The Issue The issue in this case is whether Petitioner is eligible for licensure as a resident general lines agent.
Findings Of Fact On August 14, 1998, Robert Manns, a representative for Butler County, Missouri, filed a consumer complaint with the Missouri Department of Insurance, which alleged that Petitioner financed a premium for an insurance policy when the premium had, in fact, been paid by the county. On June 9, 1999, Petitioner was assessed a fine of $10,000.00 by the Missouri Department of Insurance based on Petitioner's having practiced forgery and deception in an insurance transaction. Specifically, it was found that Petitioner signed the names of the city finance director and county commission clerk to premium finance documents and letters representing that the city and county had financed a premium when, in fact, the city and county had paid the insurance premium for the city and county accounts in full on an annual basis. At the time Petitioner forged the premium finance agreement, he was licensed as an insurance agent in the State of Missouri. The Missouri Department of Insurance did not revoke Petitioner's license as an insurance agent in the State of Missouri. On February 14, 2000, the Indiana Department of Insurance denied Petitioner’s application for licensure based upon the Missouri administrative action. On September 19, 2003, Petitioner applied for licensure as a resident general lines agent in the State of Florida. Based on its review of Petitioner's application and the administrative documents from the Missouri Department of Insurance described in paragraphs 2 above, the Department denied Petitioner’s application. In regard to the incident described in paragraph 2 above, Petitioner denied that he forged the insurance contract, but he admitted that he forged the premium finance agreement associated with the subject insurance contract. However, Petitioner testified that "no one lost money" as a result of his forging the premium finance agreement. Petitioner testified that he was not proud of the incident, that he was very sorry for doing it, and that his actions could not be justified. The Department considers the forgery of documents and deception related to insurance documents and transactions by an insurance agent to be serious matters. This is particularly true in light of the fiduciary role of an insurance agent.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that final order be entered denying Petitioner’s application for licensure as a resident general lines insurance agent in the State of Florida. DONE AND ENTERED this 23rd day of November, 2004, in Tallahassee, Leon County, Florida. S CAROLYN S. HOLIFIELD 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 23rd day of November, 2004. COPIES FURNISHED: Johnny R. Howe 4367 Winding Oaks Circle Mulberry, Florida 33860 Michael T. Ruff, Esquire Ladasiah Jackson, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0333 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Pete Dunbar, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue The issue in this case is whether Respondent committed the offenses alleged by the Department of Financial Services in the Administrative Complaint dated May 27, 2009, and, if so, what penalty should be imposed.
Findings Of Fact Petitioner, the Department of Financial Services ("Petitioner" or "the Department") has regulatory responsibility for Chapter 626, Florida Statutes (2009), the insurance licensing procedures law. Respondent, Eileen P. Suarez ("Respondent" or "Suarez"), is a licensed general lines agent transacting in property and casualty insurance, under license number E129078. She operated and was the agent in charge of the Suarez Insurance Agency, Inc. ("Agency"), in Hialeah, Florida. The Agency held a valid state license from 7/21/2006 to 7/27/2009. The Department filed a three-count Administrative Complaint against Respondent alleging that she violated various provisions of Chapter 626, Florida Statutes. COUNT I John Vila is the president of Vila Home Group, Inc., a trucking company that is in the business of hauling sand, soil, and gravel. In April 2005, he purchased a dump truck and, at the suggestion of the dealer, contacted Suarez for insurance. Suarez sold Vila two insurance policies, for the period April 29, 2005 to April 29, 2006, one with AequiCap Insurance Company ("AequiCap") and the other with the Underwriters at Lloyds, London ("Lloyds"). The AequiCap Policy was a commercial liability insurance policy. The Lloyds Policy was a commercial automobile physical damage insurance policy. In March 2006, Vila gave Suarez a check in the amount of $10,876.41, made payable to the Agency to renew the AequiCap and Lloyds policies, for the period April 29, 2006 to April 29, 2007. The AequiCap policy quote was approximately $5,350.00. The Lloyds policy quote was approximately $5,500.00. The check was deposited in the Agency's trust account, but the Lloyds policy was allowed to expire on April 29, 2006, and was not renewed until October 26, 2006, creating a six-month gap in commercial automobile physical damage insurance coverage for Vila. When it was renewed, the Lloyds Policy cost $5,712.03. Vila's AequiCap policy expired on April 29, 2006, and was not renewed because Suarez failed to pay MAI Risk Management, AequiCap's managing general agent. The funds were not returned to Vila. While the March 2006 quotes were pending, the registered driver of the truck, Andres Vila, was involved in an accident and was at fault for hitting a wire. Rather than risk an increase in the pending insurance quotes, Vila paid Bellsouth $2,390.36 in damages. COUNT II On or about October 26, 2006, Suarez provided Vila a Certificate of Liability showing that the truck was insured with AequiCap, under policy number TC012695, and with Lloyds, under policy number R641440/0251, for the period April 29, 2006 to April 29, 2007. Vila was not insured under AequiCap policy number TC012695 from April 29, 2006 to April 29, 2007. The Certificate of Liability was a false document that Suarez created on her computer, printed, and gave to Vila. COUNT III Shelly, Middlebrooks & O'Leary, Inc. ("Shelly Middlebrooks") is a licensed insurance agency, located in Jacksonville, that acts as a general agent for multiple insurance companies. Suarez collected insufficient funds to include the premiums that were intended to be forwarded to Shelley Middlebrooks for policies to insure the following trucking companies: All Nations Logistics, LLC (Policy Number 486865); Jose Veiga, d/b/a JJ Freightways (Policy Number 486885); Gary Castle/Diamond Mine (Policy Number 74APN338354); and Nics Oil, Inc. (Policy Number 74APN401617). For each of the four companies, she requested and received binders for insurance from Shelly Middlebrooks, followed by invoices for the premiums that were to have been paid within ten days of the date the invoices were received. In each instance, Suarez did not pay Shelly Middlebrooks, which cancelled the policies for non-payment of the premium. It also obtained a default judgment in the Circuit Court in and for Duval County, Florida, that requires Suarez to pay it the outstanding balances due for the four policies and a $25 insufficient funds check fee, for a total of $8,335.60, which she has been unable to pay. Instead of paying for insurance, Suarez used most of the funds she collected to pay for various other corporate expenses for the same trucking companies, including state and federal government filings for intrastate or interstate travel that were prerequisites to their becoming insurable. Suarez expected to collect the additional funds needed for insurance later, but the clients, the owners of the trucking companies, did not pay her. Suarez admits that she failed her clients in 2006, after her father's death in February 2006. She realized the Vila errors and tried to correct them in October. The Agency is now closed. Suarez's husband has been unemployed for over a year, and their home is in foreclosure. She is receiving social security disability payments and has insufficient funds to file for bankruptcy.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered by the Department of Financial Services: Finding Respondent guilty of violating Subsections 626.611(7), (8) and (10); Subsection 626.561(1); and Subsections 626.621(2) and (6), Florida Statutes, as charged in Count I of the Administrative Complaint; Finding Respondent guilty of violating Subsections 626.611(7) and (8); Subsection 626.621(6); and Subsection 626.9541 (1)(e)1., Florida Statutes, as charged in Count II of the Administrative Complaint; Finding Respondent guilty of violating Subsections 626.611(7), (8) and (10); Subsection 626.561(1); and Subsections 626.621(2) and (6), Florida Statutes, as charged in Count III of the Amended Complaint; Revoking Respondent's licenses and appointments issued or granted under or pursuant to the Florida Insurance Code; Ordering Respondent to make restitution to John Vila in the amount of $5,164.38; and Ordering Respondent to make restitution to Shelly Middlebrooks & O'Leary in the amount of $8,335.60. DONE AND ENTERED this 16th day of February, 2010, in Tallahassee, Leon County, Florida. S ELEANOR M. HUNTER 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 16th day of February, 2010.
The Issue Whether the Petitioner's application of January 11, 1991, for examination as a general lines agent should be granted.
Findings Of Fact Petitioner Paul L. Kornya was licensed in 1974 as a general lines insurance agent in the State of Florida. Prior to 1984, Respondent Department of Insurance had taken no formal disciplinary action against the Petitioner. In 1983, while licensed as an insurance agent and employed in the capacity of office manager for the Milton Carpenter Insurance Agency, Petitioner established a demand deposit account in the name of "Atlantic Association Insurance" and listed himself as the sole signatory and beneficiary on the account. Petitioner thereafter wrote four unauthorized checks on the Milton Carpenter Agency Account totaling $47,132.14 made payable to Atlantic Association Insurance and deposited them into his demand deposit account. In order to conceal his activity, the Petitioner altered the payee of the checks. In a prior administrative case (Case No. 84-L-4085F), Petitioner admitted misappropriating and converting the funds. In 1983, while licensed as an insurance agent and employed in the capacity of office manager for the Milton Carpenter Insurance Agency, Petitioner wrote two unauthorized checks on the Milton Carpenter Agency Account totaling $3,455 made payable to Blinder, Robinson and Co., Inc., Investment Bankers. In order to conceal his activity, the Petitioner listed an agency account code designated for miscellaneous companies on said checks. In a prior administrative case (Case No. 84-L- 4085F), Petitioner admitted misappropriating and converting the funds which were used for Petitioner's personal stock purchases. In 1984, a judgement in the amount of $52,013.35 was entered against Petitioner in the case styled Milton Carpenter Insurance, Inc., a Florida Corporation, and Cincinnati Insurance Company vs. Paul L. Kornya, Case No. 84-3235 CA(L)A, Fifteenth Judicial Circuit Court, Palm Beach County, Florida. On October 31, 1985, the Department entered a Final Order revoking Petitioner's license qualifications and eligibility for licensure for a period of two years, based upon the misappropriation and conversion of said funds. By application signed December 16, 1987 and filed December 28, 1987, Petitioner submitted an application for examination as a general lines insurance agent. By Insurance Commissioner Bill Gunter's letter to the Petitioner of February 29, 1988, the Department requested that the Petitioner submit certain certificates of employment to verify his prior experience. The letter stated that, "[t]o qualify for this examination through experience you must have completed within the past 4 years, at least 1 year of substantially full-time responsible duties as the bona fide employee of an agent or insurer. Your duties during this time must have been in all lines of property, casualty, surety, health and marine insurance. ... One certificate should be completed by you and the other by your employer." The Petitioner claims to have submitted said employment certificates shortly following the Department's request. However, the Department's files do not contain the documents or any other response to the letter, and there is no evidence beyond Petitioner's testimony to support the claim. By letter of March 17, 1988, Department representative Franklin Thompson again requested the experience information cited in the February 29 letter or in the alternative, that Petitioner submit proof that a course of education had been completed. The letter further stated that "we will need a statement from Milton Carpenter Insurance Inc. Agency of Belle Glade, Florida stating that any and all indebtedness you may have had relative to their firm has been satisfied". Both the February 29 and March 17 letters provided that failure to file the information within 30 days from the date of each letter is grounds for denial of the application. Three months passed following the March 17 letter to the Petitioner. According to the records of the Department, no response to either letter was received. On June 17, 1988, the Petitioner's December 1987 application was closed by the Department based upon the failure of Petitioner to submit the previously requested information. By letter of June 23, 1988, the Petitioner advised the Department that the indebtedness was not to the Milton Carpenter Insurance Agency, but was to Cincinnati Insurance Company, which had insured the Carpenter agency against such losses. The letter further stated that approximately $5,000 had been repaid to the Cincinnati Insurance Company. By letter of August 3, 1988, Department representative Thompson wrote, "[t]he information you have furnished has been thoroughly reviewed. It appears that your indebtedness with Milton Carpenter Insurance has been assigned to Cincinnati Insurance Company. Please request that Cincinnati Insurance Company furnish us with a statement indicating that all of your indebtedness to their company has been satisfied". The letter stated that failure to respond within 30 days from the date of the letter was grounds for denial of the application. The evidence does not explain the reason for Mr. Thompson's letter of August 3, 1988. Given the June 17 closure of the pending application based upon the Petitioner's failure to supply additional information, the information furnished apparently consisted of the Petitioner's untimely filed letter of June 23. As of August 3, no pending application existed. In any event, the Petitioner did not respond to the August 3 request. By second application signed October 31, 1989, and filed November 3, 1989, Petitioner submitted an application for examination as a general lines insurance agent. By undated letter, Department representative Thompson again requested Petitioner to submit either certificates of employment to verify his prior experience or proof of completion of certain educational requirements, and further requested a reply to the letter of August 3, 1988 seeking statement from Cincinnati Insurance Company indicating that "all of your indebtedness to their company has been satisfied". Again the letter provides that failure to furnish the requested information within 30 days would result in the file being closed. 1/ The Petitioner, subsequent to the undated letter and prior to February 2, 1990, submitted said certificates of employment. Early in 1990, the Petitioner's application file was assigned to Department representative, Patricia Lehman. On February 2, 1990, Ms. Lehman informed that Petitioner that his certificates of employment were not acceptable, and that he would be required to complete a 240 hour educational requirement. Further, Ms. Lehman's letter provided that, "[i]n addition, you will need to furnish us with a certified letter from Cincinnati Insurance Company that you have made full restitution or a certified copy of the written agreement between you and the party(s) involved that you are making restitution satisfactory to all parties concerned. The information you sent to us is not certified and reflects no signatures". Beginning February 26, 1990, Mr. Kornya took and completed the 240 hour insurance course as identified in the Department's previous communications. The $595 course met for six weeks, five days each week, from 8:00 a.m. to 5:00 p.m. On September 17, 1990, the pending application was closed by the Respondent based upon the failure of Petitioner to submit the previously requested information. There is no evidence that Petitioner submitted evidence of completing the educational requirement. On or about January 8, 1991, Petitioner entered into an restitution agreement with Cincinnati Insurance Company setting forth a payment schedule which requires that Petitioner make a payment of $300 each month to the Cincinnati Insurance Company in order to eventually satisfy the entire $52,013.35 judgement against him. By application signed January 11, 1991, and filed January 16, 1991, Petitioner submitted an application for examination as a general lines agent. By memorandum of February 18, 1991, to her superior, Bob Stewart, Ms. Lehman recommended that the Petitioner's application be denied. Specifically, her memo provides as follows: Mr. Kornya's license qualification and eligibility for licensure were revoked by the Department in 1985 for the mishandling of funds in a fiduciary capacity. It does not appear Mr. Kornya attempted to make restitution until the signed Agreement in 1991. He has demonstrated lack of fitness and trustworthiness to engage in the business of insurance. Therefore pursuant to Sections 626.611(1) (7) , [sic] 626.641(2) and 626.731(1), I recommend his application be denied. Although Ms. Lehman's memo states that "[i]t does not appear Mr. Kornya attempted to make restitution until the signed Agreement in 1991", prior to the January 8, 1991 execution of the restitution agreement, the Petitioner had paid $12,237.94 to Cincinnati Insurance Company realized from the sale of vehicles and real estate. The executed copy of the restitution agreement reflects that such funds were paid, although the agreement fails to indicate when the payment was made. The payment was applied towards interest which had accumulated on the judgement, not towards the $52,013.35 principle judgement amount. At the time of the hearing, the restitution payments were current (although Petitioner did not make the $300 payment due in April, but paid $600 in May.) As of the date of hearing, approximately $49,913 remained to be paid to Cincinnati Insurance Company to satisfy the judgement. Although at the time of the hearing, a letter allegedly from Cincinnati Insurance Company indicated that they had not received documentation of Petitioner's compliance with paragraph five of the restitution agreement (a requirement that Petitioner purchase a life insurance policy naming the insurer as irrevocable beneficiary), said policy was purchased on January 9, 1991. By letter of March 1, 1991, the Department denied the application, based on an application of the statutory sections cited in Ms. Lehman's memo. On June 21, 1991, the Department issued an amended letter of denial. 2/ In the amended letter of denial, the Department cites the prior misappropriation of funds, the unsatisfied judgement, and the 1985 revocation of licensure and eligibility for licensure, which "circumstances surrounding that revocation still exist". The letter cites Sections 626.611(1), (4), (7), (9), (10) and (13), section 626.641(2), and section 626.731(1) Florida Statutes, as the statutory basis for the denial. The evidence fails to establish that any representative of the Department of Insurance, at any time, informed or assured the Petitioner that, upon his completion of the course of education and upon the execution of the restitution agreement between Cincinnati Insurance Company and the Petitioner, his application for examination for licensure as a general lines insurance agent would be approved. The Petitioner has been acquainted with his current employer, Samuel Jokich, for approximately six years. Mr. Jokich employs the Petitioner as a "Colorado Prime" freezer beef salesman. According to Mr. Jokich, the Petitioner is "extremely trustworthy" and of good character. The Petitioner had not disclosed to Mr. Jokich, and Mr. Jokich was not otherwise aware, that the Petitioner had taken approximately $52,000 from the Milton Carpenter Insurance Agency. Mr. Jeffrey Hooker, an independent insurance agent in Belle Glade and childhood friend of the Petitioner's, is aware of the Petitioner's misappropriation and conversion of approximately $52,000 from the Milton Carpenter Insurance Agency. However, Mr. Hooker stated that he would trust the Petitioner and "try to help him any way I could". Mr. Hooker desires to become partners with the Petitioner in a proposed insurance agency in Ft. Myers. Mr. Kenneth Snyder, a field representative for CNA Insurance Company, has known the Petitioner for approximately eight years. He believes the Petitioner to be of "good character" with "solid morals". Although Mr. Snyder was aware that the Petitioner had taken some funds from the Milton Carpenter Insurance Agency, he was unaware of the amount of said funds. Mr. Snyder stated that he would be willing to enter into a business relationship were the Petitioner to become licensed as a general lines agent.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department of Insurance enter a Final Order denying the application of Paul L. Kornya to sit for examination for licensure as a general lines insurance agent. DONE and RECOMMENDED this 23rd day of January, 1992, 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 23rd day of January, 1992.
The Issue The issue is whether the Respondent, James Edward Hickerson, violated the provisions of Chapters 624, 626 and 627, Florida Statutes, by commission or omission of acts as alleged specifically in the Administrative Complaint. The entry of this order was ; delayed by late filing of the transcript and post hearing briefs, the filing time of which was extended by order dated May 19, 1983. Petitioner submitted post hearing proposed findings of fact in the form of a proposed recommended order. To the extent the proposed findings of fact have not been included in the factual findings in this order, they are specifically rejected as being irrelevant, not being based upon the most credible evidence, or not being a finding of fact.
Findings Of Fact General Findings At all times relative to the Administrative Complaint, the Respondent, James Edward Hickerson, was President of the Hickerson Insurance Agency, Inc., located in Winter Haven, Florida, and held licenses as a surplus lines-property casualty and surety surplus lines, ordinary-combination life (including disability insurance) , general lines-property, casualty, surety and miscellaneous, and disability insurance agent issued by the Insurance Commissioner. The Respondent sold Hickerson Insurance Agency, Inc. , to James Hurst, Jr., as of March 1, 1982. Pursuant to their contract for sale, the Respondent remained liable for all business written prior to March 1, 1982, and the conduct of the business affairs of said agency prior to that date. Count I On January 29, 1982, Patricia Ann Haller applied for a bond as a notary at Hickerson Insurance Agency, Inc.(hereinafter, the Hickerson Agency). Haller paid the Hickerson Agency a total of $61 for a notary seal and as premium on said bond. When Haller did not receive the bond and seal, she called the Hickerson Agency and was advised by a secretary that her application had been lost. She received a letter presumably forwarding a new application but which did not contain an enclosed application. When Haller again called the Hickerson Agency, she was advised to come to the agency and sign a new application. Haller went to the agency and signed a second application in February 1982. When she did not receive the bond and seal, after March 1, 1982, she recontacted the agency and at that time spoke with James Hurst, Jr., the new owner. A search of the office records by James Hurst, Jr. and the office staff revealed no record of the Haller transaction with the Hickerson Agency. The company to which application was made for the bond had no record of receiving the application for Haller's bond. Haller advised James Hurst, Jr., that she no longer wanted the bond. Haller never received the bond or a refund of the money she paid to the Hickerson Agency. Under the contract for purchase of the Hickerson Agency, the Respondent received all premiums and was responsible for all money collected on transactions prior to March 1, 1982. The Respondent was responsible for providing Haller's bond and her premiums. Counts II, III, IV, V and VI The Hickerson Agency billed Southern Mortgage Company of Florida, Inc., in the amount of $86 on December 14, 1981, for the renewal of fire insurance in behalf of Pearly Mae Williams. (See Petitioner's Exhibit 12.) The Hickerson Agency billed United Companies Financial Corporation in the amount of $193 on or before February 17, 1982, for the renewal of homeowner's insurance in behalf of Annie N. Bonney. (See Petitioner's Exhibit 15.) The Hickerson Agency billed United Companies Life Insurance Company in the amount of $9 on February 8, 1982, for homeowner's insurance in behalf of Charles or Della M. Byrd. (See Petitioner'S Exhibit 18.) The Hickerson Agency received a check in the amount of $85 from United Companies, Inc., on December 23, 1981, for the payment of fire insurance for Pearly M. Williams. (See Petitioner's Exhibit 13.) United Companies Financial Corporation paid the Hickerson Agency $193 on January 25, 1982, for fire insurance in behalf of Annie M. Bonney. (See Petitioner's Exhibit 16.) United Companies Financial Corporation paid the Hickerson Agency $9 on February 17, 1982, for fire insurance in behalf of Charles Edward Byrd. (See Petitioner's Exhibit 19.) Under the contract agreement between the Hickerson Agency and Independent Fire Insurance Company, the premiums on insurance placed with Independent Fire Insurance Company were due the 15th of the month following the effective date of the insurance coverage. (See Petitioner's Exhibit 11.) The insurance for Pearly Mae Williams was renewed on January 31, 1982. (See Petitioner's Exhibit 9.) The premium was due and owing and to be paid by the Hickerson Agency on February 15, 1982. Independent Fire Insurance Company renewed the fire insurance for Annie N. Bonney on February 17, 1982. (See Petitioner's Exhibit 14.) The premium was due and owing and to be paid by the Hickerson Agency on March 15, 1982. Independent Fire Insurance Company renewed the insurance of Charles or Della M. Byrd on February 22, 1982. (See Petitioner's Exhibit 17.) The premium was due and owing and to be paid by the Hickerson Agency on March 15, 1982. (See Petitioner's Exhibit 17.) Independent Fire Insurance Company renewed the insurance of Curtis Smith on January 26, 1982, and, pursuant to the Hickerson Agency's agreement with said company, the premium for this insurance was to be paid by the Hickerson Agency on February 15, 1952. (See Petitioner's Exhibit 20.) Independent Fire Insurance Company renewed the insurance of Edna T. Tipper on December 14, 1951, and, pursuant to the Hickerson Agency's agreement with said company, the premium for this insurance was due from the Hickerson Agency on January 15, 1952. (See Petitioner's Exhibit 21.) Regarding the insurance of Curtis Smith, there is no evidence that the Hickerson Agency received payment from the insured or the insured's mortgagee. Concerning Edna T. Tipper, there is no evidence that the Hickerson Agency received payment for said insurance from the insured or the insured's mortgagee. A statement of account similar to Petitioner's Exhibit numbered 22, the statement for February 1952, was provided to the Hickerson Agency each month. As of February 25, 1952, premiums were owed for the insurance in effect on Pearly Mae Williams, Edna T. Tipper, Curtis Smith, Charles Byrd and Annie N. Bonney by the Hickerson Agency. (See Petitioner's Exhibit 22.) On July 14, 1952, Independent Fire Insurance Company advised the Respondent at his home address by certified mail that his account with the company was in arrears in the amount of $531.30 and made demand for payment no later than August 3, 1952. (See Petitioner's Exhibit 22.) On July 19, 1952, the Respondent tendered payment to Independent Fire Insurance Company with his check numbered 2343 in the amount of $531.30. (See Petitioner's Exhibit 24.) A letter from Independent Fire Insurance Company reflects that said company has been paid the premiums due on Williams, Tipper, Smith, Byrd and Bonney. (See Petitioner's Exhibit 25.) The Respondent received payments from Williams (Count II), Bonney (Count III) and Byrd (Count IV) with which he was to pay the premiums due on insurance for them. The Respondent did not pay the premiums for these insureds when due, although he had received the money with which to do so. Count VII Jackie Ricks Colson first insured her 1979 Toyota with the Hickerson Agency in March 1979. In March 1980, she renewed the insurance on her car and added her husband's 1978 Pontiac Transam to the policy. In March 1981, having received notice that her automobile insurance required renewal, Mrs. Colson paid $260 as a down payment to the Hickerson Agency and executed a finance agreement to finance the remainder of the premium with Capital Premium Plan. By financing the premium, Capital Premium Plan paid the Hickerson Agency the premium, and Mrs. Colson made payments as required under the financing agreement to Capital Premium Plan. Mrs. Colson made the payments as required from March 1981 through December 31, 1981, at which time she had paid off all but $3.60 of the borrowed amount, which Capital Premium Plan charged off. Although requested many times to provide a copy of the policy by Mr. and Mrs. Colson, the Hickerson Agency did not do so. As a result thereof, the bank financing Mr. Colson's Transam insured that car and charged Mr. Colson for the insurance. The Colsons have never received a policy of insurance on their cars from the Hickerson Agency. The records of the Hickerson Agency do not reflect that any insurance was in effect between March 17, 1981, and September 1981 on the Toyota and November 1981 on the Transam. The Colsons' Toyota was insured on September 28, 1981, for a period of one year with Dixie Insurance Company for a premium charge of $495. (See Petitioner's Exhibit 28.) Their Pontiac Transam was added to said policy by endorsement effective November 27, 1981. (See Petitioner's Exhibit 29.) On September 30, 1981, Mrs. Colson was involved in an auto accident in the Toyota, which suffered major damage. Mrs. Colson was unable to get her car from the garage until December 1981, because the insurance company would not pay for the repairs. Mr. Colson also had difficulty with delay in payment for insured damages when the top of the Transam was damaged. The Respondent accepted a premium from Mrs. Colson but did not provide automobile insurance as requested between March 17, 1981, and September 28, 1981, on the Toyota and November 27, 1981, on the Transam. The Respondent did not provide the Colsons with copies of their policies after repeated requests. Count VIII The records of Capital Premium Plan (Petitioner's Exhibit 33) reflect the Respondent owed Capital Premium Plan $1,306.01 as the result of cancelled policies which required the Respondent to return unearned premium amounts to Capital Premium Plan. A statement for these accounts was presented in June 1982. The record reflects that in late 1982 the Respondent paid $356.01 of the money originally owed. At the date of hearing, the Respondent owed Capital Premium Plan $950 in unearned premiums. The Respondent raised no valid defense to the claim by Capital Premium Plan. Count IX Pursuant to his agreement with Underwriters Insurance Company, the Respondent was required to pay said company premiums for policies sold issued by the company. (See Petitioner's Exhibit 34.) As of September 1981, the Respondent's accounts with Underwriters Insurance Company were not current. The company's representative called upon the Respondent and made demand for the money owed by the Respondent to the company. The Respondent gave the company's representative a check in full payment of the amount then due. This check was dishonored by the bank upon its presentation due to insufficient funds. As a result thereof, Underwriters Insurance Company cancelled its underwriting agreement with the Respondent. The Respondent owed Underwriters Insurance Company approximately $6,000 as of the date of the hearing. The Respondent asserted no reasonable defense to the company's claims. Count X On February 16, 1979, automobile and health insurance was purchased for Grecian Pool Service by Frank Weller, the company's president. Neither Grecian nor Weller received a copy of the insurance policies from the Hickerson Agency. One of Grecian's vehicles was involved in an accident. Michigan Mutual, the insurer of the other vehicle, attempted to collect $228 for damages it had paid but which were the responsibility of Grecian's insurer. Michigan Mutual contacted the Hickerson Agency many times in an effort to obtain payment from Grecian's insurer but was unsuccessful. Michigan Mutual contacted the Department of Insurance, and an agent of the Department contacted the Respondent, who stated that a check had been sent to Michigan Mutual. The Department's agent contacted Michigan Mutual, which denied receipt of the check. The Department's agent then asked the Respondent to provide the Department with a copy of the front and back of the cancelled check. In response, an employee of the Hickerson Agency advised the Department's agent that it had no information concerning the accident and requested the Department to provide more information in order that it could respond to the Department's request. The Respondent failed to provide a timely response to Michigan Mutual of claim information as requested. The Respondent failed to provide the Department with records and information upon request. The Respondent failed to provide the insured with a copy of the insurance policy. Count XI and XIII W. F. Jones and James Earl Jones, who are brothers, both tendered premiums to the Hickerson Agency for the purchase of insurance on tractor- trailer trucks which they respectively owned. The daughter of W. F. Jones paid the Hickerson Agency $2,678 in September 1981 for insurance on two trucks owned by W. F. Jones. This payment was made in four checks each for $669.50 to be negotiated one each week for four weeks commencing on September 2, 1981. (See Petitioner's Exhibit 52.) On September 4, 1981, Shelley, Middlebrooks and O'Leary (hereinafter, SMO), general agent for Carolina Casualty, issued a binder on insurance for W. F. Jones. The quoted down payment for this policy was $2,678, and the premium on the ten-day binder issued by SMO was $928. The Hickerson Agency remitted to SMO the amount of $557.95. This was $267.25 less than the required binder premium. SMO immediately notified the Hickerson Agency that additional money was due. When the money was not forthcoming, SMO sent the Hickerson Agency a 14-day notice of cancellation. This extended the coverage of the binder until October 6, 1981. The Hickerson Agency did not forward any additional amount, and the insurance was cancelled on October 6, 1981. The amount received from the Hickerson Agency was less than the earned premium for the coverage from September 4, 1981, until October 6, 1981. In November 1981, the Hickerson Agency sent SMO a check for $257.25, the amount left owing on the earned premium. In February 1982, after many requests by W. F. Jones and his wife for the insurance policy and inquiries from them to the Hickerson Agency about their monthly payments, Jones received notice from the company financing his trucks that the trucks were not insured by the Hickerson Agency as he had thought. W. F. Jones checked with the Hickerson Agency, which was unable to produce a policy of insurance or other evidence of insurance. W. F. Jones demanded his money back, and the Respondent wrote Jones a check for the money that Jones had paid. When Mrs. W. F. Jones took the Respondent's check for deposit, her bank advised her after checking with Respondent's bank that there were insufficient funds in Respondent's account to cover the check. Because W. F. Jones had left on a trip, Mrs. Jones took the check to the Hickerson Agency and requested insurance. On February 5, 1982, Huffman and Associates bound coverage on W. F. Jones's two trucks with Canal Insurance Company. Huffman and Associates received $2,345 with a balance of $6,097, which was financed through a premium finance company. The Canal Insurance Company policy number for W. F. Jones was AC29 67 99. No evidence was presented that the two trucks belonging to W. F. Jones were insured between October 6, 1981, and February 5, 1982, although the Hickerson Agency had received payment for the down payment in the amount of $2,678. James Earl Jones applied for insurance on his truck with the Hickerson Agency on or about July 29, 1981. Mrs. James Earl Jones wrote three checks to the Hickerson Agency on said date to be negotiated as indicated: July 29, 1981- -$500 for immediate negotiation; $474--hold until August 5, 1981; $474--hold until August 19, 1981. The balance of the premium was financed with Capital Premium Plan with a monthly payment of $305.45. Monthly payments were made by James Earl Jones to the Respondent or to Capital Premium Plan until April 5, 1982. At that time, Capital Premium Plan cancelled the insurance due to late payments by the insured. When notified of the cancellation of the insurance by Capital Premium Plan, Mrs. James Earl Jones contacted Canal Insurance Company in care of New South Underwriters, which was listed as the insurer by Capital Premium Plan. Mrs. Jones was advised by New South Underwriters that they had no record of insurance on the Jones's truck with Canal Insurance Company. Mrs. James Earl Jones called the Hickerson Agency and asked for the policy number on the truck. The Respondent called Mrs. Jones and gave the policy number for the insurance on the truck as AC29 67 99, the policy number of W. F. Jones. (See paragraph 38 above.) When Mrs. James Earl Jones rechecked, she found that the policy was that of W. F. Jones, whereupon she called James Earl Jones, who went directly to the Hickerson Agency and spoke with the Respondent. James Earl Jones demanded of the Respondent some proof of insurance. The Respondent gave him a copy of the first page of W. F. Jones's policy. When James Earl Jones pointed out the error and demanded proof of his insured status, the Respondent wrote him a check for $2,990.50, a refund of the down payment and payments which James Earl Jones had made to Capital Premium Plan through that date. The records of Canal Insurance Company do not reflect insurance issued to James Earl Jones between July 1981 and March 1982. James Earl Jones was insured by Canal Insurance Company in April 1982 through an agency in Tampa not related in any way to the transaction with the Respondent. The records of Capital Premium Plan reflect that money was borrowed for insurance to be placed with Canal Insurance Company through New South Underwriters. Capital Premium Plan made money available to the Respondent for the premiums as indicated. The Hickerson Agency did not have records or produce records indicating that James Earl Jones was insured by the Hickerson Agency between July 1981 and March 1982, when the Respondent refunded Jones's premiums. Count XII In September 1981, Hugh Shaw of Ridge Printing purchased workmen's compensation insurance from the Respondent and paid for said insurance with two checks, each for $426.50. Shaw was contacted in May 1982 by officials of the Department of Commerce and advised that he had no workmen's compensation insurance. Shaw referred the officials to the Respondent. Shaw never received a policy of insurance from the Respondent for insurance purchased in September 1981. A search of the records of Mr. Hurst's agency revealed no insurance placed by the agency for Shaw. No evidence was introduced by the Respondent that Shaw was insured against workmen's compensation loss. No evidence was received that any portion of the premiums paid by Shaw were returned to him. Count IV (In addition to this count, many of the other counts in this Administrative Complaint allege that records related to various insureds were not present at the Hickerson Agency, and that the Respondent failed to maintain records as required by law. The findings made relative to this count are applicable to similar allegations contained throughout the Administrative Complaint and constitute the findings of fact relative to those allegations.) The Respondent sold his insurance agency to James Hurst, Jr., effective March 1, 1982. Testimony was received that some of the records alleged to have been missing later were present prior to that date. Evidence was received that many records were not present at the agency after that date. No evidence was received that the Respondent was responsible for removal of the records. Pursuant to their contract, James Hurst, Jr., was responsible for the office after March 1, 1982, and the Respondent is not vicariously liable for missing records after that date. No evidence was presented as to any specific record at issue in these charges that was discovered to be missing prior to March 1, 1982. Count XV On October 2, 1981, Harold Scott purchased insurance on a camper from the Respondent. On that date, Scott gave the Respondent a check for $123 and signed a premium financing agreement for the balance of $287. Scott never received a copy of the insurance policy. No evidence was introduced by the Respondent that Scott was insured. In September 1982, the Respondent paid to Scott the down payment and other money that Scott. had paid on his insurance. Count XVI On April 7, 1981, Joseph Simmons purchased workmen's compensation coverage and a bond from the Respondent. Simmons paid $798 as a down payment and executed a premium financing agreement with Sesco Premium Plan. Simmons never received a copy of the policy or a payment book. Sesco Premium Plan never financed an insurance policy for Joseph Simmons of Winter Haven, Florida. (See Petitioner's Exhibit 64.) No evidence was introduced by the Respondent that Simmons was insured against workmen's compensation claims after April 7, 1981. The Respondent accepted a premium for insurance from Simmons and did not provide the requested coverage.
Recommendation While violations of Section 626.621, Florida Statutes, permit the Department discretion in disciplining a licensee, violations by the Respondent of Section 626.611, Florida Statutes, as found above, mandate that the Department must discipline him. Considering the number and the severity of the violations, it is recommended that the Department of Insurance and Treasurer revoke each and every license held by the Respondent, James Edward Hickerson. DONE and RECOMMENDED this 17th day of June, 1983, in Tallahassee, Leon County, Florida. STEPHEN F. DEAN, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 17th day of June, 1983. COPIES FURNISHED: Curtis A. Billingsley, Esquire Department of Insurance Larson Building Tallahassee, Florida 32301 Douglas H. Smith, Esquire Post Office Box 1145 Lake Alfred, Florida 33850 Marvin B. Wood, Esquire 2600 Industrial Park Drive Lakeland, Florida 33801 Tom Pobjecky State Attorney's Office Post Office Box 1309 Bartow, Florida 33838 The Honorable William Gunter State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32301 =================================================================
The Issue Whether Petitioner's application for licensure as a Resident General Lines Insurance Agent was properly denied by the Department of Financial Services.
Findings Of Fact Petitioner owns two insurance agencies, All Florida Insurance and Tax Services ("All Florida") and One Florida Insurance Agency, Inc. ("One Florida"). On or about January 5, 2010, Gardonal Marcellot ("Marcellot") filled out an application and interviewed with Petitioner for an insurance agent position. The same day, Petitioner offered Marcellot a job at All Florida as an insurance agent.1/ Marcellot accepted the job and provided Pierre a copy of his 2-20 General Lines Insurance Agent license and Social Security card. Pierre informed Marcellot that his start date for employment with All Florida would be January 15, 2010. Soon thereafter, there was a major earthquake in Haiti, and Petitioner informed Marcellot by email that she had to go out of the country to help her family and she was pushing back his start date with the company. Marcellot never reported to work or started his employment with All Florida after Pierre left the country.2/ On or about February 12, 2010, Petitioner applied for agency licensure with the Department for All Florida and named Christopher Jeremie as the Agent in Charge. Pierre also named Marcellot as the secretary and treasurer of All Florida on the application. Marcellot never held a corporate officer position at All Florida. While operating All Florida, Pierre engaged in all the activities that require an insurance agent license. She admitted during the hearing that she ran the office, met with customers by phone and in person, responded to fax and email insurance requests, provided insurance quotes for customers, completed forms for customers, input the insurance information in the computer to get quotes for customers to review, input the information online, and processed numerous insurance applications. On February 26, 2010, Petitioner filled out an application for a Change of Agent in Charge for All Florida and named Marcellot Agent in Charge without his permission. 3/ Pierre continued to utilize Marcellot's licensure information and name him Agent in Charge without his permission to obtain Agency appointments with companies4/ for at least five insurance applications. On May 22, 2010, Pierre next utilized Otto Latimer's ("Latimer") licensure information without his permission and changed the Agent in Charge for All Florida by naming Latimer to the position.5/ On June 22, 2010, Petitioner submitted an Application for Agency Licensure online to the Department on behalf of One Florida and also named Latimer as the Agent in Charge without his permission. Latimer never worked at or served as Agent in Charge for All Florida or One Florida. Latimer owns his own business, Service Ace Corporation, where he works full time. He has been licensed since 1983 as a General Lines Insurance agent. At some point, Latimer discovered that Pierre was having problems getting a 2-20 license agent. He offered to help her by allowing her to rent space at his agency location and for her to work under his license. He never gave her permission or allowed her to use his license or name him as Agent in Charge for appointments. Pierre utilized Latimer's licensure information without his permission for her insurance companies and named him Agent in Charge for both Universal Property and Casualty Insurance Company and Citizens Property Insurance Corporation ("Citizens") insurance appointments for a total of about 19 insurance applications. On August 11, 2010, Citizens terminated All Florida's Agent Appointment Agreement after determining that Pierre had committed forgery and larceny based on false personification because Pierre signed Marcellot's name to the agent appointment application and named him as agent of record. On December 13, 2010, Pierre filed an application with the Department for a Resident General Lines Agent license. On December 21, 2010, Petitioner signed and issued All Florida check number 1003 to Del Rio Discount Corporation, in the amount of $1,000.00. Pierre cut check number 1003 as the gross down payment on a premium finance agreement dated October 1, 2010, for the homeowner policy purchased by Bernard and Eleanor Woodside. The check was returned for insufficient funds. Del Rio Finance filed a complaint with the Department against Petitioner for Pierre issuing check 1003 on behalf of All Florida because the check bounced for insufficient funds. Wendi Cameron ("Cameron"), the Department's investigator in this matter, started investigating the complaint in January 2011. She went to Pierre's office location to see Latimer, whom she believed was the Agent in Charge based on the paperwork Pierre had falsely completed and filed. Latimer was not present and so Cameron spoke to Pierre, who told Cameron that Latimer was out of the office. On May 29, 2011, while Pierre's insufficient funds investigation was still pending, Cameron received another complaint about Pierre namely that Citizens Insurance Company had terminated Pierre's appointment after being advised by Marcellot that Pierre had used his identity without his knowledge and forged his name on applications. Cameron visited Petitioner's office three times during Petitioner's investigations and an Agent in Charge was never present. Pierre was managing the office on each visit. On the fourth visit to the office, it was closed with a note on the door. Cameron was never able to speak to an Agent in Charge and was always informed that one was not available each time she called or visited. The Department concluded its investigation of Pierre and denied her application for licensure based on the Department's sections 626.112(1)(a), (b)4, 626.112(9), 626.172(2), (3), 626.611(7), (8), 626.621(2),(3), and (6).
Recommendation Upon consideration of the foregoing Findings of Fact and Conclusions of Law reached, it is RECOMMENDED that the Department of Financial Services enter a final order denying Petitioner's application for licensure as a General Lines Insurance Agent in the State of Florida. DONE AND ENTERED this 26th day of March, 2012, 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 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 26th day of March, 2012.
The Issue Whether the Respondent's insurance licenses should be disciplined on the basis of the alleged multiple violations of Chapter 626, Florida Statutes, as set forth in the Administrative Complaint.
Findings Of Fact Petitioner is the state agency charged with licensing insurance agents of all types, regulating licensure status, and enforcing the practice standards of licensed agents within the powers granted by the Legislature in Chapter 626, Florida Statutes. At all times material to these proceedings, Respondent Wolfe was licensed as an insurance agent in the following areas: Ordinary Life, Ordinary Life including Disability Insurance, General Lines, and Disability. Respondent was also registered with the Department as an Automobile Inspection and Warranty Salesperson. Respondent Wolfe conducted his insurance business through Edison Insurance Agency, Inc. (hereinafter Edison), which is located in Fort Myers, Florida. The Respondent is the President, the Director, and sole shareholder of the insurance agency. All of Edison's personnel who collected funds in a fiduciary capacity, on behalf of the insured named in the Administrative Complaint, acted through the supervision and control of Respondent Wolfe, the licensed general lines agent of record at Edison. One of the services provided to customers who sought insurance through Edison was the agency's processing of premium financing applications. If an insurance customer decided to finance premium payments, the Respondent or agency personnel, would arrange premium financing for the customer through Regency Premium Finance Company (hereinafter Regency). Once the insurance customer's application to Regency was processed, Regency would issue a check for the financed portion of the premium. The check would name Edison as the payee, and would be sent to the agency's offices. The Respondent or agency personnel acting through his licenses, were then required to remit the money to the insurance company to obtain the insurance coverage selected by the proposed insured. Count I On October 7, 1986, Regency issued a check in the amount of eleven thousand eighty four dollars and twenty five cents to Edison. Upon receipt of the check, Edison paid the outstanding balance of the premiums owed to Canal Insurance Company by Shirley Turlington, who became insured with the company through Edison on July 16, 1986, under policies numbered P02 31 71, and 14 43 39. On November 7, 1986, a Notice of Cancellation was sent by Regency to the insurer as the insured did not pay an installment payment, as agreed, by October 16, 1986. The insurance policies were cancelled by the insurer, and an unearned premium of ten thousand one hundred and twenty four dollars was credited to Edison's account with Dana Roehrig & Associates, an authorized representative of Canal Insurance Company. Pursuant to the Premium Finance Agreement signed by the insured Shirley Turlington, Regency was assigned all unearned premiums returned by the insurance company on these specific policies. Shirley Turlington was not entitled to the unearned premiums credited to Edison's account by Canal Insurance Company through Dana Roehrig & Associates. A determination of Regency's entitlement to the unearned premium refund is currently pending in a civil action. Count II On March 16, 1987, Regency issued a check in the amount of nine thousand four hundred and forty one dollars to Edison. The purpose of the check was to have Edison pay the outstanding balance of the premium owed to Canal Insurance Company by Guillermo Rodriguez for a commercial automobile liability policy numbered 152 656. In reality, the amount of money necessary for payment to Canal Insurance Company had already been earmarked in the account maintained by Dana Roehrig & Associates which shows the credits and debits placed on Edison's business transactions with Dana Roehrig & Associates. The premium was paid, and the policy was issued by Canal Insurance Company with an effective date of February 2, 1987. In the premium finance agreement completed on behalf of Mr. Rodriguez in Edison's Offices, the inception date of the policy was projected for March 29, 1987. Respondent Wolfe and Edison personnel were unable to bind Canal Insurance Company so that an actual policy number and policy inception date were unknown by Edison at the time the finance agreement with Regency was completed at the agency. As the commercial automobile liability market was very active at Dana Roehrig & Associates during this time period, it is unknown what basis was used for the projected inception date of the policy. On May 27, 1987, a Notice of Cancellation was sent by Regency to the insurer as the insured did not pay an installment payment, as agreed, on April 29, 1987. The policy was cancelled September 25, 1987. No evidence was presented at hearing to demonstrate what happened to the unearned premium refund. Count III On March 24, 1987, Regency issued a check in the amount of twenty one thousand four hundred thirty five dollars to Edison. The purpose of the check was to pay the outstanding balance of the premium on a commercial automobile liability policy from Lumbermans Mutual Insurance Company which had been applied for by Thomas Gleason through Edison. Edison did not purchase an insurance policy for Mr. Gleason with the funds sent to Edison by Regency for that purpose. The check from Regency was cashed, and the funds were commingled with other funds in the agency's account number 632717. Count IV On April 21, 1987, Regency issued a check in the amount of twenty five thousand one hundred and fifty eight dollar and seventy five cents to Edison. The agency was to apply these funds against the outstanding balances on premiums for Clayton Olding, Inc., a trucking firm. The proposed insured had applied for insurance coverage from Canal Insurance Company and Cadillac Insurance Company. Edison paid for policy number 155941 with Canal Insurance Company with check number 7120. The premium amount and the inception date listed on the Regency premium finance agreement were correct. A notice of cancellation was sent to Canal Insurance Company on July 1, 1987, as Clayton Olding had failed to pay the installment due Regency on June 13, 1987. However, the policy had already been cancelled by the insured on June 1, 1987. A credit of nineteen thousand one hundred seventeen dollars and eighty cents was placed against Edison's account with Dana Roehrig & Associates, the authorized representative for Canal Insurance Company. Paperwork given to Clayton Olding, Inc. represented that the company was insured by Cadillac Insurance Company through Edison. Edison was the authorized agent of Cadillac Insurance Company and was able to temporarily bind the company. However, the money which was to be given to Cadillac Insurance Company as the down payment on the insurance premium was never sent to the insurer. Instead, Rose Delaney, an employee of Edison, created interagency documents which reflected that the money had been sent, and took the money for her own personal use. When Clayton Olding, Inc. notified Ms. Delaney to cancel the policy on June 1, 1987, this customer believed that Edison had acquired the insurance policy requested with Cadillac Insurance Company. Clayton Olding, Inc. received a refund from Edison after the cancellation of the two policies in the amount of approximately one thousand dollars. It was not revealed at hearing whether the refund related to the Canal Insurance Company policy or the Cadillac Insurance Company policy, or both transactions. Count V On April 28, 1987, Regency issued a check in the amount of four thousand five hundred and sixteen dollars to Edison for payment of the outstanding balance of the premium purportedly owed by Arthur Farquharson to Canal Insurance Company through Edison. Edison did not purchase an insurance policy for Mr. Farquharson with the funds sent to Edison by Regency for that purpose. The check from Regency was cashed, and the funds were commingled with the funds in the agency's checking account numbered 632717. The policy requested by Mr. Farquharson was never obtained by Edison on his behalf. Counts VI through VIII Count VI through Count VIII of the Administrative Complaint involve requests from proposed insured to purchase insurance through Edison. The proposed insured were Clinton Roole, Bertel Alexander Prince, and A & E Young Trucking, Inc, respectively. In each application for insurance, the proposed insured requested premium financing through Regency. Regency issued checks on behalf of these proposed insured to Edison. The agency was to pay the outstanding balances on insurance premiums in the policies purportedly obtained by Edison on behalf of these customers. Edison did not properly apply the funds sent to the agency by Regency because the requested policies were never purchased by Edison on behalf of these customers. The checks from Regency were cashed by the agency, and commingled with other funds in the agency's checking account numbered 632717. The customers did not receive the benefits requested from Edison, their insurance agency. Count IX On May 7, 1987, Regency issued a check in the amount of thirty two thousand one hundred and nine dollars to Edison. The agency was to apply the funds against the outstanding balances on three policies which were purportedly applied for from the following companies through Edison: Canal Insurance Company, Cadillac Insurance Company, and South Atlantic Council. The proposed insured was Charles Bernardo d/b/a ABX, Inc. A binder of insurance was issued by Canal Insurance Company to Mr. Bernardo for a fifteen day period which expired on April 28, 1987. A full policy was never purchased by Edison on behalf of Mr. Bernardo with the funds sent to Edison by Regency for that purpose. No information was provided at hearing regarding the purported application for insurance from South Atlantic Council on behalf of Mr. Bernardo through Edison. The check from Regency to Edison was cashed, and the funds were commingled with other funds in the agency's checking account numbered 632717. Mitigation All of the insurance transactions involved in the Administrative Complaint were conducted by Rose Delaney, an employee of Edison. During the months of March 1987 through May 1987, this employee was involved in a complex embezzlement and document falsification scheme in which she embezzled funds from the insurance agency and created phoney insurance policies and premium financing agreements, as well as false agency control documents, to cover her misdeeds. Respondent Wolfe was unable to discover this embezzlement scheme until May 23, 1987. His inability to detect the scheme was based upon a number of extraordinary factors, in spite of his reasonable attempts to supervise his insurance business and the employees with the high degree of care commensurate with his responsibilities as an insurance agent. These extraordinary factors were: the rapid and intense growth of Respondent's business during this time period; the redesign of the computerized accounting program by the agency's accountant, who failed to recognize that he had disabled an account reconciliation function within the program; the sophistication of Ms. Delaney's embezzlement scheme, and her ability to generate false documents within the agency setting which hid her crimes from the supervisory reviews conducted by Respondent Wolfe over a two and one half month period. Rose Delaney, the perpetrator of the embezzlement and documentation falsification scheme, is currently being treated in a mental health institution for mental illness. She has been diagnosed as having major depression with psychotic features as well as suffering from latent schizophrenia, paranoid type. Based upon the professional opinions of the two psychiatrists who examined Ms. Delaney, she was insane during the time she handled the insurance transactions set forth in the Administrative Complaint. The McNaughton standard was applied by both of the experts, and no evidence to the contrary was presented during the administrative hearing.
Recommendation Based upon the foregoing, it is RECOMMENDED: That the Respondent, Gary Stephen Wolfe, be found not guilty of all nine counts set forth in the Administrative Complaint. DONE and ENTERED this 5th day of September, 1989, at Tallahassee, Florida. VERONICA E. DONNELLY Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 5th day of September, 1989. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 88-4927 Petitioner's proposed findings of fact are addressed as follows: Accepted. See HO# 2. Accepted. See HO# 2. Accepted. See HO# 3. Accepted. See HO# 3. Petitioner's findings do not contain a number 5. Accepted. See HO# 3. Accepted. Accepted. See HO# 4. Accepted. Accepted. See HO# 5. Rejected. See HO# 27. Accepted. See HO# 5. Accepted, but for further exposition of the facts, see HO# 7. Accepted. See HO# 5. Accepted. See HO# 6 and # 7. Accepted. Accepted. Rejected. See HO# 27. Accepted. See HO# 8. Rejected. Irrelevant. See HO# 8. Rejected. See HO# 10. Accepted. Accepted. Rejected. See HO# 27. Accepted. See HO# 11. Accepted. See HO# 12. Accepted. See HO# 12. Accepted. Accepted. Rejected. See HOC 27. Accepted. See HO# 13. Rejected. Irrelevant. See HO# 13. Rejected. Irrelevant to pleadings. See HO# 13. Rejected. Irrelevant to pleadings. See HO# 13. Accepted. See HO# 14. Accepted. See HO# 14. Accepted. See HO# 14. Accepted. Accepted. Rejected. See HO# 27. Accepted. See HO# 17. Accepted. See HO# 18. Accepted. See 1O# 18. 43.-48. Not provided to the Hearing Officer. Accepted. See HO# 18. Accepted. Accepted. Rejected. See HO# 27. Accepted. See HO# 19. Accepted. See HO# 20. Accepted. See HO# 20. Accepted. Accepted. Accepted. See HO# 19. Accepted. See HO# 20. Accepted. See HO# 20. Accepted. Accepted. Rejected. See HO# 27. Accepted. See HO# 19. Accepted. See HO# 20. Rejected. Cumulative. Rejected. Improper summary. Rejected. Cumulative. Rejected. See HO# 25 and #27. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant and immaterial. Rejected. Irrelevant. Accepted. See HO# 25. Rejected. See HO# 27. Rejected. Irrelevant. Improper shifting of burdens of proof. Not an ultimate issue in these proceedings. Rejected. Immaterial. Outside the scope of the pleadings. Rejected. Contrary to fact. A co-signer was required on any checks signed by Ms. Delaney. Rejected. Outside the scope of the pleadings. Accepted that Respondent Wolfe was not personally involved in the wrongdoings committed by Ms. Delaney. See HO# 25. The rest of paragraph 84 is rejected as argumentative. Rejected. Irrelevant - Argumentative. Rejected. Improper summary. Rejected. Argument as opposed to proposed finding of fact. Improper summary. Respondent's proposed findings of fact are addressed as follows: Accepted. See HO# 2. Accepted. See HO# 3. Rejected. Irrelevant. Accepted the first statement in paragraph 4. See HO# 9. The rest is rejected a- irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Accepted. Rejected. Irrelevant. Rejected. Irrelevant. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. See HO# 26. Accepted. Rejected. Irrelevant. Rejected. Not established by competent evidence. Accepted. Rejected. Improper summary with many factual conclusions that are immaterial to the allegationS in the Administrative Complaint. Rejected. Irrelevant to these proceedings. Rejected. Irrelevant. Accepted. Accepted. Accepted. Rejected. Not established by competent evidence. Rejected. Irrelevant to these proceedings. Accepted. Accepted. See HO# 27. Accepted. Accepted. See HO# 25. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Improper summary. For rulings on each transaction, refer to Findings of Fact in the Recommended Order. Accepted. See HO# 25. COPIES FURNISHED: S. Marc Herskovitz, Esquire Office of Legal Services 412 Larson Building Tallahassee, Florida 32399-0300 Joseph D. Stewart, Esquire Hardt & Stewart 801 Laurel Oak Drive Suite 705, Sun Bank Building Naples, Florida 33963 Honorable Tom Gallagher State Treasurer and Insurance Commissioner The Capitol Tallahassee, Florida 32399-0300 Don Dowdell, Esquire General Counsel Department of Insurance The Capitol Tallahassee, Florida 32399-0300 =================================================================
The Issue The issue in the case is whether Petitioner is entitled to a Resident Independent All-Lines Insurance Adjuster license.
Findings Of Fact On July 24, 1999, Petitioner was involved in a physical altercation in her driveway, defending herself against a female neighbor. Shortly after the altercation, Petitioner was arrested for Aggravated Battery. On January 12, 2000, a Criminal Information was filed against Petitioner charging her with Aggravated Battery Causing Great Bodily Harm. On August 15, 2000, Petitioner pled no-contest to Felony Battery and was placed on two-years' probation. Adjudication of guilt was withheld. Fourteen months later, on October 18, 2001, Petitioner's probation was terminated early without any violations. On March 11, 2002, Petitioner applied for licensure as a Resident Independent All-Lines Insurance Adjuster and provided the prior arrest information in her application. On May 24, 2002, Respondent denied Petitioner's application for licensure on the basis of her single arrest and subsequent plea. On June 18, 2002, Petitioner submitted a timely Election of Proceedings form requesting a formal hearing. Respondent's licensing review committee, composed of the Bureau Chief of Licensing Division, Licensing administrators, the Assistant Division Director of Agent and Agency Services, and a Department attorney, reviewed Petitioner's application and determined that she was unfit and untrustworthy to hold a license. The review committee's decision was based strictly on Petitioner's prior criminal plea and the limited time between her completion of probation and application for licensure. The evidence presented at hearing, however, demonstrated Petitioner's fitness and trustworthiness to hold a license. Petitioner, an African-American, lives in a 50-house subdivision containing approximately three African-American families. On July 24, 1999, Petitioner attempted to enter her driveway but was blocked by a car that was parked in front of her driveway. A Caucasian woman was parked in front of Petitioner's driveway and was reading mail that she had retrieved from the community mailbox located in Petitioner's front yard. Despite having experienced the woman's similar rude behavior 2-weeks prior, Petitioner politely "tooted" her horn to encourage the woman to move her van forward and patiently waited. Shortly thereafter, Petitioner again beeped her horn. In response, the woman glanced at Petitioner, looked away, and refused to move. Thereafter, Petitioner placed her car in park, approached the driver's side of the woman's car, knocked on her window, and said, "I want to go in my driveway." Again, the woman ignored her request and continued to read her mail. Petitioner stated that after further knocking, she opened the woman's door and said, "I don't know you and you don't know me. I want to go into my driveway and I need you to move your van." In response the woman said to Petitioner, "You need to move. I want to close my door." Immediately thereafter, and without warning, the woman pushed Petitioner to the ground, got out of her car and attacked Petitioner. After being repeatedly struck by the woman, Petitioner bit the woman's shoulder in self-defense. Within seconds, the altercation, which Petitioner alleges was racially motivated, ended and the woman drove away. Petitioner ran into her house and relayed the events to her teenage children. Prior to calling 911, Petitioner called her uncle for advice. While on the telephone with her relative, the police arrived at Petitioner's home and she was arrested. Petitioner retained a lawyer to contest the charge. Upon her attorney's advice, Petitioner reluctantly agreed to plead no-contest to the charge, accept two years of probation, and receive a withholding of an adjudication of guilt. Petitioner's probation was terminated after 14 months without incident. Petitioner has never been arrested nor convicted of any crime prior to this incident. Since 1987, Petitioner has been working in the insurance industry in various capacities including claims examiner. She is currently entrusted with large sums of money, successfully works in customer service, and routinely deals with difficult customers in an appropriate and professional manner. Petitioner has been praised by her employers and co-workers and possesses an excellent demeanor. Petitioner has been offered a position as an adjustor trainee with Zurich Insurance Company contingent upon obtaining an adjustor's license. On June 21, 2001, approximately nine months before Petitioner submitted her application, Respondent repealed its law enforcement waiting period rule which outlined the length of time an applicant was required to wait, following a felony plea, in order to qualify for licensure. While Respondent adopted a new law enforcement waiting period rule pursuant to Section 626.207, Florida Statutes, on October 17, 2002, approximately five months after Petitioner submitted her application, Respondent stipulates that the new rule does not apply to Petitioner. In fact, at the time Petitioner submitted her application in March 2002, Respondent stipulates that it operated strictly under Sections 626.611 and 626.621, Florida Statutes. Consequently, Petitioner applied at a time when Respondent admittedly used only the statutes as a basis for denial. Waiting periods were not applied to applications for licensure during March 2002. While Petitioner's Notice of Denial contains a typographical error as to the date on the first page of the letter, the Agent Personal Data Inquiry correctly shows that Petitioner was officially denied on May 24, 2002.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent issue a Final Order approving Petitioner's application for licensure as a Resident Independent All-Lines Insurance Adjuster. DONE AND ENTERED this 19th day of March, 2003, in Tallahassee, Leon County, Florida. WILLIAM R. PFEIFFER 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 19th day of March, 2003. COPIES FURNISHED: Ladasiah Jackson, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0333 Maria N. Neal 5639 Breckenridge Circle Orlando, Florida 32818-1377 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
Findings Of Fact At all times pertinent hereto, the Respondent has been a licensed General Lines-Property, Casualty, Surety and Miscellaneous Insurance Agent in the State of Florida. The Respondent is the owner and registered agent of United No-Fault Agency, Inc. d/b/a Allied Insurance Agency, Inc. (Allied) , at 832 Irma Avenue; 4950 Silver Star Road; and 2410 Curry Ford Road, all Orlando, Florida addresses. Linda Get was employed with Allied Insurance Agency, Inc. from August, 1978 to July, 1981. She has one year of college education, but is not trained in the insurance field and was not a licensed insurance agent at times pertinent hereto. Ms. Getz helped market insurance at the 832 Irma Avenue office, at which there was no licensed agent employed from April, 1981 to July, 1981. Ms. Getz met with customers, assisted them in completing insurance applications and collected premiums from them, including helping to write and complete insurance applications for customers. The record does not reflect that she signed the Respondent's name on any insurance applications. Ms. Getz was paid a salary for these duties. She was not paid a commission for all policies she wrote for the office, and did not split any commissions with the Respondent. When the agency was profitable, however, she did receive a bonus in addition to her regular salary, representing a percentage of the profits of the agency for that particular month. These bonuses were not related to any commission percentage arrangement attributable to the sale of each individual policy however. Linda Getz was instructed by the Respondent to sell PIP and AD&D coverage together, that is, to quote the premium as one premium to prospective customers. Towing coverage, motor club coverage and AD&D coverage however, was not offered as mandatory to the customers and the customer could elect not to take it if he was informed of the difference in the policies. Ms. Getz did not explain coverages to customers unless she was specifically asked, however, and quoted the premium for both PIP which the subject customers requested and the AD&D coverage, which the Respondent told her to market in a package with the PIP, as one premium. After customers bought the policies or applied and paid their premium, the applications were sent to the insurer companies involved, the policies were prepared and then returned with all related documents to Respondent's agency, whereupon they would be mailed with related documents to the insured-customers. See, Section 624.425(3), Florida Statutes (1983). The Respondent, in training and instructing his subordinates, including Linda Getz and the other agents at each of the three offices, instructed them to add the cost of AD&D coverage or motor club membership coverage in all price quotations given for automobile insurance if the policy requested by the prospective customer was a minimum PIP "tag insurance" type coverage. His instructions to his employees and agents also included telling customers that the price of PIP coverage included the price of AD&D coverage as a package, and that they would not sell PIP coverage alone. In order to purchase an automobile license plate or tag in Florida, a driver must, at a minimum, show evidence of having personal injury protection (PIP) coverage. This type of insurance coverage is commonly termed "tag insurance." The Respondent's agency sold this type of insurance and others, including AD&D, auto club policies and liability. On or about December 30, 1981, Mr. William B. Salman went to the Allied Insurance Agency in response to a billboard he had observed that indicated that PIP coverage could be obtained for $47 premium. He considered that to be a good price and went to the Allied Agency to get such PIP coverage, for obtaining "car tags." He arrived at the Curry Ford Road agency of the Respondent and requested "car tag" insurance in response to the advertisement. He requested no other forms of insurance. He was given two applications to complete which he just signed, supplying no information. It was presumably completed by a member of the Respondent's staff. He then paid by check for the coverage and left the agency believing that he had gotten the minimum coverage he had requested. One of the papers he signed was an application (Exhibit 4) which at the top has printed the words: AFRICAN TRAVELERS ASSOCIATION Travel/Accident Benefits Including ACCIDENTAL DEATH & DISMEMBERMENT COVERAGE Application Mr. Salman understands the meaning of the term death and dismemberment, but did not have any such death and dismembership coverage explained to him while at the agency and during the course of his purchase of insurance. He does not recall being hurried or pressured to sign any papers. He only, however, intended to buy the minimum amount of insurance necessary to obtain his automobile tag' and left the agency believing that that was all he had gotten, because no explanation otherwise was given him. He thought nothing amiss by the required payment of $47 because he still considered that to be a good price for the PIP coverage alone. Although he clearly signed an AD&D coverage application and designated a beneficiary therefor, he did not read and understand the policy at the time, and did not have it explained to him, therefore he was unaware, until informed during Petitioner's investigation, that he had bought an AD&D policy in addition to the PIP coverage he had originally requested. At no time was it explained that he was buying a separate policy in addition to the requested PIP coverage. The policies were ultimately delivered to Mr. Salman by mail from the Respondent. On or about November 19, 1981, Marsh H. Polson, was sold automobile insurance coverage by Jeffrey Mark Turner, or someone acting under his supervision or control at the Curry Ford Road agency. Mr. Polson had called the agency by telephone to obtain an insurance quote and was quoted a price of $45. He merely wanted PIP coverage and considered $45 to be a favorable rate, so he went to the agency for the purpose of obtaining it. He was given application forms to execute and signed them, but paid little attention to the specifics of the papers he was signing. He was not pressured or rushed by the Respondent or any of his agents or employees, but merely did not take the time to read the applications and other documents. He only asked for PIP coverage because he wanted the minimum amount necessary to obtain car tags. In fact, however, he had been sold two separate policies, an AD&D policy, as well as the PIP coverage which would have cost approximately $20 by itself. The purchase of the AD&D policy involved signing a separate form entitled: AMERICAN TRAVELERS ASSOCIATION Travel/Accident Benefits Including ACCIDENTAL DEATH & DISMEMBERMENT COVERAGE Application The remaining $25 of the $45 premium amount represented the cost of the AD&D policy. He was asked to name a beneficiary and dice so, but paid little attention to the specifics of the forms he signed. At no time was Polson informed by the person he dealt with at the agency that he was purchasing something other than "tag insurance." He left the premises under the impression he had only purchased tag insurance or PIP coverage. No one ever explained the details of his coverages and he was not aware, until he learned through the department's investigation, that he had bought an AD&D policy as well as a PIP policy, which he had not intended to do when he went to the Respondent's place of business. His policies were ultimately delivered by mail by the Respondent's agency. On or about November 10, 1981, Mr. James C. Fine, wishing to buy minimum auto tag/PIP insurance, went to the Curry Ford Road agency for purposes of inquiring about such coverage. He dealt with Jeffrey Mark Turner or someone else operating under the supervision and control of Respondent at that agency, being on the premises a total of 15 to 20 minutes. He was quoted a price for "driver license insurance," agreed to purchase it, and paid the premium amount, ("less than $50"), signing certain applications. Indeed, he bought both a PIP and an AD&D policy. He was aware he was getting death benefits however, because he provided his brother's name as beneficiary. It was not explained to him, however, that the AD&D coverage was optional and that the minimum legal requirement for PIP insurance did not include a requirement that he obtain death coverage. Mr. Fine (and each of the customers involved in this proceeding) purchased an AD&D policy which involved signing a separate form under the caption of the language quoted above. At no time was Mr. Fine told by any of the Respondent's personnel or the Respondent, that he was specifically purchasing something other than mere "tag insurance. He left the premises under the impression that he had only purchased the minimum legally required tag insurance, and was not informed that the death benefits he had purchased (AD&D coverage) were not legally required. Ultimately, the policies were mailed to Mr. Fine, although he did not actually receive them because his address had changed, and so they were returned to the Allied Agency, uniformed. Mr. Fine has a four-year college education and understood that he had some sort of death benefit because he was required to name a beneficiary, but he still did not understand that the AD&D coverage was not legally required of him, nor that it was not a requisite part of the minimal "tag insurance" he intended to buy when he arrived at the agency, and thought he had bought when he left. On or about November 27, 1981, Mabel L. Dobbins wished to purchase automobile insurance coverage for her son's car and her own. She went to the Allied Agency and dealt with either Jeffrey Mark Turner or persons unknown who were employed by the Respondent under his direction and control, and, upon inquiring about minimum PIP insurance, was quoted a premium of $47. She inquired about liability insurance for one of the cars and was quoted the fee of $60 as a downpayment with a total premium for liability of $151, and a total payment of $180, representing, in part, a finance fee. As to the PIP coverage, she only wanted the minimum car tag insurance, but Jeffrey ark Turner or others under the supervision and control of Respondent, charged Ms. Dobbins for an AD&D policy written by American Travelers Association, which was included in the price of her PIP coverage without her knowledge or consent. Ms. Dobbins is employed as a cook and has a 10th grade education. She was not familiar with the specifics or terms of the coverage she was buying, just merely signed a place marked "x" and believed she was getting, as she intended, the minimum PIP "tag insurance." The fact that she was buying a separate policy for AD&D at a greater price than mere PIP coverage was not explained to her. Both separate policies or coverages were "packaged" under one premium charge without her knowledge as was the case with the other customers involved in this proceeding. The import of her signing two different policy applications was not explained to her. She was charged $47 premium for her PIP coverage and was not informed that $25 of that premium represented the AD&D policy she had not requested. On or about March 18, 1982, Roger Walton visited the Respondent's agency at 4950 Silverstar Road in Orlando, Florida. That agency was managed by Roger George Peltier, a licensed agent who was resident agent at that office at the time. Mr. Walton spoke with Mr. Peltier and requested "tag insurance." He was sold an AD&D policy as well as a PIP policy. He was quoted one premium by the Respondent's agent which included AD&D coverage and was not informed that the AD&D coverage was optional. He was given the impression by the Respondent's agent that the price he paid was for PIP coverage in a minimum amount and that there were no cheaper or less encompassing options available in order for him to have the legally required PIP coverage. He was given to understand that the death benefit portion was automatically mandatorily included. Indeed, if Mr. Walton had known that the AD&D coverage was optional, he would not have bought it, inasmuch as he already had similar coverage. In any event, he signed applications for both types of coverage, without realizing he only had the option to buy just the PIP coverage, paid the agent and left the office. His policies were ultimately mailed to him. Although the agent explained the coverage to some extent to him, the agent never explained that the packaged PIP and AD&D coverage could have been purchased separately with the PIP coverage costing less than the above-mentioned $47 rate for both. Mr. Walton would not have normally purchased AD&D coverage at additional cost, but did so in the belief that it was part of what he was legally required to purchase. On or about March 3, 1982, Jacquelyn Tillman went to Respondent's agency on Silver Star Road seeking to purchase "tag insurance." She was quoted a price by Roger Peltier or someone under the Respondent's supervision and control, of $47 for the requested PIP coverage. Indeed, the $47 included the PIP policy as well as an AD&D policy written by American Travelers Association. Ms. Tillman paid the required premium and signed applications for both type policies in the course of her meeting with the Respondent's representative. She was not informed that the $47 she paid included anything more than PIP coverage, when indeed it included an AD&D policy. Had she known that the AD&D policy was included in that premium rate which she paid, she would not have purchased it. Thus, the coverage she actually purchased was not fully explained to her and the purpose of the fees charged was not explained. Although the AD&D policy was indeed optional, she was not informed that she had the option to select it or refuse it, in the process or purchasing the minimum legally required PIP coverage. On or about April 15, 1982, Mr. Frank A. Walliman went to the Irma Avenue office of the Respondent's agency for the purpose of buying minimum liability coverage for his car. He only wanted and believed he only bought, liability insurance, as well as PIP coverage which he knew to be legally required at the time. Indeed, he was sold an AD&D policy as well. The fact that the PIP and liability coverage he bought also included for the total price, an AD&D policy, was not disclosed to him. He neither requested nor desired to pay additional money for an AD&D policy, and would not knowingly have purchased it at additional cost. In March, 1981, Mr. George Justus visited the Allied Agency at Irma Avenue for the purpose of buying minimal PIP or "tag insurance. On that date, from an unknown agent of Respondent, Mr. Justus bought insurance for a premium of $57. The extent, types, terms and details of his coverage were not explained to him, although he did sign applications for an AD&D policy, as had the other customers discussed above, as well as a PIP policy, for which he paid the total of $57. He neither requested nor desired an AD&D policy at extra cost. The fact that the AD&D policy from American Travelers Association was at extra cost over and above the PIP coverage he originally desired was not explained to him, nor was the fact that it was legally optional coverage explained to him. On or about March 13, 1982, Mr. Johnny Moore visited the Irma Avenue office of the Respondent's agency. Mr. Moore wanted to buy minimum "car insurance." He paid approximately $50 for PIP coverage as well as an AD&D policy. He signed applications for both policies, although his original desire when he went to the agency was to buy minimal car insurance. Mr. Moore testified however, that he did want as much coverage as he could afford and he bought the two policies with the awareness that he was also getting an AD&D policy. Thus, in some fashion, the fact that he was getting an AD&D policy as well as a PIP policy was disclosed to him in this instance. On or about April 14, 1982, Mr. David R. Lowe visited the Respondent's agency at Irma Avenue for the purpose of buying minimum PIP coverage for purposes of buying his automobile tag. Just as in the case of the other customers, Mr. Lowe was also sold an AD&D policy which he did not request nor intend to purchase when he went to the agency. The fact that he had purchased, on a separate application, an AD&D policy was never explained to him. Indeed, although Mr. Lowe recalls filling out the forms, his testimony reveals that his wife actually filled out the application forms for him because he is largely illiterate. In any event, he-did not understand that he had purchased an AD&D policy, nor did he understand that such a policy was optional and not legally required of him in order to purchase the minimum legally required PIP insurance. Sometime in late 1981, Cynthia Zellers visited the Irma Avenue office of the Respondent's agency and conversed with Mr. Jim Morris, the Respondent's resident licensed agent. She informed him that she wanted the minimum legal coverage for her automobile and paid the premium quoted. Indeed, she purchased unbeknownst to her, an AD&D policy, as well as the minimum PIP coverage, although she clearly informed Mr. Morris she wanted nothing more than the minimum legal coverage. She had her discussion with Mr. Morris in the afternoon at his office at the Respondent's agency, and was in no particular hurry to process her application. Still no one at the agency informed her that the AD&D policy she was purchasing was optional and not legally required, and had she known that she would not have purchased the AD&D coverage at additional cost. Mr. Robert Scheer also went to the Irma Avenue office of the Respondent seeking minimum PIP coverage. He specifically informed the employee or agent (name unknown) that he wanted only minim; PIP coverage, and that he wanted the cheapest insurance possible for two cars, so that he could get his automobile license plates. Indeed, Mr. Scheer signed applications for both AD&D coverage as well as PIP coverage. The fact that he had purchased AD&D coverage was never disclosed to him, nor was the fact that it was optional coverage (under the law) ever explained to him. Mr. Scheer would not have purchased the AD&D coverage for an extra premium amount had he known it was an optional coverage, not legally required to be included with the PIP coverage. On approximately May 8, 1982, Mr. Lawrence S. Ternest went to the Allied Agency on Irma Avenue and told an unindentified man employed there, that he merely wanted to purchase PIP coverage, the minimum necessary for purchase of his automobile tags. He was quoted a premium of $47 by Respondent's agent or employee. No mention was made to him that that amount included the premium for an AD&D policy. He signed the pertinent applications in evidence, and thought that he had merely purchased PIP coverage as he had desired to do, and the fact that he purchased AD&D benefits included in that $47 premium was not explained to him, nor was the fact that such was not legally required. Had he known he had purchased AD&D coverage and that it was not legally required in order to obtain his automobile tag, he would not have bought it at extra cost above the premium attributable to PIP coverage. Witnesses Peltier and Morris, who were agents of the Respondent operating two of the three offices at times pertinent hereto, as well as Linda Getz, established that the Respondent gave his agents in charge of all offices specific instructions that no one was to market PIP coverage without packaging it with AD&D coverage. This directive was carried out by the agents and employees working under Respondent's supervision and control by charging one premium when a person requested PIP auto tag coverage and including in that premium an additional AD&D insurance policy and thereby charging enough premium to cover the costs and profit margins attributable to both types of policy. These witnesses also established that they did not habitually explain coverages to customers such as those discussed above, but rather answered questions if the customer asked regarding any coverage details. "Sliding" is the practice of tricking insureds into buying coverages other than those they wish to purchase. In a typical sliding scenario, an agent who engages in the practice, generally gives the insured a single document containing more than one policy, so that the insured believes he is only applying for and purchasing one policy. In the case at bar, the customers were provided separate application documents for each of the two pertinent policies. The types of policies were identified in large bold-faced print, i.e. the AD&D policy was identified at the top of its application form as an AD&D policy. The customer's signatures were required on each policy application, and a beneficiary had to be named, which designation each customer was aware of. Receipts were provided to the customers for both policies and most of the insureds read the agreements prior to signing them. As established by an accepted expert witness, Andrew M. Beverly, the Respondent's policy of packaging PIP coverage with AD&D coverage does not, in itself, amount to sliding or dishonest and fraudulent practice. Many insurance agents and agencies do this in order to economically justify their sale of the minimal type of PIP coverage requested by the type of customers involved in the case at bar. Insurance agents ad agencies cannot economically and profitably sell PIP coverage alone, as Mr. Beverly clearly established, rather, it must be packaged with some other type of coverage in order for the sale to the customer to generate sufficient revenue for the agency to cover the cost of writing the coverage, and "opening" the file on that customer, plus some modicum of profit margin. Mr. Beverly established that such an agent as the Respondent may ethically package policies and sell multiple policies for packaged rates as here, and may ethically refuse to sell single, minimal PIP coverage, when the premium revenue received will not justify the cost of writing the coverage. Mr. Beverly extensively reviewed the Respondent's files regarding the subject customers and others and concluded that the files were reasonably well- kept and were representative of a reasonably well-run insurance agency of this nature. The files reflected that the customers were indeed sold packaged AD&D and PIP coverage, but signed separate policy applications. Mr. Beverly stressed however, that when a customer comes in requesting only one type of coverage, such as PIP, and the agent or other person servicing sells him some other coverage or coverage in addition to that requested, then the complete details regarding that coverage, including disclosure of any additional price, and all other ramifications to the customer regarding the addition of coverage, and charging therefor, in addition to that originally requested, must be fully explained and disclosed.
Recommendation Having considered the foregoing Findings of Fact and Conclusions of Law, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, and the evidence of record, it is, therefore RECOMMENDED that Respondent be found guilty of violating Subsection 626.611(9), 626.621(2), 626.621(6), 624.11, and 627.736 (1), Florida Statutes, as to Counts 3, 4, 5, 12, 15, 17, 18, 19, 21, 22, 23 and 24 of the Administrative Complaint, and that his insurance license be suspended for 60 days. All other charges should be dismissed. DONE and ENTERED this 17th day of August, 1984, in Tallahassee, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904)488-9675 FILED with the Clerk of the Division of Administrative Hearings this 17th day of August, 1984.
The Issue Whether Respondent committed the violations alleged in the Administrative Complaint and, if so, what penalties should be imposed.
Findings Of Fact Based upon the evidence adduced at hearing and the record as a whole, the following findings of fact are made: Respondent's Licensure and Work History Respondent is now, and has been at all times material to the instant case, licensed by Petitioner as a general lines (property and casualty) insurance agent. At no time material to the instant case has he been licensed as a surplus lines agent. In the 30 plus years that he has been in the insurance business, no licensing agency has taken any disciplinary action against him. From January of 1997 until July of 1997 (which includes the entire period during which the events described in the Administrative Complaint took place), Respondent worked as an insurance agent for Braishfield of Florida, Inc. (Braishfield), an insurance agency/brokerage firm. (In July of 1997, he started his own insurance agency/brokerage firm, Bandel and Associates, which he still operates.) The Saxony Condominium Association The Saxony Condominium Association (Association) consists of the owners of the 672 units (located in 14 buildings) in the "Saxony" section of the Kings Point condominium development in Delray Beach. The development is approximately seven to ten miles from the Atlantic Ocean. For the past six years, Elinor Lichten has been the president of the Association. The Association's Insurance Committee In August of 1992, before Ms. Lichten became president of the Association, Hurricane Andrew made landfall in the South Florida area and caused extensive property damage. In the years that followed, the premiums that the Association paid for insurance increased dramatically. In February of 1996, in an effort to contain these escalating insurance costs, the Association formed an insurance committee. Ms. Lichten named Dan Miller to serve as the chairman of the committee. Mr. Miller appointed the remaining members on the committee. Ed Greenbaum was among those Mr. Miller appointed to the committee. Ms. Lichten was not a voting member of the committee, although she did attend some (but not all) of the committee's meetings. The Association's Fireman's Fund Policies At the time the insurance committee was formed, the Association was insured by Fireman's Fund. It obtained this insurance coverage through Sedgwick James of Florida, Inc. (Sedgwick). The insurance agent who represented Sedgwick in its dealings with the Association was J. Simione. In October of 1996, the Association received a notice that the Fireman's Fund policies would not be renewed. Upon receiving the notice, Ms. Lichten telephoned Mr. Simione, who advised her that he was "negotiating to reinstate that policy and that in all probability it would be reinstated." Mr. Simione subsequently contacted Ms. Lichten and advised her that the negotiations had been successful. The Fireman's Fund policies were thereafter renewed. The renewed policies had an effective date of December 1, 1996, and an expiration date of December 1, 1997. The Association agreed to the renewal notwithstanding the renewed policies' high premiums and deductibles. Members of the insurance committee, who had met with Mr. Simione "between three to five times" prior to the renewal of the policies, had advised the committee members that there were no better options available and that they should "be absolutely delighted [to] have the coverage [they] had since insurance companies were not renewing policies." When they asked Mr. Simione to "find [a] layered program [for the Association, like those other condominium associations in the area had] where the [risk] is divided so that the premiums are reduced," Mr. Simione told them that it "wasn't possible," explaining that "all of the layering programs [they] had referred to had since fallen apart." The Insurance Committee's Discussions with Respondent Following the renewal of the Fireman's Fund policies, members of insurance committee, at the direction Mr. Miller, "start[ed] to interview" other insurance agents "to see whether or not Mr. Simione's comment to [them concerning the unavailability of a layered program for the Association] had any validity." Respondent was the second agent to be "interview[ed]." He was initially contacted by Ed Greenbaum, who told him that the insurance committee "was very upset by the current coverage package they had" and wanted to see if "there was something better." Respondent spoke subsequently with both Mr. Greenbaum and Mr. Miller. Following this conversation, he sent Mr. Greenbaum the following letter, dated February 23, 1997: It was pleasure talking to you and Dan Miller and I appreciate your candor. Based on the information you provided on the phone, it appears the premiums and deductibles that are currently in force are excessive. My comment is based on what is available in the marketplace today. It appears that the earliest I can sit down and discuss this with the board is in May. My recommendation is that we move our meeting up to March or April. This will enable us to obtain the best possible terms and conditions as we will have ample time prior to the beginning of the hurricane season. The association has nothing to lose and potentially a lot to gain. My evaluation requires a minimum amount of time. After our meeting and a review of the current program and losses, I will be in a position to confirm in writing what improvements can be made. I look forward to hearing from you. Respondent provided the "marketing person" at Braishfield with the information he had been provided by Mr. Greenbaum and Mr. Miller concerning the Association's insurance needs and loss history. The "marketing person" thereupon canvassed the market to determine if there were any alternatives to the Fireman's Fund policies. Such canvassing revealed that there did exist an alternative to the Fireman's Fund policies, in the form of a layered program in which three of the participating insurers were not "authorized insurers," as that term is used in Florida's "Surplus Lines Law." The "marketing person" prepared the following "Statement of Diligent Effort" for Respondent's signature as the "producing agent": Pursuant to [sic] Section 626.914(4), Florida Statutes, requires producing agents to document that a diligent effort has been made to place a risk with at least three (3) authorized insurers prior to contacting a surplus lines agent to export the risk in the surplus lines market. The following form, prescribed by the Department, must be completed IN FULL for each risk. Name of person contacted and telephone number are MANDATORY. COUNTY OF RISK: Palm Beach County NAME OF INSURED: Saxony A-N Condominium Association TYPE OF COVERAGE: Property AUTHORIZED INSURER #1 NAME- Hartford Insurance TELEPHONE NUMBER- 800-824-1732 PERSON CONTACTED- Ben Wilson DATE OF CONTACT- March 21, 1997 REASON FOR DECLINATION- Type of Risk/Property Location AUTHORIZED INSURER #2 NAME- General Accident Ins. TELEPHONE NUMBER- 407-660-1985 PERSON CONTACTED- Bob Rayser DATE OF CONTACT- March 21, 1997 REASON FOR DECLINATION- Type of Risk/Property Location AUTHORIZED INSURER #2 NAME- RISCORP TELEPHONE NUMBER- 800-226-7472 PERSON CONTACTED- Bryan Flowers DATE OF CONTACT- March 21, 1997 REASON FOR DECLINATION- Risk does not qualify for program Respondent signed this "Statement of Diligent Effort" on the line provided for the "[s]ignature of [p]roducing [a]gent." He did so in good faith based upon the representations made to him by the "marketing person." In April of 1997, Respondent met with members of the insurance committee and Ms. Lichten at Mr. Miller's residence to discuss the possibility of the Association obtaining, through Braishfield, the layered program of insurance described above to replace the Fireman's Fund policies that were then in effect. Respondent, on behalf of Braishfield, made a "conceptual" proposal at the meeting. After the meeting, Respondent sent the following letter, dated April 16, 1997, to Dan Miller: It was a pleasure meeting with you and the committee and again I want to apologize for arriving late. Per our discussions, we will provide our final proposal after receiving written confirmation regarding the three year loss history for property and liability. Our proposal will be effective June 1, however we will use whatever date is acceptable to the committee. We anticipate, it will take us approximately two weeks from the time we go into the marketplace until everything is finalized. It appears, there is minimal exposure for equipment, such as heating, cooling and electrical systems. Consequently, we will not include machinery and equipment breakdown in our final proposal. I strongly recommend that you obtain an updated appraisal on your buildings as it is extremely important that your replacement cost reflect today's cost. This will eliminate any potential coinsurance or under insurance problem in the event of a loss. I look forward to working with you and the committee and being appointed as your broker to assist you in all your insurance needs. In May of 1997, Respondent, on behalf of Braishfield, presented a detailed formal written proposal (Braishfield's Written Proposal) to the Association. Braishfield's Written Proposal contained an "Executive Summary" which read as follows: Executive Summary Per our conceptual proposal and correspondence of April 16, we are pleased to present our final program including terms and conditions. Our proposal is based on information provided by the Insurance Committee on policies that are currently in force. Our comparison of coverages incorporates this information. The differences are what we believe to be the key or salient features of each program. The bottom line is, we are offering a substantial premium savings, significantly lower deductibles with comparable coverage. Our recommendation is to appoint Braishfield of Florida as your broker to place all coverage in effect as soon as possible. The "final program" referenced in the "Executive Summary" was a layered program. The "[p]articipating [c]arriers" in the program and their "Best's Ratings" were listed as follows in Braishfield's Written Proposal: PARTICIPATING CARRIERS Property Insurance Carriers Best's Rating Lexington Insurance A++15 General Star Insurance A++7 Royal Surplus Lines A-7 General Liability/Crime New Hampshire Insurance A++15 Directors & Officers Liability Chubb Insurance Group A++15 Umbrella Liability Great American Insurance A+11 The three "carriers" providing "property insurance" coverage were not "authorized insurers," within the meaning of the "Surplus Lines Law." The "[b]enefits of the Braishfield [p]roposed [p]rogram [o]ver [c]urrent [p]rogram" were described in Braishfield's Written Proposal as follows: A Premium Savings of $42,529 Annually.* No Coinsurance Penalty. A 2% Deductible per building as respect to the perils of wind and hail. A $5,000,000 limit for Excess Liability A $5,000 AOP Deductible * Our premium savings is based on the following: Company Coverage Premiums Fireman's Fund Package $144,071 Fireman's Fund Umbrella $2,168 TOTAL $146,239 $ 12,966 (Agent's Fee) TOTAL $159,205 Proposal Cancellation Date June 1, 1997 Pro Rata Return Premium- $79,761 Short Rate Return Premium- $71,801 NOTE: A $1,000,000 Umbrella would produce a further savings of $3,395 Braishfield's Written Proposal also contained a "Program Comparison," which provided as follows: Coverage Current Proposed Program Program $20,454,000 Blanket As Per Limit on Schedule Real and Personal Property Coinsurance Yes No Demolition $250,000 Cost Law & $5,000,000 $500,000 Ordinance Deductible -Wind 3% of $20,454,00 2% Per Building -AOP $10,000 $5,000 Valuation Replacement Cost Re- Placement Cost Unnamed Yes See Note Storm Deductible Umbrella $1,000,00 $5,000,000 Limit NOTE: Our comparison does not include unnamed storm wind coverage. This will be discussed during the presentation. Respondent met with the committee members and Ms. Lichten for about eight hours on or about May 6, 1997. At the meeting, he explained Braishfield's Written Proposal in detail and answered questions. On or about May 9, 1997, Respondent sent the following letter to Mr. Miller for the insurance committee's consideration: The benefits to the association under Braishfield's proposal are: A $5,000 AOP deductible Significantly lower premium No co-insurance penalty A superior wind deductible in the event of a catastrophe such a hurricane. The elimination of any rate increase in 1997 even if this is a bad year for the insurance industry. Outstanding insurance service will include a renewal strategy meeting 120 days prior to expiration. This meeting will disclose options, market conditions and pricing projections. This will allow the committee to act proactively instead of reactively in the best interest of the association. -$5,000,000 Umbrella. One other point to consider involves the payment of premium. If you cancel the Fireman's Fund Package policy on June 1, the earned premium is estimated to be $72,035. If you include a short rate penalty this increases to $79,239. Including the May installment the association has paid $96,165. The difference or the return premium due the association is $24,130 which should be refunded within 60 days. Since you have paid more premium than is earned no payment should be made for June. This enables the association to apply June's payment of $12,015 toward the down payment under Braishfield's program of $26,557.16. The net amount the association has to come up with is $14,542.16. I trust this will be helpful to the committee. It has not been shown that that Respondent at any time knowingly provided the Association (through its officers and representatives) with any false or misleading information or that he knowingly, with the intent to deceive, hid any information from the Association. He disclosed, among other things, that Braishfield's proposed layered program, unlike the Fireman's Fund policies, included "unauthorized insurers" and explained the differences between "unauthorized" and "authorized" insurers. In explaining these differences, he talked about the Florida Insurance Guaranty Act, which protects those insured by "authorized insurers" in the event of insurer insolvency, but does not offer similar protection to those insured by "unauthorized insurers." Respondent also advised that the mid- term cancellation of the Fireman's Fund policies would result in a "short rate" penalty and, in addition, he discussed how Braishfield's proposed layered program would be financed and the interest rates that would be charged. The Association's Acceptance of Braishfield's Written Proposal The insurance committee brought Braishfield's Written Proposal before the Association's board of directors, which voted 15 to 14 in favor of accepting the proposal and replacing the Fireman's Fund policies with the layered program proposed by Braishfield. Post-Acceptance Activities After learning of the results of the vote, Respondent sent the following letter, dated May 27, 1997, to Mr. Miller: I was delighted to hear that the board has made their decision in favor of Braishfield. If we are looking at a May 31, 1997, effective date it is essential that the following matters be addressed immediately: The original finance agreement signed in the appropriate places indicated by "x." A check in the amount of $26,557.67 should be made payable to Braishfield of Florida for the down payment. Both the finance agreement and the check must be available to be picked up by me prior to May 31, 1997. A broker of record letter naming Braishfield on the Director's and Officer's liability policy must be executed and signed. The specific policy number should be included in the caption. A sample letter was included in our final proposal. We will be sending you a completed statement of values form which will require signature of a board or insurance committee member. I have taken the liberty of drafting a letter advising the agent to cancel all coverages effective May 31, 1997. Included is a request to confirm the return premium due the association as well as any unearned fee that will be returned. This letter should be written on Saxony letterhead and signed by you or the President of the association. In accordance with Respondent's suggestion, Ms. Lichten sent the following letter, dated May 28, 1997, to Mr. Simione: Re: Fireman's Commercial Insurance Pkg. Policy #S15MZX80662013 Fireman's Umbrella Insurance Policy #XSC 00074217738 Dear Mr. Simione: Effective May 31, 1997, please cancel above captioned policies. The Saxony Board of Directors at a Special Meeting held on May 27, 1997 voted to appoint a new agent. Please acknowledge the above cancellation in writing and also confirm the return premium due under each policy, including any penalty. Confirmation of any unearned brokerage fee should also be included. All calculations should be based on a May 31, 1997 cancellation date. Thank you for your cooperation and consideration you have given Saxony over the past few years. The following day, May 29, 1997, Ms. Lichten sent the following letter, with the described enclosures, to Respondent: Enclosed herewith please find the following: Duly signed Finance Agreement for our Insurance as agreed upon. Check #001 payable to Braishfield of Florida date May 28, 1997 drawn on Sun Trust in the amount of $26,557.67, which represents our down payment. Please send us [a] letter acknowledging receipt of the above together with [a] letter indicating that we will indeed have insurance as we agreed to commencing May 31, 1997. Looking forward to working with you. That same day, May 29, 1997, Respondent sent Ms. Lichten "copies of binders confirming coverage effective May 31, 1997 as per [Braishfield's] May 6th proposal." On June 5, 1997, Ms. Lichten sent Mr. Simione a signed (by Ms. Lichten) and dated (May 29, 1997) "Cancellation Request/Policy Release" form formally requesting cancellation of the Fireman's Fund policies, effective May 31, 1997. On or about June 20, 1997, Ms. Lichten was sent a Certificate of Insurance "certify[ing] that the policies listed [which had been described in Braishfield's Written Proposal] ha[d] been issued to the [Association] for the policy period indicated [May 31, 1997, to May 31, 1998]." On or about June 30, 1997, the appraiser that the Association had hired (Allied Appraisal Service) completed the "updated appraisal on [the Association's] buildings" that Respondent had recommended. Respondent reviewed the appraisal report and prepared a written analysis of the report, which he subsequently discussed with the members of the insurance committee and Ms. Lichten. In his written analysis, Respondent stated, among other things, the following: This proposal analyzes the appraisal made by Allied Appraisal Service on June 30, covering the building and surrounding improvements at Saxony "E," Delray Beach, Florida 33446. The purpose is two fold. To ascertain if the values being reported to the insurance companies reflect as closely as possible the exposure at risk. This includes the impact on coverages such as limits and deductibles. The other area is the premium which includes various options. The property coverage is underwritten in a layered program using three companies. The total limit of coverage is $20,454,000, which is subject to a sublimit per building of $1,461,000. Based on the updated appraisal, the 100% replacement cost on buildings and improvements is $24,561,978 which breaks down to $1,754,427 per building. These amounts were arrived at by eliminating and or reducing those items that were not the responsibility of the association. Other adjustments were made regarding contingencies and contractor's profit which should be discussed. The breakdown is provided on Exhibit I attached. The difference or the amount of increase required to comply with the appraisal is $4,107,978. The change in values increases the wind deductible from $29,220 to $35,088 per building. On or about July 18, 1997, Respondent (who, by this time, had left the employ of Braishfield and had started his own insurance agency/brokerage firm) sent Ms. Lichten a letter, which read as follows: Per our meeting with the insurance committee on Wednesday, July 16, it was recommended the building values be amended based on the property appraisal made by Allied Appraisal Service[] on June 30, 1997. The 100% replacement value including improvements is $24,561,978. The total amount of insurance in force is $20,454,000. The net result is a[n] increase of $4,107,978. Also included in the appraisal is the cost to change certain items revised by current building codes. This is known as law or ordinance coverage. We recommend an increase in the limit by $850,000 to $1,350,000 to cover the additional exposure. Both of the above increases place the property insurance in compliance with the appraisal. The underwriter has agreed to provide blanket coverage using 90% coinsurance. The blanket amount excluding law or ordinance coverage is $22,105,760. This is an improvement over the existing program as the blanket amount would apply to any one loss and the basis for determining the premium would be significantly less. Using an effective date of July 31, the additional premium including taxes and fees is $8,446.20. In addition to the improvement in coverage and key deductibles, our program provides a net savings in excess of $34,000 a year over the Fireman's Fund policy. The changes that Respondent had recommended based upon the "updated Appraisal" were "bound," as Respondent advised Ms. Lichten by the following letter dated August 12, 1997: This will confirm that effective July 31, the following changes have been bound: The total insurable value increased to $22,105,780. The Law or Ordinance coverage increased to $1,350,000. Coverage is on a blanket basis. The coinsurance clause has been amended to 90%. The 2% wind deductible per building is increased to $31,580. All of these changes were based on the property appraisal made by Allied Appraisal Service on June 30, with some exceptions, such as Misc. & Contingencies and Overhead/Profits. It was agreed by the insurance committee not to include these items. Attached is our invoice amount of $8,446.20 representing the additional premium due hereunder. Please make your check payable to Braishfield of Florida and send it to me. In October of 1997, Respondent submitted a renewal proposal to the Association. The proposal was accepted and renewed coverage was bound, effective December 1, 1997, for a period of three years.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department issue a final order dismissing the Administrative Complaint issued against Respondent. DONE AND ENTERED this 7th day of July, 2000, in Tallahassee, Leon County, Florida. STUART M. LERNER 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 7th day of July, 2000.
The Issue The issue is whether proposed rule 4-141.020 is an invalid exercise of delegated legislative authority.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Background These cases arose after respondent, Department of Insurance (DOI), published in the Florida Administrative Weekly its notice of intent to adopt new rules 4-141.020 and 4-141-021, Florida Administrative Code. The first rule prescribes procedures for the withdrawal and surrender of a certificate of authority, or the discontinuance of writing insurance in the state. The second rule specifies procedures for implementing the moratorium phaseout process in Section 627.7013, Florida Statutes. By agreement by the parties, rule 4-141.021 is no longer in dispute. Contending that rule 4-141.020 is invalid for numerous reasons, petitioners, United States Fidelity and Guaranty Company (USF&G) and Fidelity and Guaranty Insurance Company (FGIC), filed their petition to determine invalidity of proposed rules on February 25, 1994. Generally, the petition alleges that the rule as a whole conflicts with other statutory and constitutional provisions, as well as the authorizing statute. It further alleges that subsections (3), (5), (8), and (9)(b) of the rule conflict with the authorizing statutes, and that paragraph (9)(b) is also arbitrary, capricious and vague. Petitioner, Holyoke Mutual Insurance Company in Salem (Holyoke), filed its petition to determine invalidity of proposed rules on February 25, 1994. The petition generally alleges that the rule as a whole conflicts with the law being implemented and is arbitrary and capricious. More specifically, the petition alleges that subsections (2)(b), (5), (6)(e)4., (7)(a), (7)(b), (8), (9), (9)(a), and (9)(b) contravene statutory provisions, and that the rule as a whole violates the due process, equal protection, commerce, and impairment of contract clauses of the state and federal constitutions. The Parties Respondent is the state agency charged with the responsibility of administering and enforcing the laws of the state governing insurance companies. Petitioners USF&G and FGIC are foreign insurers authorized to transact insurance in the State of Florida, including personal lines and residential insurance. USF&G and FGIC filed a notice to withdraw from homeowners multi-peril lines of insurance on July 7, 1993, in accordance with Subsection 624.430(1), Florida Statutes. Under that law, petitioners were required to give ninety days notice to the DOI before discontinuing those lines of insurance. The ninety-day notice period would have expired on October 5, 1993. Due to various emergency rules adopted by DOI and newly enacted legislation, the notice to withdraw never became effective. Because the proposed rule would affect their right to discontinue writing certain lines of insurance, petitioners are substantially affected by rule 4-141.020. Petitioner Holyoke is a mutual insurance company that writes business in all the New England states, New York and Florida. As of December 31, 1994, Holyoke had 4,027 homeowner policies and 1,541 dwelling fire policies outstanding in the State of Florida. Some of these property and insurance contracts were entered into prior to the enactment of Section 627.7013, Florida Statutes, which provides for a phaseout of a moratorium imposed by the legislature on the cancellation or nonrenewal of certain policies. On March 11, 1993, Holyoke filed a notice of withdrawal from all lines and kinds of insurance in the State and of the surrender of its certificate of authority pursuant to Section 624.430, Florida Statutes. Its plan was to withdraw over six months, giving all policyholders six months notice before nonrenewing policies over a twelve month period. Due to various emergency rules and statutes, Holyoke has been unable to cease doing business in the state. Since rule 4-141.020 would regulate Holyoke with regard to withdrawing from the homeowners multi-peril insurance market, it is substantially affected by the proposed rule. Events Leading to the Adoption of the Rule Following Hurricane Andrew's landfall in South Florida on August 24, 1992, the insurance industry suffered catastrophic casualty losses which totaled around $15 billion. Many insurance companies announced they were either withdrawing from the state altogether, were withdrawing from the homeowners' line of business, or were cancelling or nonrenewing substantial blocks of policyholders. Beginning on August 31, 1992, the DOI began to issue a string of emergency rules designed to limit cancellations and nonrenewals of insurance policies. None of these rules, however, purported to regulate the withdrawal of insurers from the state or from particular lines of insurance. During this same time period, the DOI adopted two emergency rules establishing procedures for insurers wishing to withdraw from any property lines in Florida. These emergency rules pertaining to insurer withdrawals expired on May 12, 1993, and no authority to restrict withdrawals retroactively has been authorized by the legislature. On May 18, 1993, the DOI imposed emergency rule ER 93-18 which represented its response to market stabilization in homeowners insurance lines. The rule imposed a moratorium on the nonrenewal and cancellation of homeowners insurance policies. The rule did not purport to regulate insurer withdrawals under Section 624.430, Florida Statutes, which governs the surrender of certificates of authority or discontinuance of writing certain lines of insurance in the state. Effective June 8, 1993, the legislature enacted Chapter 93-401, Laws of Florida, which essentially codified a DOI emergency rule and imposed a moratorium on cancellation or nonrenewal of personal lines residential property insurance policies from May 19, 1993, until November 14, 1993. The law was specifically confined to imposing a time-limited moratorium on only the "cancellation and nonrenewal of residential property coverages." Just prior to the expiration of the moratorium, the legislature enacted Section 627.7013, Florida Statutes, which provided for a "phaseout" of the moratorium imposed in Chapter 93-401. The statute provides for the extension of the moratorium on nonrenewal or cancellation of personal lines property insurance imposed by Chapter 93-401, limits unrestricted nonrenewals to five percent per year, and is to remain in effect until November 14, 1996. The statute makes no reference to withdrawals by insurers. Indeed, its purposes, as stated in subsection (1) of the statute, "are to provide for a phaseout of the moratorium (on cancellation or nonrenewal of personal lines residential property insurance policies) and to require advance planning and approval for programs of exposure reduction." It is especially noteworthy that during the same legislative special session in which section 627.7013 was enacted, the legislature considered and rejected legislation that would have created a new section 624.431 granting DOI the authority to condition and prevent withdrawals by insurers. Thus, the legislature rejected a statute which would have provided the DOI with the same authority included in the proposed rule. There is no clear expression in section 627.7013 that the legislature intended the law to operate in a retroactive manner. Because the statute imposes new obligations on insurers, it must be presumed that the legislature intended it to operate prospectively. In contrast, and in response to Hurricane Andrew, when the legislature adopted Chapter 92-345, Laws of Florida, in its December 1992 special session, subsection (2) of section 1 of that law contained specific language that "this section shall take effect upon becoming a law and shall apply retroactively to August 24, 1992." On February 4, 1994, the DOI published notice of its intent to adopt new rules 4-141.020 and 4-141.021. However, the latter rule is no longer in issue. Rule 4-141.020, which is sometimes referred to as the "withdrawal rule," generally sets forth the procedures for withdrawal, surrender of certificate of authority, or discontinuance of writing insurance in the state under section 624.430. More specifically, it provides definitions of various terms [paragraph 2)], provides a DOI interpretation of section 624.430 (paragraphs (3) and (5)], prescribes procedures for withdrawals and reduction of insurance (paragraphs (6)-(8)], and sets out DOI policy regarding the relationship of reduction in business to the moratorium phaseout in section 627.7013 [paragraph (9)]. Sections 624.308(1) and 624.6012, Florida Statutes, are cited as the specific authority for adopting the rule while Sections 624.430, 624.6011, 624.6012 and 627.7013, Florida Statutes, are identified as the law implemented. Prior to Hurricane Andrew, if an insurer wished to (a) discontinue the writing of any one or more multiple kinds of insurance, (b) withdraw from the state, or (c) surrender its certificate of authority, it would simply provide to the DOI notice of its intent to do so as required by section 624.430. As long as the notice complied with the statutory requirements, the withdrawal was self- executing, and DOI did not require specific approval or impose further conditions on the insurer. Thus, before this controversy arose, DOI took the position that the only duty or power granted to it under the section was a ministerial one of altering the certificate of authority to reflect the insurer's withdrawal from certain lines of insurance or, in the case of complete withdrawal from the state, to cancel the insurer's certificate of authority. It has never adopted any permanent rule construing the statute in any other fashion. Although section 624.430 has not been amended by the legislature since it was enacted in 1963, under the proposed rule, section 627.7013 is interpreted as restricting the right of an insurer to withdraw from the state entirely or from a line of insurance. Indeed, the rule provides that section 627.7013 takes precedence over section 624.430, and unless an insurer had filed its notice of withdrawal prior to August 24, 1992, insurers are severely limited in their ability to discontinue lines of business or withdraw from the state through at least November 14, 1996. The Petitions, Stipulation and Proposed Final Orders Because the initial petitions, prehearing stipulation, and proposed final orders sometimes speak to different issues, and some of the allegations are either unclear or not precisely pled, it is necessary to comment on these matters before making findings as to the validity of the rule. Since the initial petitions frame the issues in these cases, and DOI counsel has objected to expanding the issues through stipulation or otherwise, the undersigned has limited the issues to those raised in the initial petitions and deemed all others to be untimely raised. Further, where a party has framed an allegation in its complaint, but failed to argue that issue in its proposed order, that allegation has been deemed to be abandoned. Finally, where allegations are nonspecific and speak to the rule as a whole, and the undersigned is unable to determine the language in the rule being challenged, those allegations have been disregarded. In their initial petition, USF&G and FGIC first contend that the rule as a whole is invalid because it conflicts with, extends or modifies sections 624.430, 627.7013 and "other existing (but unnamed) statutory authority," and it violates the Florida and U. S. Constitutions by interpreting section 627.7013 as taking precedence over section 624.430. In actuality, only subsection (9), and not the entire rule, speaks to this issue and thus the broad allegation has been narrowed in this respect. They have also alleged that the rule in its entirety is invalid because it conflicts with, extends or modifies the "authorizing statute" in that it purports to require filings and information not authorized by statute. Because these alleged illegal filing requirements are found in paragraph (6)(e), the undersigned has considered only that provision as subject to attack. USF&G and FGIC also allege that subsections (3), (5), (8) and (9)(b) are invalid because they conflict with, extend or modify the "authorizing statute." Finally, they allege that paragraph (9)(b) is invalid on the additional grounds that the language is arbitrary, capricious, and vague. Since the reference to paragraph (9)(b) appears to have been in error, and petitioners actually intended to challenge paragraph (9)(a), the undersigned will address the latter provision. In summary, then, and notwithstanding the broad allegations in the petition, only parts, and not the whole, of the rule have been placed in question by these petitioners. Because the proposed final order of USF&G and FGIC fails to address subsections (5) and (6)(e), the undersigned has deemed those allegations to be abandoned. Finally, the proposed order raises for the first time a contention that subsection (4) is invalid. This contention has been disregarded as being untimely raised. In its initial petition, Holyoke first contends that the rule in its entirety is invalid "because it would enlarge, contravene, and modify the specific provisions of law that it purportedly implements and because it would be arbitrary and capricious." It then goes on to plead that subsections (2)(b), (5), (6)(e)4., (7)(a), (7)(b), (8), (9), (9)(a), and (9)(b) are invalid on the ground they conflict with, extend, or modify other statutory provisions. Since no specific factual allegations have been made regarding the arbitrary and capricious nature of the rule, and there are no statutory allegations regarding the remaining parts of the rule, the undersigned will treat the petition as challenging only these paragraphs for the single ground stated. Finally, Holyoke alleges that the rule in its entirety violates the due process, equal protection, commerce, and impairment of contract clauses in the State and U. S. Constitutions. In its proposed order, Holyoke has further contended that the above paragraphs are also invalid on the grounds they are arbitrary and capricous, vague, fail to establish adequate standards and vest unbridled discretion in the agency. Because the latter three grounds were never raised in the initial petition and, as noted above, there are no specific allegations regarding the arbitrary and capricous nature of the cited paragraphs, these grounds have been disregarded as being untimely raised. Is the Rule Invalid? a. Rule 4-141.020(9) Petitioners' chief concern is the DOI's interpretation, as expressed in subsection (9) of the rule, that section 627.7013 takes precedence over section 624.430 "as to all attempted or desired reductions" affecting personal lines residential policies. Because "reductions" are broadly defined in paragraph (2)(b) of the rule as including the discontinuance of one or mulitiple lines of business, the withdrawal from the state, and the surrender of a certificate authority, subsection (9) effectively prevents an insurer from exercising its rights under section 624.430 until November 14, 1996, when the phaseout statute expires. Since the vitality of much of the rule turns on the validity of subsection (9), the multiple allegations concerning this provision will be addressed first. The exact language in subsection (9) is as follows: (9) Relationship of Reduction to Moratorium Phaseout. The department interprets Section 627.7013(2)(a)4., Florida Statutes, relating to certain applications for reduction filed prior to August 24, 1992, as indicating a legislative intent that as to all attempted or desired reductions affecting "Florida per- sonal lines residential policies" (hereinafter "residential policies"), other than those in which such reduction notice was filed prior to August 24, 1992, Section 627.7013 applies and takes precedence over Section 624.430, and prohibits or limits such reductions affecting residential policies, where there is any relation- ship between the reduction sought, and the risk of loss from hurricane exposure. Subparagraph (2)(a)4. of section 627.7013 provides the principal statutory support for the rule and reads as follows: 4. Notwithstanding any provisions of this section to the contrary, this section does not apply to any insurer that, prior to August 24, 1992, filed notice of its intent to dis- continue its writings in this state under s. 624.430, and for which a finding has been made by the department, the Division of Administrative Hearings of the Department of Management Services, or a court that such notice satisfied all re- quirements of s. 624.430. As explained at hearing by the author of the rule, "by implication" or "negative inference" the DOI construed the above statutory language as manifesting an intent on the part of the legislature to make all types of withdrawals, and not just the cancellation or nonrenewal of personal lines residential property policies, subject to the moratorium phaseout statute. In other words, DOI posits that the legislative exemption from the moratorium phaseout statute of an insurer who filed, prior to August 24, 1992, a notice of its intent to discontinue writings, supports the broad negative inference that section 627.7013 prohibits an insurer not only from "discontinuing its writing" of one or more lines of business after August 24, 1992, but also from withdrawing from the state and surrendering its certificate of authority. In making this interpretation of section 627.7013 in its rule, the DOI ignored the distinctions between "discontinuance of lines of insurance" versus "withdrawal from the state" versus "surrendering a certificate of authority." Section 627.7013 refers only to "discontinue," as opposed to a total withdrawal coupled with a surrender of a certificate. Whatever negative inference might be drawn from subparagraph (2)(a)4. regarding the discontinuance of a line of insurance before August 24, 1992, as opposed to after that date, it cannot be extended to prohibit an insurer's total withdrawal from Florida and the surrender of its certificate of authority. Such an interpretation is not only contrary to the plain language in sections 624.430 and 627.7013, but also subsection 624.416(1), which recognizes an insurer's right to surrender its certificate of authority. To this extent, then, the rule is an invalid exercise of delegated legislative authority. Assuming that the statute is a proper source of authority for imposing restrictions on discontinuing lines of insurance by virtue of the words "discontinue its writings" in subparagraph (2)(a)4., petitioners argue further that DOI has used the rule to interpret the statute so as to have it apply in a retroactive manner to insurance contracts in existence prior to the enactment of the statute. It is undisputed that all petitioners had insurance contracts in existence as of the date of the enactment of the law, and that the rule operates in a retroactive manner by applying to all notices of withdrawal filed prior to the enactment of section 627.7013 but after August 24, 1992. In resolving this issue, the undersigned cannot find, and respondent has not credibly reported, any clear expression in the statute that the legislature intended to apply the statute retroactively. At the same time, the statute affects petitioners' substantive rights by imposing new obligations or duties in connection with their right to withdraw under section 624.430, and thus it is deemed to be substantive in nature. Because the rule has the effect of imposing retroactive obligations and duties on petitioners in contravention of section 627.7013, subsection (9) is found to be an invalid exercise of delegated legislative authority. b. Rule 4-141.020(2)(b) Proposed rule 4-141.020(2)(b) defines the terms "reduce presence in Florida," "reduce," and "reduction" as follows: (b) "Reduce presence in Florida," "Reduce," and "Reduction," as used in this rule are inclusive terms meant to collectively refer to any and all of the following actions as may be desired or taken by an insurer: to surrender its Florida certificate of authority; to withdraw from Florida; or to discontinue the writing of any one or multiple lines or kinds of insurance in Florida. Holyoke contends that the foregoing language is invalid because the term "reduction" is defined as including a total withdrawal from all lines of insurance in Florida and the surrender of a certificate of authority, and thus it contravenes sections 624.430, 624.415, 624.416 and 627.7013. 34. Sections 624.430, 624.6011, 624.6012 and 627.7013 are cited by DOI as the source of authority for the definition. There is nothing in section 624.6011, which classifies insurance into seven "kinds of insurance," nor section 624.6012, which defines the term "lines of insurance," authorizing the broad and sweeping definition of the word "reduction." Similarly, section 627.7013(2)(b) authorizes the DOI to "adopt rules to implement this subsection," but subsection (2) deals only with "the cancellation or nonrenewal of personal lines residential property insurance policies that were in force on November 14, 1993, and were subject to the moratorium." Section 624.430 does speak in general terms to "(a)ny insurer desiring to surrender its certificate of authority, withdraw from this state, or discontinue the writing of any one or multiple kinds of insurance in this state," but in the context of this rule, which seeks to prevent all types of withdrawals under the authority of section 627.7013, the rule clearly contravenes the law being implemented. Therefore, paragraph (2)(b) constitutes an invalid exercise of delegated legislative authority. c. Rule 4-141.020(3) Proposed rule 4-141.020(3) reads as follows: (3) Actions Having the Substantial Effect of a Withdrawal or Discontinuance of Writing Insurance in this State. Reductions subject to Section 624.430, Florida Statutes, include any action or actions the reasonably forseeable substantial effect of which is, or will be when the action is completed, to have discon- tinued the writing of a kind or line of insurance or to have withdrawn from Florida. "Substantial effect" means that, for example, the continuance of a token amount of writing in Florida will not prevent a conclusion that a reduction subject to Section 624.430 has or will occur. Furthermore, it is not determinative of the existence of a reduction requiring notice under Section 624.430, that the action is taken in a single step, or by a series of steps over time, if the reasonably forseeable effect of the action or actions is or will to be to (sic) have substantially effected a reduction. The application of Section 624.430 does not depend upon the insurer's subjective statement of desire or intent as to the effect of its actions. In their petition, USF&G and FGIC contended this part of the rule impermissibly "conflicts with, modifies or extends the authorizing statutes in that the rule adopts a 'reasonably forseeable substantial effect' test for determining whether a proposed action is subject to Section 624.430, Florida Statutes." While petitioners have addressed other somewhat similar provisions in paragraph (9)(a), no argument has been made in their proposed order as to subsection (3), and the undersigned has accordingly assumed the issue to be abandoned. d. Rule 4-141.020(5) Proposed rule 4-141.020(5) prescribes the following time limitations in which an insurer can take no action after filing a notice of reduction with DOI: (5) Notice to Precede Action to Reduce Presence in Florida. An insurer shall take no action in furtherance of a reduction, prior to the expir- ation of 90 days after the receipt by the depart- ment of the notice required by Section 624.430. Prohibited actions include sending any notice of cancellation or termination, or notice of intent to cancel or terminate, to any policyholder, agent, managing general agent, reinsurer, or other person or entity. In their petition, USF&G and FGIC have alleged that the proposed rule conflicts with, modifies or extends "the authorizing statute in that it prohibits an insurer from taking action in furtherance of the proposed reduction prior to the expiration of the 90-day period under section 624.430, Florida Statutes." Holyoke makes the same allegation and contends the rule contravenes sections 624.430, 624.415 and 624.416. The record is not clear on the exact manner in which section 624.430 operates. It may be reasonably inferred, however, that once a notice of withdrawal is filed, the insurer may then begin notifying customers and other interested persons that it will withdraw at the end of the ninety-day statutory time period. By restricting insurers from taking this action in contravention of the terms of section 624.430, and there being no other valid source of authority, subsection (5) is found to be an invalid exercise of delegated legislative authority. e. Rule 4-141.020(6)(e)4. Paragraph (6)(e) describes the content of the notice to be given to DOI when providing a notice of reduction. Subparagraph 4. therein requires the following information to be provided in the notice of reduction: 4. Insurers shall also provide the department with the following information in the notice: A listing of all lines of insurance the insurer than has in force in Florida which will be affected by the reduction, and for each line, a statement of the approximate number of policies and dollars of premium then in force in Florida and which will be affected by the desired reduction. A description of what notice and treatment will be given by the insurer to its affected Florida policyholders concerning the reduction; and what steps will be taken by the insurer regarding processing of any outstanding covered claims of such policyholders while and after the insurer accomplishes its reduction. A description of projected impact of the reduction upon the insurer's Florida agent and agency force, if any. In addition to any other information related to the impact on agents, the insurer shall state the number of affected agents and give a brief description of what they are being told. Holyoke claims that this portion of the rule is invalid because it requires an insurer "to provide excessive information" in contravention of sections 624.430, 624.415 and 624.416. Since the proposed rule is based upon the premise that the DOI has the authority under section 627.7013 to restrict the ability of insurers to withdraw in any fashion, and such statutory authority has been found to be lacking in the laws being implemented, the rule is deemed to be an invalid exercise of delegated legislative authority on the ground it modifies or extends sections 624.430 and 627.7013. f. Rule 4-141.020(7)(a) and (b) These paragraphs describe the DOI's responsibilities once an insurer files a notice of reduction. They read as follows: (7) Department Action Upon Receipt of Notice. Subsequent to receiving the initial filing the department will request the insurer to provide further information, or will conduct such other investigation as is necessary to determine whether the initial information provided is accurate and whether the proposed action will have the effects projected by the insurer. Reduction Tolled During Certain Investi- gations. The department shall inform the insurer by (sic) that the proposed reduction would be in violation of, or cause a violation of, any provision of the Insurance Code or rule of the department, and thereafter the insurer shall not effect the reduction and shall terminate any action then under way towards accomplishment of the reduction, until such time as the department's allegation is determined under Section 120.57, Florida Statutes, and such appeals as may be taken by either party are concluded. Like so many other parts of the rule, Holyoke contends here that the foregoing language is invalid because it contravenes sections 624.430, 624.415, and 624.416. Since the proposed rule purports to place new restrictions on insurers seeking to withdraw, and it has no source of statutory authority, the above language is found to be an invalid exercise of delegated legislative authority on the ground it extends or modifies sections 624.430 and 624.7013. g. Rule 4-141.020(8) This provision provides that no surrender of a certificate is effective until approved by DOI. The specific language in the subsection reads as follows: (8) Certificate of Authority Surrender Effected by Department Order. No surrender or attempted surrender of a certificate of authority is effective until accepted by order of the department. USF&G and FGIC contend the rule conflicts with, modifies or extends section 624.430 since that statute requires an insurer to provide notice that it intends to surrend a certificate of authority, but does not require it to obtain DOI approval to do so. In its petition, Holyoke has alleged that the foregoing language contravenes not only section 624.430, but also sections 624.415 and 624.416. As noted in finding of fact 17, until the enactment of section 627.7013, DOI has always taken the position that a notice of withdrawal did not require specific agency approval. Rather, DOI has said that the only power or duty granted it under section 624.430 was a ministerial one of altering the certificate of authority to reflect the insurer's withdrawal from certain lines of insurance or, in the case of complete withdrawal from the state, to cancel the insurer's certificate of authority. Since section 624.430 has not been amended, and section 627.7013 does not enlarge DOI's rights with regard to a notice of withdrawal filed by an insurer, the paragraph is found to in conflict with both sections 624.430 and 627.7013. Therefore, it is deemed to be an invalid exercise of delegated legislative authority. h. Rule 4-141.020(9)(a) This paragraph generally provides that any reductions in residential policies proposed by an insurer must be unrelated, directly or indirectly, to a reduction of risk of loss from hurricane exposure. The rather lengthy rule reads as follows: Reduction Must be Unrelated to Risk of Loss From Hurricane Exposure. Pursuant to Section 627.7013, where the reduction affects residential policies, the proposed reduction must be unrelated to the risk of loss from hurricane exposure. The department notes that Section 627.7013 does not in any way qualify or limit the requirement that the reduction be unrelated to the risk of loss from hurricane exposure. The department interprets the word "unrelated," as used in Section 627.7013, in the context of the exigent circumstances motivating the enactment of the statute, and the remedial nature of the statute, as requiring a liberal, wide-reaching definition, so that the reduction must be completely unrelated, directly and indirectly, to reduction of risk of loss from hurricane exposure. As stated in subsection (3), above, the department is not bound by the reason facially asserted for the reduction. If the reduction is related in part to reduction of risk of loss from hurricane exposure, the reduction is prohibited unless authorized as type one, two, or three relief, under Rule 4-141.021, notwith- standing that some other reason is in good faith also part of the reason for seeking the reduction. The objective effect of the propose (sic) reduction in reducing hurricane exposure is given more weight than the insurer's subjective motivations, in determining whether the reduction is unrelated to risk of hurricane exposure. Subjective motivation is relevant primarily only where the objective effect is equivocal. Factors which will be given great weight in evaluating whether a desired reduction is related to risk of hurricane loss are: Would the reduction in Florida be accompanied by reduction action by the insurer in other states? If so, would a disproportionate amount of the impact be in areas of the country especially subject to risk of loss from hurricane? How much of the reduction in Florida would be in residential policy exposures as compared to exposures in other lines of insurance in Florida? If the insurer is discontinuing writing only some lines of insurance are the lines being discontinued especially subject to risk of loss from hurricane, as compared to the lines not being discontinued? Does the insurer have a significant con- centration of residential policies and exposure to risk of loss from hurricane exposure under residential policies in Florida? Would the desired reduction significantly reduce the insurer's exposure to risk of loss from hurricane exposure under residential policies in Florida? Holyoke argues that the paragraph contravenes sections 624.430, 624.416 and 627.7013 by stating that any "reduction" must be "unrelated to risk of loss from hurricane exposure" and that "unrelated" means "completely unrelated, directly and indirectly, to reduction of risk of loss from hurricane exposure." At the same time, USF&G and FGIC contend the rule is invalid since it "improperly" defines the term "unrelated" to permit the DOI to apply a subjective "effects" test "using illegal, arbitrary, capricious, and vague factors which fail to establish adequate standards for agency action and which exceed the agency's delegated authority." Although several statutes are cited as being the law implemented, section 627.7013 is the principal source of authority for the rule. Subparagraph (2)(a)1. of the statute provides in relevant part that (t)his subparagraph does not prohibit any cancellations or nonrenewals of such policies for any other lawful reason unrelated to the risk of loss from hurricane exposure. The statutory language unequivocally reserves to insurers the right to cancel or nonrenew policies "for any other lawful reason unrelated to the risk of loss from hurricane exposure." To the extent the rule authorizes DOI to prohibit nonrenewals or cancellations if they are related in part to reduction of hurricane exposure, even if other reasons are in good faith and are part of the reason for seeking the cancellations or nonrenewals, the language contravenes the statute. The rule further provides that if the effect of a reduction in exposure is to avoid hurricane exposure, the nonrenewal or cancellation can be denied even if the insurer has given a lawful reason unrelated to the risk of loss from hurricane exposure. Since it can be reasonably inferred that the ultimate effect of every withdrawal is to reduce to zero the insurer's risk of loss from hurricane exposure, the "effects" test strips the statute of its clear mandate that insurers maintain the right to cancel or nonrenew policies "for any other lawful reason unrelated to the risk of loss from hurricane exposure." For this additional reason, the rule contravenes the statute. Next, while there is some evidential support as to DOI's theory in adopting the rule as a whole, there is no factual basis in the record to support the rationale for the language in paragraph (9)(a). As such, it is deemed to be arbitrary and capricious. Finally, in applying the six factors that would be given "great weight" in evaluating whether a desired reduction is related to risk of hurricane loss, the DOI acknowledges that there are no criteria or guidelines to follow in weighing these objective effects. Indeed, the DOI author admitted he had insufficient experience to fashion more specific guidelines. Even so, the language is not so vague as to confuse a person of reasonable knowledge, nor can it be said that the rule fails to establish adequate standards for agency action which exceed the agency's delegated authority. i. Rule 4-141.020(9)(b) The final provision under challenge is found in paragraph (9)(b) which reads as follows: (b) If the department determines that any proposed reduction violates Section 627.7013, the insurer shall not proceed with the reduction as it affects residential policies, and shall file an application under Rule 4-141.021 which implements Section 627.7013. The reduction in residential policies shall be limited to the extent of relief granted the insurer by the department under Section 627.7013 and Rule 4-141.021. Holyoke contends that this language is invalid because it contravenes sections 624.430, 624.415 and 624.416. Although the allegation is imprecise, it is assumed that petitioner contends the rule impermissibly broadens the definition of the word "reduction" to include an insurer's withdrawal from the state or the surrender of a certificate of authority. Because the undersigned has previously found that the DOI clearly lacks statutory authority under section 627.7013 to limit withdrawals from the state or the surrender of a certificate of authority, and the broad definition of "reduction" in paragraph (2)(b) has been deemed to be invalid, it is found that the language in the rule conflicts with sections 624.430 and 627.7013 and is an invalid exercise of delegated legislative authority. D. Constitutional Claims Even if the rule is a valid exercise of delegated legislative authority, Holyoke nonetheless contends the rule is invalid because it violates the Florida and United States Constitutions in several respects. USF&G and FGIC join in this claim. Due process and takings clause Article I, section 9 of the Florida Constitution provides that "(n)o person shall be deprived of life, liberty or property without due process of law . . ." USF&G, FGIC and Holyoke contend the proposed rule violates this provision and its federal counterpart, the 14th Amendment of the United States Constitution. Holyoke's presence in the state may be characterized as small. Therefore, the absence of economies of scale assures continuing operating losses for the company. Indeed, in 1993 and 1994, Holyoke suffered operational losses in the state of $822,071 and $736,000, respectively, without the landfall of a hurricane. The rule bars Holyoke from withdrawing totally from Florida and surrendering its certificate of authority as it wishes to do. In Holyoke's case, every dollar of risk required to be underwritten in Florida requires that it forego writing business in another state, or increase its surplus-to-writings ratio, thereby increasing the financial risk assumed. The prospect of continuing losses in Florida impacts Holyoke in two ways. First, it suffers a drain on its surplus to the extent of the forced losses. Second, given the relationship between surplus and writing capacity, the loss of surplus caused by the operating losses results in its inability to write business in another state upon the lost surplus. USF&G is now in the process of downsizing its firm. In 1991, it was on the verge of insolvency having suffered losses of $600 million in that year alone. Based on marketing studies performed after 1991, the company has reshaped its corporate strategy and has subsequently withdrawn entirely from two states (Texas and Louisiana), and has withdrawn all personal lines from nine states. In addition, USF&G has made selected withdrawals for particular lines in many other states, and has pared its total employees from 12,500 to 6,000. The proposed rule prevents it from meeting its corporate objective of filing with DOI a notice of withdrawal for personal homeowners multiperil insurance. Equal protection clause Section 2 of Article I of the Florida Constitution provides in part that "(a)ll natural persons are equal before the law." Under the proposed rule, Holyoke must continue to do business in the personal lines market of the state indefinitely, or at least until November 1996. Holyoke contends this is to the detriment of residents of other states in which it writes business, and that the rule favors Florida residents over residents of other states for an illegitimate purpose. Commerce clause The federal commerce clause limits the power of the states to interfere with interstate commerce. Holyoke contends that the interstate allocation of capital and surplus constitutes interstate commerce, and because the proposed rule seeks to regulate its decision as to how to allocate capital and surplus, it violates the commerce clause. Impairment of contracts Article I, section 10 of the Florida Constitution provides that "(n)o . . . law impairing the obligation of contracts shall be passed." All three petitioners contend that section 627.7013, as interpreted by the proposed rule, violates the impairment of contract clauses of both the Florida and United States Constitutions. All petitioners had insurance contracts in existence at the time section 627.7013 was enacted and the rule proposed. Prior to that time, petitioners' rights with respect to those contracts were set forth in section 624.430. The DOI's interpretation of section 627.7013, as expressed in its rule, prohibits the insurers from exercising these pre-existing contractual rights, including the right to withdraw. To this extent, an impairment has occurred. By prohibiting an insurer from withdrawing from the state, DOI's impairment of those rights can be deemed to be substantial. Petitioners operate in a heavily regulated industry. At the same time, according to the findings and purposes of section 627.7013, that legislation was prompted by Hurricane Andrew's "enormous monetary impact to insurers," proposals by insurers to make "substantial cancellation or nonrenewal of their homeowner's insurance policyholders," and the legislature's "compelling state interest in maintaining an orderly market for personal lines residential property insurance."
