If the surrender penalty is excluded from the calculation, Ms. McCann’s loss is $4,029.94. Based upon Respondent’s transaction of insurance with Ms. McCann, Respondent was paid a commission of $1,879.52 by NFOA. Re: Count IV: Consumer – Lenora Bricker On or about November 30, 2006, Respondent solicited and induced Lenora Bricker of Winter Haven, Florida, then aged 87, to transfer or otherwise surrender ownership of her existing annuity contract with American Equity Investment Life Insurance Company in return for an NFOA annuity. The NFOA agreement that the consumer entered into, and which was signed by Respondent, is dated subsequent to the State of Washington Order to Cease and Desist that was filed against NFOA. Ultimately, this transaction did not close. Respondent knew or reasonably should have known that NFOA was not an authorized insurer in Florida. Respondent, by use of the NFOA installment plan agreement, knowingly misrepresented to Ms. Bricker that NFOA was a charitable non-profit organization under Section 501(c)(3) of the IRC, even though Respondent knew or should have known that NFOA was not a tax exempt corporation. Based upon Respondent’s transaction of insurance with Ms. Bricker, Respondent was paid a commission of $1,085.17 by NFOA, even though the transaction was not completed. Re: Count V: Consumer – Louise Blevins On or about November 30, 2006, Respondent solicited and induced Louise Blevins of Longwood, Florida, then aged 81, to transfer or otherwise surrender ownership of her existing annuity contract with American Equity Investment Life Insurance Company in return for an NFOA annuity. The NFOA agreement that the consumer entered into, and which was signed by Respondent, is dated subsequent to the State of Washington Order to Cease and Desist that was filed against NFOA. Ultimately, this transaction did not close. Respondent knew or reasonably should have known that NFOA was not an authorized insurer in Florida. Respondent, by use of the NFOA installment plan agreement, knowingly misrepresented to Ms. Blevins that NFOA was a charitable non-profit organization under Section 501(c)(3) of the IRC, even though Respondent knew or should have known that NFOA was not a tax exempt corporation. Based upon Respondent’s transaction of insurance with Ms. Bricker, Respondent was paid a commission of $5,469.09 by NFOA, even though the transaction did not close. Re: Count VI: Consumer – Audrey Piel On December 14, 2006, Respondent solicited and induced Audrey Piel of Maitland, Florida, then aged 81, to transfer or otherwise surrender ownership of her existing annuity contract with American Equity Investment Life Insurance Company in return for an NFOA annuity. The NFOA agreement that the consumer entered into, and which was signed by Respondent, is dated subsequent to the State of Washington Order to Cease and Desist that was filed against NFOA. Respondent knew or reasonably should have known that NFOA was not an authorized insurer in Florida. Respondent, by use of the NFOA installment plan agreement, knowingly misrepresented to Ms. Piel that NFOA was a charitable non-profit organization under Section 501(c)(3) of the IRC, even though Respondent knew or should have known that NFOA was not a tax exempt corporation. Based upon Respondent’s transaction of insurance, Ms. Piel is anticipated to lose approximately $5,594.24. The loss consists of $21,089.17, the amount transferred to NFOA; less $996.35 (installment payments made by NFOA to Ms. Piel); $13.645.33 (the first payment sent by Receiver); and $2,938.99, (the second payment sent by Receiver). Ms. Piel lost $2,085.74 through surrender charges incurred for transferring her original American Equity annuity to NFOA. If the surrender penalty is excluded from the calculation, Ms. Piel’s loss is $3,508.50. Based upon Respondent’s transaction of insurance with Ms. Piel, Respondent was paid a commission of $1,839.54 by NFOA. Re: Count VII: Consumer – John Bartlett On February 13, 2007, Respondent solicited and induced John Bartlett of Orlando, Florida, then age 75, to transfer or otherwise surrender ownership of his existing annuity contract with American Equity Investment Life Insurance Company in return for an NFOA annuity. The NFOA agreement that the consumer entered into, and which was signed by Respondent, is dated subsequent to the State of Washington Order to Cease and Desist that was filed against NFOA. Ultimately, this transaction did not close. Respondent knew or reasonably should have known that NFOA was not an authorized insurer in Florida. Respondent, by use of the NFOA installment plan agreement, knowingly misrepresented to Mr. Bartlett that NFOA was a charitable non-profit organization under Section 501(c)(3) of the IRC, even though Respondent knew or should have known that NFOA was not a tax exempt corporation. Based upon Respondent’s transaction of insurance with Mr. Bartlett, Respondent was paid a commission of approximately $16,385.56 by NFOA, even though the transaction was not completed. Re: Count VIII: Consumer – Lilla Dama On January 18, Respondent solicited and induced Lilla Dama of Orlando, Florida, then aged 86, to transfer or otherwise surrender ownership of her existing annuity contract with American Equity Investment Life Insurance Company in return for an NFOA annuity. The NFOA agreement that the consumer entered into, and which was signed by Respondent, is dated subsequent to the State of Washington Order to Cease and Desist that was filed against NFOA. Ultimately, this transaction did not close. Respondent knew or reasonably should have known that NFOA was not an authorized insurer in Florida. Respondent, by use of the NFOA installment plan agreement, knowingly misrepresented to Ms. Dama that NFOA was a charitable non-profit organization under Section 501(c)(3) of the IRC, even though Respondent knew or should have known that NFOA was not a tax exempt corporation. Based upon Respondent’s transaction of insurance with Ms. Dama, Respondent was paid a commission of approximately $2,757.52 by NFOA, even though the transaction was not completed. Re: Count IX: Consumer – Agnes Burns On February 28, 2007, and April 2, 2007, Respondent solicited and induced Agnes Burns of Orlando, Florida, then aged 87, to transfer or otherwise surrender ownership of her existing annuity contract with American Equity Investment Life Insurance Company and New York Life Insurance and Annuity Company, respectively, in return for an NFOA annuity. The NFOA agreement that the consumer entered into, and which was signed by Respondent, is dated subsequent to the State of Washington Order to Cease and Desist that was filed against NFOA. Respondent knew or reasonably should have known that NFOA was not an authorized insurer in Florida. Respondent, by use of the NFOA installment plan agreement, knowingly misrepresented to Ms. Burns that NFOA was a charitable non-profit organization under Section 501(c)(3) of the IRC, even though Respondent knew or should have known that NFOA was not a tax exempt corporation. Based upon Respondent’s transaction of insurance, Ms. Burns is anticipated to lose approximately $77,509.17. The loss consists of $335,070.29, the amount transferred to NFOA; less $18,363.66 (installment payments sent by NFOA to Ms. Burns); $205,859.31 (the first payment sent by Receiver); and $44,338.93 (the second payment sent by Receiver). A surrender penalty of $11,000.78 was incurred by Ms Burns for transferring her original annuities to NFOA. If the surrender penalty is excluded from the calculation, Ms. Burns’ loss is $66,508.39. Based upon Respondent’s transaction of insurance with Ms. Burns, Respondent was paid a commission of $30,080.00 by NFOA. Re: Count X: Consumers – Ms. Buchanan; Ms. Golus, and Mr. Owens Respondent solicited and induced Elizabeth Buchanan, aged 42, of Bradenton, Florida; Nancy Golus, aged 59, of Palmetto, Florida; and Herbert Owens, aged 86, of St. Petersburg, Florida, to transfer or otherwise surrender ownership of their existing annuity contracts in return for an NFOA annuities. As to the the NFOA agreement that Mr. Owens entered into, and which was signed by Respondent, the date of the agreement is subsequent to the State of Washington Order to Cease and Desist that was filed against NFOA. The NFOA agreements that Ms. Buchanan and Ms. Golus entered into were dated prior to the State of Washington’s Order to Cease and Desist. Respondent knew or reasonably should have known that NFOA was not an authorized insurer in Florida. Based upon Respondent’s transactions of insurance, Ms. Buchanan is anticipated to lose approximately $89,031.12. The loss consists of $162,445.60, the amount transferred to NFOA; less $20,000.00 (installment payments sent by NFOA to Ms. Buchanan); $92,589.64 (the first payment sent by Receiver); and $19,942.38 (the second payment sent by Receiver). Ms. Buchanan suffered $59,117.54 in losses from surrender charges incurred. Even after partial refunds by the DCI Receiver and the surrender penalty are excluded from the calculation, Ms. Buchanan’s loss is still $29,913.58. Ms. Golus is anticipated to lose approximately $146,027.18, the amount transferred to NFOA. Ms. Golus received $94,917.67 (the first payment by Receiver) and $20,443.81 (the second payment by Receiver). However, Ms. Golus suffered $53,152.47 in surrender charges incurred. Even after partial refunds by the Receiver and the surrender penalty are excluded from the calculation, Ms. Golus’ loss is $30,665.67. Mr. Owens is anticipated to lose approximately $10,976.33. The loss consists of $54,743.52, the amount transferred to NFOA; less $5,108.40 (installment payments sent by NFOA to Mr. Owens); $32,262.83 (the first payment by Receiver); and, $6,948.92 (the second payment sent by Receiver). Mr. Owens incurred $552.96 in surrender charges. Even after partial refunds by the Receiver and the surrender penalty are excluded from the calculation, Mr. Owens’ loss is still $10,423.37. In each and every count, Petitioner proved by clear and convincing evidence that: Respondent directly or indirectly represented or aided an unauthorized insurer to do business in Florida. Respondent knew or reasonably should have known that the annuity contracts he contracted with clients were with an unauthorized insurer. Respondent knowingly placed before the public a statement, assertion, or representation with respect to the business of insurance that was untrue, deceptive or misleading. Respondent knowingly caused to be made, published, disseminated, circulated, delivered, or placed before the public a false material statement. Respondent demonstrated a lack of fitness and trustworthiness to engage in the business of insurance. Respondent engaged in unfair and deceptive practices or showed himself to be a source of injury or loss to the public.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Chief Financial Officer enter a final order finding that: Respondent violated Subsections 626.901(1), 626.901(2), 626.9541(1)(b)4., 626.9541(1)(e)1.e., 626.611(7), 626.621(2), and 626.621(6), Florida Statutes, as charged in Counts I-X of the Second Amended Administrative Complaint; Revoking each and every one of Respondent’s licenses and appointments issued or granted under or pursuant to the Florida Insurance Code; and Providing that if Respondent, subsequent to revocation, makes application to Petitioner for any licensure, a new license will not be granted if Respondent fails to prove that he has otherwise satisfied the financial losses of his NFOA clients, or if Respondent otherwise fails to establish that he is eligible for licensure. DONE AND ENTERED this 10th day of December, 2009, in Tallahassee, Leon County, Florida. S DANIEL M. KILBRIDE 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 10th day of December, 2009.
