The Issue The issues are whether Respondent violated Chapter 440, Florida Statutes, by failing to obtain workers' compensation insurance, and if so, what penalty should be imposed.
Findings Of Fact Petitioner is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers' compensation for the benefit of their employees as required by Section 440.107, Florida Statutes (2008). Respondent is a Florida Corporation that engages in the painting business. Abner Gonzalez is Respondent's President. Painting is a workplace operation that satisfies the criteria of the term "construction industry" as set forth in the Basic Manual of the National Council on Compensation Insurance, Inc. (NCCI). On May 15, 2009, Petitioner's investigator, Allen DiMaria conducted an investigation at the intersection of Normandy Boulevard and Guardian Drive in Jacksonville, Florida. Mr. DiMaria observed one worker on a ladder and another worker on the ground painting a block and masonry entrance to a development. The workers at the site identified themselves to Mr. DiMaria as Abner Gonzalez and César Silvestre. Mr. Gonzalez stated that Respondent had a contract to paint the wall and that he and Mr. Silvestre were Respondent's employees. Mr. Gonzalez stated that, as a corporate officer, he had an exemption for workers' compensation. Mr. Gonzalez admitted that Respondent had not secured workers' compensation for Mr. Silvestre. Mr. DiMaria was able to confirm that Mr. Gonzalez had a current valid construction exemption, specifically for painting. However, Mr. Gonzalez did not have a painting exemption for the entirety of the prior three years. On May 15, 2009, Mr. DiMaria issued and personally served on Respondent a Stop-Work Order and Order of Penalty Assessment for failure to comply with statutory requirements. Mr. DiMaria also issued Respondent a Request for Production of Business Records for Penalty Assessment Calculation. Because Respondent did not promptly provide Petitioner with the requested business records, Petitioner's staff imputed Respondent's payroll and calculated the penalty as the average weekly wage rate multiplied by 1.5. pursuant to Section 440.107, Florida Statutes. Petitioner then issued the Amended Order of Penalty Assessment in the amount of $26,180.24 on June 11, 2009. Respondent subsequently provided Petitioner with business records. The records included Respondent's bank statements for the prior three years and Respondent's 2007 Employer's Quarterly Federal Tax Returns. The records also showed that Respondent provided employment without workers' compensation insurance to persons other than Mr. Gonzalez and Mr. Silvestre during the prior three years. On June 26, 2009, Petitioner issued the Second Amended Order of Penalty Assessment based upon Respondent's business records in the amount of $7,641.14. The Second Amended Order of Penalty Assessment, showing the reduced penalty, was served on Respondent by certified mail.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That Respondent issue a final order affirming the Stop-Work Order and Second Amended Order of Penalty Assessment in the amount of $7,641.14. DONE AND ENTERED this 14th day of October, 2009, in Tallahassee, Leon County, Florida. S SUZANNE F. HOOD 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 14th day of October, 2009. COPIES FURNISHED: Paige Billings Shoemaker, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 Abner Gonzales 1924 Firefly Drive Green Cove Springs, Florida 32043 Tracy Beal, Agency Clerk Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 Benjamin Diamond, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue The issue to be resolved in this proceeding concerns whether the Petitioner is owed the sum of $4,787.00 representing 14 shipments of cucumbers supplied to the Respondent for which the Petitioner has allegedly not been paid. Consequently, it must be determined whether the Petitioner is entitled to recompense from the bond posted by the Respondent, through its surety, in accordance with the provisions of Sections 604.15-604.34, Florida Statutes.
Findings Of Fact The Petitioner, Long & Scott Farms, Inc., is a grower of cucumbers for the commercial market. The Respondent, Mo-Bo Enterprises, Inc., is a buyer and broker of such agricultural produce. During the fall 1994 harvesting and shipping season for cucumbers, a problem arose in the business relationship between the Petitioner and the Respondent, which had not previously occurred. On October 21, 1994, the Petitioner sold and shipped to the Respondent, or to its consignee, a shipment of 84 crates of dill-pickle-sized cucumbers, at a price of $15.00 per crate. Thus, the invoice billing for that shipment was $1,260.00. The payment for that shipment was delayed for a long period of time; but finally, on February 15, 1994, a partial payment of $1,071.00 was made for that shipment and invoice. The Respondent's representatives assured the Petitioner that the remainder of that bill would be paid promptly, but no payment has ever been made. Between the dates of October 21, 1994 and November 8, 1994, some 13 other shipments of cucumbers were made on the order and purchase of the Respondent, sold and shipped by the Petitioner, for which the Respondent has never paid any amount to the Petitioner. The 14 shipments resulted in a balance due to the Petitioner from the Respondent of $4,787.00. That amount includes the deficiency in payment for the shipment of October 21, 1994, for which the above-referenced partial payment was made. The Petitioner and the Respondent had a business arrangement, whereby the Respondent would notify the Petitioner of any problem with any shipment, such as deficient quality, rot, or other deterioration, shortage in amount shipped, and the like. This arrangement, whereby notification of any problem with a shipment should be provided to the Petitioner within eight hours of the shipment's arrival, was printed on each invoice form, which forms were submitted to the Respondent upon the dispatch of each shipment. The Respondent never informed the Petitioner of any problems with any of the shipments involved in this proceeding. The shipments were all duly and timely made to the Respondent and received by it or its consignees. Moreover, in their prior discussions and negotiations concerning the relevant unpaid bill, the Respondent has never denied owing that amount. It simply has not paid the amount due, although it or its representatives have offered to negotiate some sort of payment arrangement. The unrefuted evidence thus shows that the Respondent and its surety company, Armor Insurance Company, are indebted to the Petitioner in the amount of $4,787.00 and that payment for that amount has not been made.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered by the Department ordering the Respondent to pay the above-referenced sum of $4,787.00 to the Petitioner and in the event of failure of the Respondent to remit such payment, that the Respondent, Armor Insurance Company, pay over to the Department the amount herein found to be due and owing from the bond posted by that surety company for the Respondent dealer, which sum should then be remitted over to the Petitioner. DONE AND ENTERED this 30th day of October, 1995, in Tallahassee, Florida. P. MICHAEL RUFF, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of October, 1995. COPIES FURNISHED: Mr. Frank D. Scott Post Office Box 1228 Zellwood, FL 32798 Charles D. Barnard, Esq. 200 S.E. 6th St., Ste. 205 Fort Lauderdale, FL 33301 Mark J. Albrechta, Esq. Armor Insurance Company Box 15250 Tampa, FL 33684-5250 Honorable Bob Crawford Commissioner of Agriculture Department of Agriculture and Consumer Services The Capitol, PL-10 Tallahassee, FL 32399-0810 Richard Tritschler, Esq. General Counsel Department of Agriculture and Consumer Services The Capitol, PL-10 Tallahassee, FL 32399-0810
The Issue The issue presented for decision herein is whether or not the Petitioner successfully completed the answers posed on the April, 1987 professional engineer's examination.
Findings Of Fact Petitioner took the April, 1987 professional engineering examination and was advised that he failed the principles and practice portion of the examine. His raw score was 45 points and the parties stipulated that he needed a minimum raw score of 48 points to pass the examination. In his request for hearing, Petitioner challenged questions 120, 123 and 420. However, during the hearing, he only presented testimony and challenged question 420. Question 420 is worth 10 points and is set forth in its entirety in Petitioner's Exhibit Number 1. For reasons of test security, the exhibit has been sealed. Question 420 requires the examinee to explore the area regarding "braced excavations" and explores the principles involved in such excavations. Question 420 requires the examinee to calculate the safety factor for a braced excavation including the depth of excavation which would cause failure by "bottom heaving". Petitioner, in calculating the safety factor, made a mathematical error when he incorporated the B-prime value calculation which was inserted into the equation in making his calculations. Question 420 does not direct the applicant to apply the calculations to either a square excavation or to a rectangular excavation. Petitioner assumed the shape of the excavation to be square and calculated the factor of safety according to that assumption. In assuming the square excavation, Petitioner did not make the more conservative calculation that will be required in making the safety factor calculation for a rectangular excavation. In this regard, an examination of Petitioner's work sheet indicates that he referenced the correct calculation on his work sheet but the calculation was not transferred to or utilized in the equation. Respondent utilizes the standard scoring plan outline, which is more commonly known as the Items Specific Scoring Plan (ISSP) which is used by the scorers in grading the exam. The ISSP provides a scoring breakdown for each question so that certain uniform criteria are met by all applicants. For example, four points are given for a correct solution on a specific question regardless of the scorer. This criteria is supplied by the person or persons who prepared the exam. The criteria indicates "in problem-specific terms, the types of deficiencies that would lead to scoring at each of the eleven (0-10) points on the scale". The ISSP awards six points on question 420 when the applicants meets the following standards: "all categories satisfied, applicant demonstrate minimally adequate knowledge in all relevant aspect of the item." ISSP awards seven points on question 420 when the applicant's answer meets the following standard: "all categories satisfied, obtains solution, but chooses less than optimum approach. Solution is awkward but reasonable". The ISSP awards eight points on question 420 when the applicant's answer meets the following standards: "all categories satisfied. Errors attributable to misread tables or calculating devices. Errors would be corrected by routine checking. Results reasonable, though not correct". The ISSP awards nine points on question 420 when the applicant's answer meets the following standard: "all categories satisfied, correct solution but excessively conservative in choice of working values; or presentation lacking in completeness of equations, diagrams, orderly steps in solution, etc." The ISSP criteria for awarding nine points as to question 420 clearly requires that the Petitioner calculate the correct solution without mathematical errors. The Petitioner's answer was not correct regardless of the assumption as to the shape of the excavation since he made a mathematical error. The ISSP criteria for awarding eight points as to question 420 allows Petitioner to calculate the answer with mathematical errors with the requirements that the results are reasonable. Petitioner made a mathematical error although his result was reasonable. His answer fits the criteria for the award of eight points in conformity with the ISSP criteria. Petitioner received six points for his answer to question 420 whereas he is entitled to an award of eight points.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: Respondent enter a Final Order determining that Petitioner failed the principles and practice portion of the April, 1987 engineering examination. RECOMMENDED this 30th day of June 1988, in Tallahassee, Florida. JAMES E. BRADWELL 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 30th day of June, 1988. COPIES FURNISHED: Glen E. Wichinsky, Esquire 900 Glades Road, 5th Floor Boca Raton, Florida 33431 Michael A. Mone', Esquire Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32399-0750 Allen R. Smith, Jr. Executive Director Department of Professional Regulation, Board of Professional Engineers 130 North Monroe Street Tallahassee, Florida 32399-0750 William O'Neil, Esquire General Counsel Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32399-0750
The Issue The issues to be determined in this case are whether Respondent Plumb Structures, Inc., violated state laws applicable to workers’ compensation insurance coverage by failing to secure coverage for an employee and, if so, whether the penalty assessed against Respondent by Petitioner Department of Financial Services, Division of Workers’ Compensation (Department) was lawful.
Findings Of Fact Petitioner is the state agency responsible for the enforcement of the workers’ compensation insurance coverage requirements established in Chapter 440, Florida Statutes (2007).1 Respondent is a Florida corporation with its office in Hudson. Timothy Frees is Respondent’s vice president and registered agent. On September 25, 2007, Lloyd Hillis, an investigator for the Department, was performing “spot checks” of contractors and subcontractors at job sites in certain subdivisions in Land ‘O Lakes to determine compliance with the worker’s compensation laws. Mr. Hillis stopped at a house where he observed a worker installing sliding glass doors. The worker identified himself to Mr. Hillis as Timothy Frees and stated that he worked for Plumb Structures, Inc. Upon checking relevant records maintained by the Department on his laptop computer, Mr. Hillis determined Mr. Frees was not covered by workers’ compensation insurance. The computerized records showed Mr. Frees had obtained an exemption from coverage for a period of time, but the exemption had expired on August 4, 2005. Subsection 440.05(3), Florida Statutes, provides that each corporate officer of a corporation engaged in the construction industry may elect to be exempt from the requirements of Chapter 440, Florida Statutes, and Subsection 440.05(5), Florida Statutes, provides that, upon written notice of such election, the Department will issue a certificate of exemption which is valid for two years. The Department’s records indicated that the Department mailed Mr. Frees a “Notice of Expiration of Certificate of Election to be Exempt” on June 16, 2005. It was undisputed that no application to renew the certificate of exemption for Mr. Frees beyond August 4, 2005, was sent to the Department until after September 25, 2007. Before leaving the job-site, Mr. Hillis issued a stop- work order against Plumb Structures and hand-delivered it to Mr. Frees. Mr. Frees was also given a Request for Production of Business Records for Penalty Assessment Calculation. Business records were requested for the period from August 4, 2005, the expiration date of Mr. Frees’ exemption, to September 25, 2007, the date of the stop-work order. Mr. Frees produced some business records for the Department, including a pay stub from Bill the Window Man, Inc., for which Mr. Frees said he worked as a subcontractor in 2005, showing year-to-date earnings through December 8, 2005, of $13,526; a W-2 Wage and Tax Statement issued by Plumb Structures showing 2006 income to Mr. Frees of $27,675; and a single pay stub from 2007 showing a year-to-date income from Plumb Structures of $17,460. These business records were not sufficient to determine Mr. Frees’ wage for these years because they did not indicate his hourly rate of pay. Therefore, the Department imputed his wage by using the statewide approved manual rate for the class code applicable to installation of doors. On September 27, 2007, the Department issued an Amended Order of Penalty Assessment against Plumb Structures for $8,774.75. Respondent does not dispute the Department’s imputed wage for Mr. Frees, but Respondent does dispute that Mr. Frees was an employee of Plumb Structures following the expiration of the certificate of exemption. With regard to work done by Mr. Frees in 2005, Respondent also argues that the evidence only shows Mr. Frees was an employee of Bill the Window Man, Inc. Mr. Frees told the Department’s investigator that “he” was a subcontractor to Bill the Window Man in 2005, but Mr. Hillis assumed, and the Department contends, that Mr. Frees meant that Plumb Structures was the subcontractor to Bill the Window Man. The pay stubs of Bill the Window Man were made out to Timothy Frees, not Plumb Structures. The Department’s evidence on this point does not meet the standard of proof applicable in this case, which is “clear and convincing evidence.” Respondent’s argument that Mr. Frees was not an employee of Plumb Structures in 2006 and 2007 is based solely on Respondent’s interpretation of the applicable law and is addressed below.
Recommendation Based on the Findings of Fact and Conclusions of Law, it is recommended that the Department enter a final order that assesses a penalty against Respondent of $7,649.72. DONE AND ENTERED this 9th day of April, 2008, in Tallahassee, Leon County, Florida. BRAM D. E. CANTER 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 9th day of April, 2008.
The Issue At issue in this proceeding is whether proposed Florida Administrative Code Rule 69O-125.005 is an invalid exercise of delegated legislative authority.
Findings Of Fact Petitioners AIA is a trade association made up of 40 groups of insurance companies. AIA member companies annually write $6 billion in property, casualty, and automobile insurance in Florida. AIA's primary purpose is to represent the interests of its member insurance groups in regulatory and legislative matters throughout the United States, including Florida. NAMIC is a trade association consisting of 1,430 members, mostly mutual insurance companies. NAMIC member companies annually write $10 billion in property, casualty, and automobile insurance in Florida. NAMIC represents the interests of its member insurance companies in regulatory and legislative matters throughout the United States, including Florida. PCI is a national trade association of property and casualty insurance companies consisting of 1,055 members. PCI members include mutual insurance companies, stock insurance companies, and reciprocal insurers that write property and casualty insurance in Florida. PCI members annually write approximately $15 billion in premiums in Florida. PCI participated in the OIR's workshops on the Proposed Rule. PCI's assistant vice president and regional manager, William Stander, testified that if the Proposed Rule is adopted, PCI's member companies would be required either to withdraw from the Florida market or drastically reorganize their business model. FIC is an insurance trade association made up of 39 insurance groups that represent approximately 250 insurance companies writing all lines of insurance. All of FIC's members are licensed in Florida and write approximately $27 billion in premiums in Florida. FIC has participated in rule challenges in the past, and participated in the workshop and public hearing process conducted by OIR for this Proposed Rule. FIC President Guy Marvin testified that FIC's property and casualty members use credit scoring and would be affected by the Proposed Rule. A substantial number of Petitioners' members are insurers writing property and casualty insurance and/or motor vehicle insurance coverage in Florida. These members use credit-based insurance scoring in their underwriting and rating processes. They would be directly regulated by the Proposed Rule in their underwriting and rating methods and in the rate filing processes set forth in Sections 627.062 and 627.0651, Florida Statutes. Fair Isaac originated credit-based insurance scoring and is a leading provider of credit-based insurance scoring information in the United States and Canada. Fair Isaac has invested millions of dollars in the development and maintenance of its credit-based insurance models. Fair Isaac concedes that it is not an insurer and, thus, would not be directly regulated by the Proposed Rule. However, Fair Isaac would be directly affected by any negative impact that the Proposed Rule would have in setting limits on the use of credit-based insurance score models in Florida. Lamont Boyd, a manager in Fair Isaac's global scoring division, testified that if the Proposed Rule goes into effect Fair Isaac would, at a minimum, lose all of the revenue it currently generates from insurance companies that use its scores in the State of Florida, because Fair Isaac's credit-based insurance scoring model cannot meet the requirements of the Proposed Rule regarding racial, ethnic, and religious categorization. Mr. Boyd also testified that enactment of the Proposed Rule could cause a "ripple effect" of similar regulations in other states, further impairing Fair Isaac's business. The Statute and Proposed Rule During the 1990s, insurance companies' use of consumer credit information for underwriting and rating automobile and residential property insurance policies greatly increased. Insurance regulators expressed concern that the use of consumer credit reports, credit histories and credit-based insurance scoring models could have a negative effect on consumers' ability to obtain and keep insurance at appropriate rates. Of particular concern was the possibility that the use of credit scoring would particularly hurt minorities, people with low incomes, and young people, because those persons would be more likely to have poor credit scores. On September 19, 2001, Insurance Commissioner Tom Gallagher appointed a task force to examine the use of credit reports and develop recommendations for the Legislature or for the promulgation of rules regarding the use of credit scoring by the insurance industry. The task force met on four separate occasions throughout the state in 2001, and issued its report on January 23, 2002. The task force report conceded that the evidence supporting the negative impact of the use of credit reports on specific groups is "primarily anecdotal," and that the insurance industry had submitted anecdotal evidence to the contrary. Among its nine recommendations, the task force recommended the following: A comprehensive and independent investigation of the relationship between insurers' use of consumer credit information and risk of loss including the impact by race, income, geographic location and age. A prohibition against the use of credit reports as the sole basis for making underwriting or rating decisions. That insurers using credit as an underwriting or rating factor be required to provide regulators with sufficient information to independently verify that use. That insurers be required to send a copy of the credit report to those consumers whose adverse insurance decision is a result of their consumer credit information and a simple explanation of the specific credit characteristics that caused the adverse decision. That insurers not be permitted to draw a negative inference from a bad credit score that is due to medical bills, little or no credit information, or other special circumstances that are clearly not related to an applicant's or policyholder's insurability. That the impact of credit reports be mitigated by imposing limits on the weight that insurers can give to them in the decision to write a policy and limits on the amount the premium can be increased due to credit information. No evidence was presented that the "comprehensive and independent investigation" of insurers' use of credit information was undertaken by the Legislature. However, the other recommendations of the task force were addressed in Senate Bills 40A and 42A, enacted by the Legislature and signed by the governor on June 26, 2003. These companion bills, each with an effective date of January 1, 2004, were codified as Sections 626.9741 and 626.97411, Florida Statutes, respectively. Chapters 2003-407 and 2003-408, Laws of Florida. Section 626.9741, Florida Statutes, provides: The purpose of this section is to regulate and limit the use of credit reports and credit scores by insurers for underwriting and rating purposes. This section applies only to personal lines motor vehicle insurance and personal lines residential insurance, which includes homeowners, mobile home owners' dwelling, tenants, condominium unit owners, cooperative unit owners, and similar types of insurance. As used in this section, the term: "Adverse decision" means a decision to refuse to issue or renew a policy of insurance; to issue a policy with exclusions or restrictions; to increase the rates or premium charged for a policy of insurance; to place an insured or applicant in a rating tier that does not have the lowest available rates for which that insured or applicant is otherwise eligible; or to place an applicant or insured with a company operating under common management, control, or ownership which does not offer the lowest rates available, within the affiliate group of insurance companies, for which that insured or applicant is otherwise eligible. "Credit report" means any written, oral, or other communication of any information by a consumer reporting agency, as defined in the federal Fair Credit Reporting Act, 15 U.S.C. ss. 1681 et seq., bearing on a consumer's credit worthiness, credit standing, or credit capacity, which is used or expected to be used or collected as a factor to establish a person's eligibility for credit or insurance, or any other purpose authorized pursuant to the applicable provision of such federal act. A credit score alone, as calculated by a credit reporting agency or by or for the insurer, may not be considered a credit report. "Credit score" means a score, grade, or value that is derived by using any or all data from a credit report in any type of model, method, or program, whether electronically, in an algorithm, computer software or program, or any other process, for the purpose of grading or ranking credit report data. "Tier" means a category within a single insurer into which insureds with substantially similar risk, exposure, or expense factors are placed for purposes of determining rate or premium. An insurer must inform an applicant or insured, in the same medium as the application is taken, that a credit report or score is being requested for underwriting or rating purposes. An insurer that makes an adverse decision based, in whole or in part, upon a credit report must provide at no charge, a copy of the credit report to the applicant or insured or provide the applicant or insured with the name, address, and telephone number of the consumer reporting agency from which the insured or applicant may obtain the credit report. The insurer must provide notification to the consumer explaining the reasons for the adverse decision. The reasons must be provided in sufficiently clear and specific language so that a person can identify the basis for the insurer's adverse decision. Such notification shall include a description of the four primary reasons, or such fewer number as existed, which were the primary influences of the adverse decision. The use of generalized terms such as "poor credit history," "poor credit rating," or "poor insurance score" does not meet the explanation requirements of this subsection. A credit score may not be used in underwriting or rating insurance unless the scoring process produces information in sufficient detail to permit compliance with the requirements of this subsection. It shall not be deemed an adverse decision if, due to the insured's credit report or credit score, the insured continues to receive a less favorable rate or placement in a less favorable tier or company at the time of renewal except for renewals or reunderwriting required by this section. (4)(a) An insurer may not request a credit report or score based upon the race, color, religion, marital status, age, gender, income, national origin, or place of residence of the applicant or insured. An insurer may not make an adverse decision solely because of information contained in a credit report or score without consideration of any other underwriting or rating factor. An insurer may not make an adverse decision or use a credit score that could lead to such a decision if based, in whole or in part, on: The absence of, or an insufficient, credit history, in which instance the insurer shall: Treat the consumer as otherwise approved by the Office of Insurance Regulation if the insurer presents information that such an absence or inability is related to the risk for the insurer; Treat the consumer as if the applicant or insured had neutral credit information, as defined by the insurer; Exclude the use of credit information as a factor and use only other underwriting criteria; Collection accounts with a medical industry code, if so identified on the consumer's credit report; Place of residence; or Any other circumstance that the Financial Services Commission determines, by rule, lacks sufficient statistical correlation and actuarial justification as a predictor of insurance risk. An insurer may use the number of credit inquiries requested or made regarding the applicant or insured except for: Credit inquiries not initiated by the consumer or inquiries requested by the consumer for his or her own credit information. Inquiries relating to insurance coverage, if so identified on a consumer's credit report. Collection accounts with a medical industry code, if so identified on the consumer's credit report Multiple lender inquiries, if coded by the consumer reporting agency on the consumer's credit report as being from the home mortgage industry and made within 30 days of one another, unless only one inquiry is considered. Multiple lender inquiries, if coded by the consumer reporting agency on the consumer's credit report as being from the automobile lending industry and made within 30 days of one another, unless only one inquiry is considered. An insurer must, upon the request of an applicant or insured, provide a means of appeal for an applicant or insured whose credit report or credit score is unduly influenced by a dissolution of marriage, the death of a spouse, or temporary loss of employment. The insurer must complete its review within 10 business days after the request by the applicant or insured and receipt of reasonable documentation requested by the insurer, and, if the insurer determines that the credit report or credit score was unduly influenced by any of such factors, the insurer shall treat the applicant or insured as if the applicant or insured had neutral credit information or shall exclude the credit information, as defined by the insurer, whichever is more favorable to the applicant or insured. An insurer shall not be considered out of compliance with its underwriting rules or rates or forms filed with the Office of Insurance Regulation or out of compliance with any other state law or rule as a result of granting any exceptions pursuant to this subsection. A rate filing that uses credit reports or credit scores must comply with the requirements of s. 627.062 or s. 627.0651 to ensure that rates are not excessive, inadequate, or unfairly discriminatory. An insurer that requests or uses credit reports and credit scoring in its underwriting and rating methods shall maintain and adhere to established written procedures that reflect the restrictions set forth in the federal Fair Credit Reporting Act, this section, and all rules related thereto. (7)(a) An insurer shall establish procedures to review the credit history of an insured who was adversely affected by the use of the insured's credit history at the initial rating of the policy, or at a subsequent renewal thereof. This review must be performed at a minimum of once every 2 years or at the request of the insured, whichever is sooner, and the insurer shall adjust the premium of the insured to reflect any improvement in the credit history. The procedures must provide that, with respect to existing policyholders, the review of a credit report will not be used by the insurer to cancel, refuse to renew, or require a change in the method of payment or payment plan. (b) However, as an alternative to the requirements of paragraph (a), an insurer that used a credit report or credit score for an insured upon inception of a policy, who will not use a credit report or score for reunderwriting, shall reevaluate the insured within the first 3 years after inception, based on other allowable underwriting or rating factors, excluding credit information if the insurer does not increase the rates or premium charged to the insured based on the exclusion of credit reports or credit scores. The commission may adopt rules to administer this section. The rules may include, but need not be limited to: Information that must be included in filings to demonstrate compliance with subsection (3). Statistical detail that insurers using credit reports or scores under subsection (5) must retain and report annually to the Office of Insurance Regulation. Standards that ensure that rates or premiums associated with the use of a credit report or score are not unfairly discriminatory, based upon race, color, religion, marital status, age, gender, income, national origin, or place of residence. Standards for review of models, methods, programs, or any other process by which to grade or rank credit report data and which may produce credit scores in order to ensure that the insurer demonstrates that such grading, ranking, or scoring is valid in predicting insurance risk of an applicant or insured. Section 626.97411, Florida Statutes, provides: Credit scoring methodologies and related data and information that are trade secrets as defined in s. 688.002 and that are filed with the Office of Insurance Regulation pursuant to a rate filing or other filing required by law are confidential and exempt from the provisions of s. 119.07(1) and s. 24(a), Art. I of the State Constitution.3 Following extensive rule development workshops and industry comment, proposed Florida Administrative Code Rule 69O-125.005 was initially published in the Florida Administrative Weekly, on February 11, 2005.4 The Proposed Rule states, as follows: 69O-125.005 Use of Credit Reports and Credit Scores by Insurers. For the purpose of this rule, the following definitions apply: "Applicant", for purposes of Section 626.9741, F.S., means an individual whose credit report or score is requested for underwriting or rating purposes relating to personal lines motor vehicle or personal lines residential insurance and shall not include individuals who have merely requested a quote. "Credit scoring methodology" means any methodology that uses credit reports or credit scores, in whole or in part, for underwriting or rating purposes. "Data cleansing" means the correction or enhancement of presumed incomplete, incorrect, missing, or improperly formatted information. "Personal lines motor vehicle" insurance means insurance against loss or damage to any motorized land vehicle or any loss, liability, or expense resulting from or incidental to ownership, maintenance or use of such vehicle if the contract of insurance shows one or more natural persons as named insureds. The following are not included in this definition: Vehicles used as public livery or conveyance; Vehicles rented to others; Vehicles with more than four wheels; Vehicles used primarily for commercial purposes; and Vehicles with a net vehicle weight of more than 5,000 pounds designed or used for the carriage of goods (other than the personal effects of passengers) or drawing a trailer designed or used for the carriage of such goods. The following are specifically included, inter alia, in this definition: Motorcycles; Motor homes; Antique or classic automobiles; and Recreational vehicles. "Unfairly discriminatory" means that adverse decisions resulting from the use of a credit scoring methodology disproportionately affects persons belonging to any of the classes set forth in Section 626.9741(8)(c), F.S. Insurers may not use any credit scoring methodology that is unfairly discriminatory. The burden of demonstrating that the credit scoring methodology is not unfairly discriminatory is upon the insurer. An insurer may not request or use a credit report or credit score in its underwriting or rating method unless it maintains and adheres to established written procedures that reflect the restrictions set forth in the federal Fair Credit Reporting Act, Section 626.9741, F.S., and these rules. Upon initial use or any change in that use, insurers using credit reports or credit scores for underwriting or rating personal lines residential or personal lines motor vehicle insurance shall include the following information in filings submitted pursuant to Section 627.062 or 627.0651, F.S. A listing of the types of individuals whose credit reports or scores the company will use or attempt to use to underwrite or rate a given policy. For example: Person signing application; Named insured or spouse; and All listed operators. How those individual reports or scores will be combined if more than one is used. For example: Average score used; Highest score used. The name(s) of the consumer reporting agencies or any other third party vendors from which the company will obtain or attempt to obtain credit reports or scores. Precise identifying information specifying or describing the credit scoring methodology, if any, the company will use including: Common or trade name; Version, subtype, or intended segment of business the system was designed for; and Any other information needed to distinguish a particular credit scoring methodology from other similar ones, whether developed by the company or by a third party vendor. The effect of particular scores or ranges of scores (or, for companies not using scores, the effect of particular items appearing on a credit report) on any of the following as applicable: Rate or premium charged for a policy of insurance; Placement of an insured or applicant in a rating tier; Placement of an applicant or insured in a company within an affiliated group of insurance companies; Decision to refuse to issue or renew a policy of insurance or to issue a policy with exclusions or restrictions or limitations in payment plans. The effect of the absence or insufficiency of credit history (as referenced in Section 626.9741(4)(c)1., F.S.) on any items listed in paragraph (e) above. The manner in which collection accounts identified with a medical industry code (as referenced in Section 626.9741(4)(c)2., F.S.) on a consumer's credit report will be treated in the underwriting or rating process or within any credit scoring methodology used. The manner in which collection accounts that are not identified with a medical industry code, but which an applicant or insured demonstrates are the direct result of significant and extraordinary medical expenses, will be treated in the underwriting or rating process or within any credit scoring methodology used. The manner in which the following will be treated in the underwriting or rating process, or within any credit scoring methodology used: Credit inquiries not initiated by the consumer; Requests by the consumer for the consumer's own credit information; Multiple lender inquiries, if coded by the consumer reporting agency on the consumer's credit report as being from the automobile lending industry or the home mortgage industry and made within 30 days of one another; Multiple lender inquiries that are not coded by the consumer reporting agency on the consumer's credit report as being from the automobile lending industry or the home mortgage industry and made within 30 days of one another, but that an applicant or insured demonstrates are the direct result of such inquiries; Inquiries relating to insurance coverage, if so identified on a consumer's credit report; and Inquiries relating to insurance coverage that are not so identified on a consumer's credit report, but which an applicant or insured demonstrates are the direct result of such inquiries. The list of all clear and specific primary reasons that may be cited to the consumer as the basis or explanation for an adverse decision under Section 626.9741(3), F.S. and the criteria determining when each of those reasons will be so cited. A description of the process that the insurer will use to correct any error in premium charged the insured, or in underwriting decision made concerning the insured, if the basis of the premium charged or the decision made is a disputed item that is later removed from the credit report or corrected, provided that the insured first notifies the insurer that the item has been removed or corrected. A certification that no use of credit reports or scores in rating insurance will apply to any component of a rate or premium attributed to hurricane coverage for residential properties as separately identified in accordance with Section 627.0629, F.S. Insurers desiring to make adverse decisions for personal lines motor vehicle policies or personal lines residential policies based on the absence or insufficiency of credit history shall either: Treat such consumers or applicants as otherwise approved by the Office of Insurance Regulation if the insurer presents information that such an absence or inability is related to the risk for the insurer and does not result in a disparate impact on persons belonging to any of the classes set forth in Section 626.9741(8)(c), This information will be held as confidential if properly so identified by the insurer and eligible under Section 626.9711, F.S. The information shall include: Data comparing experience for each category of those with absent or insufficient credit history to each category of insureds separately treated with respect to credit and having sufficient credit history; A statistically credible method of analysis that concludes that the relationship between absence or insufficiency and the risk assumed is not due to chance; A statistically credible method of analysis that concludes that absence or insufficiency of credit history does not disparately impact persons belonging to any of the classes set forth in Section 626.9741(8)(c), F.S.; A statistically credible method of analysis that confirms that the treatment proposed by the insurer is quantitatively appropriate; and Statistical tests establishing that the treatment proposed by the insurer is warranted for the total of all consumers with absence or insufficiency of credit history and for at least two subsets of such consumers. Treat such consumers as if the applicant or insured had neutral credit information, as defined by the insurer. Should an insurer fail to specify a definition, neutral is defined as the average score that a stratified random sample of consumers or applicants having sufficient credit history would attain using the insurer's credit scoring methodology; or Exclude credit as a factor and use other criteria. These other criteria must be specified by the insurer and must not result in average treatment for the totality of consumers with an absence of or insufficiency of credit history any less favorable than the treatment of average consumers or applicants having sufficient credit history. Insurers desiring to make adverse decisions for personal lines motor vehicle or personal lines residential insurance based on information contained in a credit report or score shall file with the Office information establishing that the results of such decisions do not correlate so closely with the zip code of residence of the insured as to constitute a decision based on place of residence of the insured in violation of Section 626.9741(4)(c)(3), F.S. (7)(a) Insurers using credit reports or credit scores for underwriting or rating personal lines residential or personal lines motor vehicle insurance shall develop, maintain, and adhere to written procedures consistent with Section 626.9741(4)(e), F.S. providing appeals for applicants or insureds whose credit reports or scores are unduly influenced by dissolution of marriage, death of a spouse, or temporary loss of employment. (b) These procedures shall be subject to examination by the Office at any time. (8)(a)1. Insurers using credit reports or credit scoring in rating personal lines motor vehicle or personal lines residential insurance shall develop, maintain, and adhere to written procedures to review the credit history of an insured who was adversely affected by such use at initial rating of the policy or subsequent renewal thereof. These procedures shall be subject to examination by the Office at any time. The procedures shall comply with the following: A review shall be conducted: No later than 2 years following the date of any adverse decision, or Any time, at the request of the insured, but no more than once per policy period without insurer assent. The insurer shall notify the named insureds annually of their right to request the review in (II) above. Renewal notices issued 120 days or less after the effective date of this rule are not included in this requirement. The insurer shall adjust the premium to reflect any improvement in credit history no later than the first renewal date that follows a review of credit history. The renewal premium shall be subject to other rating factors lawfully used by the insurer. The review shall not be used by the insurer to cancel, refuse to renew, or require a change in the method of payment or payment plan based on credit history. (b)1. As an alternative to the requirements in paragraph (8)(a), insurers using credit reports or scores at the inception of a policy but not for re-underwriting shall develop, maintain, and adhere to written procedures. These procedures shall be subject to examination by the Office at any time. The procedures shall comply with the following: Insureds shall be reevaluated no later than 3 years following policy inception based on allowable underwriting or rating factors, excluding credit information. The rate or premium charged to an insured shall not be greater, solely as a result of the reevaluation, than the rate or premium charged for the immediately preceding policy term. This shall not be construed to prohibit an insurer from applying regular underwriting criteria (which may result in a greater premium) or general rate increases to the premium charged. For insureds that received an adverse decision notification at policy inception, no residual effects of that adverse decision shall survive the reevaluation. This means that the reevaluation must be complete enough to make it possible for insureds adversely impacted at inception to attain the lowest available rate for which comparable insureds are eligible, considering only allowable underwriting or rating factors (excluding credit information) at the time of the reevaluation. No credit scoring methodology shall be used for personal lines motor vehicle or personal lines residential property insurance unless that methodology has been demonstrated to be a valid predictor of the insurance risk to be assumed by an insurer for the applicable type of insurance. The demonstration of validity detailed below need only be provided with the first rate, rule, or underwriting guidelines filing following the effective date of this rule and at any time a change is made in the credit scoring methodology. Other such filings may instead refer to the most recent prior filing containing a demonstration. Information supplied in the context of a demonstration of validity will be held as confidential if properly so identified by the insurer and eligible under Section 626.9711, F.S. A demonstration of validity shall include: A listing of the persons that contributed substantially to the development of the most current version of the method, including resumes of the persons, if obtainable, indicating their qualifications and experience in similar endeavors. An enumeration of all data cleansing techniques that have been used in the development of the method, which shall include: The nature of each technique; Any biases the technique might introduce; and The prevalence of each type of invalid information prior to correction or enhancement. All data that was used by the model developers in the derivation and calibration of the model parameters. Data shall be in sufficient detail to permit the Office to conduct multiple regression testing for validation of the credit scoring methodology. Data, including field definitions, shall be supplied in electronic format compatible with the software used by the Office. Statistical results showing that the model and parameters are predictive and not overlapping or duplicative of any other variables used to rate an applicant to such a degree as to render their combined use actuarially unsound. Such results shall include the period of time for which each element from a credit report is used. A precise listing of all elements from a credit report that are used in scoring, and the formula used to compute the score, including the time period during which each element is used. Such listing is confidential if properly so identified by the insurer. An assessment by a qualified actuary, economist, or statistician (whether or not employed by the insurer) other than persons who contributed substantially to the development of the credit scoring methodology, concluding that there is a significant statistical correlation between the scores and frequency or severity of claims. The assessment shall: Identify the person performing the assessment and show his or her educational and professional experience qualifications; and Include a test of robustness of the model, showing that it performs well on a credible validation data set. The validation data set may not be the one from which the model was developed. Documentation consisting of statistical testing of the application of the credit scoring model to determine whether it results in a disproportionate impact on the classes set forth in Section 626.9741(8)(c), A model that disproportionately affects any such class of persons is presumed to have a disparate impact and is presumed to be unfairly discriminatory. Statistical analysis shall be performed on the current insureds of the insurer using the proposed credit scoring model, and shall include the raw data and detailed results on each classification set forth in Section 626.9741(8)(c), F.S. In lieu of such analysis insurers may use the alternative in 2. below. Alternatively, insurers may submit statistical studies and analyses that have been performed by educational institutions, independent professional associations, or other reputable entities recognized in the field, that indicate that there is no disproportionate impact on any of the classes set forth in Section 626.9741(8)(c), F.S. attributable to the use of credit reports or scores. Any such studies or analyses shall have been done concerning the specific credit scoring model proposed by the insurer. The Office will utilize generally accepted statistical analysis principles in reviewing studies submitted which support the insurer's analysis that the credit scoring model does not disproportionately impact any class based upon race, color, religion, marital status, age, gender, income, national origin, or place of residence. The Office will permit reliance on such studies only to the extent that they permit independent verification of the results. The testing or validation results obtained in the course of the assessment in paragraphs (d) and (f) above. Internal Insurer data that validates the premium differentials proposed based on the scores or ranges of scores. Industry or countrywide data may be used to the extent that the Florida insurer data lacks credibility based upon generally accepted actuarial standards. Insurers using industry or countrywide data for validation shall supply Florida insurer data and demonstrate that generally accepted actuarial standards would allow reliance on each set of data to the extent the insurer has done so. Validation data including claims on personal lines residential insurance policies that are the result of acts of God shall not be used unless such acts occurred prior to January 1, 2004. The mere copying of another company's system will not fulfill the requirement to validate proposed premium differentials unless the filer has used a method or system for less than 3 years and demonstrates that it is not cost effective to retrospectively analyze its own data. Companies under common ownership, management, and control may copy to fulfill the requirement to validate proposed premium differentials if they demonstrate that the characteristics of the business to be written by the affiliate doing the copying are sufficiently similar to the affiliate being copied to presume common differentials will be accurate. The credibility standards and any judgmental adjustments, including limitations on effects, that have been used in the process of deriving premium differentials proposed and validated in paragraph (i) above. An explanation of how the credit scoring methodology treats discrepancies in the information that could have been obtained from different consumer reporting agencies: Equifax, Experian, or TransUnion. This shall not be construed to require insurers to obtain multiple reports for each insured or applicant. 1. The date that each of the analyses, tests, and validations required in paragraphs (d) through (j) above was most recently performed, and a certification that the results continue to be applicable. 2. Any item not reviewed in the previous 5 years is unacceptable. Specific Authority 624.308(1), 626.9741(8) FS. Law Implemented 624.307(1), 626.9741 FS. History-- New . The Petition 1. Statutory Definitions of "Unfairly Discriminatory" The main issue raised by Petitioners is that the Proposed Rule's definition of "unfairly discriminatory," and those portions of the Proposed Rule that rely on this definition, are invalid because they are vague, and enlarge, modify, and contravene the provisions of the law implemented and other provisions of the insurance code. Section 626.9741, Florida Statutes, does not define "unfairly discriminatory." Subsection 626.9741(5), Florida Statutes, provides that a rate filing using credit reports or scores "must comply with the requirements of s. 627.062 or s. 627.0651 to ensure that rates are not excessive, inadequate, or unfairly discriminatory." Subsection 626.9741(8)(c), Florida Statutes, provides that the FSC may adopt rules, including standards to ensure that rates or premiums "associated with the use of a credit report or score are not unfairly discriminatory, based upon race, color, religion, marital status, age, gender, income, national origin, or place of residence." Chapter 627, Part I, Florida Statutes, is referred to as the "Rating Law." § 627.011, Fla. Stat. The purpose of the Rating Law is to "promote the public welfare by regulating insurance rates . . . to the end that they shall not be excessive, inadequate, or unfairly discriminatory." § 627.031(1)(a), Fla. Stat. The Rating Law provisions referenced by Subsection 626.9741(5), Florida Statutes, in relation to ensuring that rates are not "unfairly discriminatory" are Sections 627.062 and 627.0651, Florida Statutes. Section 627.062, Florida Statutes, titled "Rate standards," provides that "[t]he rates for all classes of insurance to which the provisions of this part are applicable shall not be excessive, inadequate, or unfairly discriminatory." § 627.062(1), Fla. Stat. Subsection 627.062(2)(e)6., Florida Statutes, provides: A rate shall be deemed unfairly discriminatory as to a risk or group of risks if the application of premium discounts, credits, or surcharges among such risks does not bear a reasonable relationship to the expected loss and expense experience among the various risks. Section 627.0651, Florida Statutes, titled "Making and use of rates for motor vehicle insurance," provides, in relevant part: One rate shall be deemed unfairly discriminatory in relation to another in the same class if it clearly fails to reflect equitably the difference in expected losses and expenses. Rates are not unfairly discriminatory because different premiums result for policyholders with like loss exposures but different expense factors, or like expense factors but different loss exposures, so long as rates reflect the differences with reasonable accuracy. Rates are not unfairly discriminatory if averaged broadly among members of a group; nor are rates unfairly discriminatory even though they are lower than rates for nonmembers of the group. However, such rates are unfairly discriminatory if they are not actuarially measurable and credible and sufficiently related to actual or expected loss and expense experience of the group so as to assure that nonmembers of the group are not unfairly discriminated against. Use of a single United States Postal Service zip code as a rating territory shall be deemed unfairly discriminatory. Petitioners point out that each of these statutory examples describing "unfairly discriminatory" rates has an actuarial basis, i.e., rates must be related to the actual or expected loss and expense factors for a given group or class, rather than any extraneous factors. If two risks have the same expected losses and expenses, the insurer must charge them the same rate. If the risks have different expected losses and expenses, the insurer must charge them different rates. Michael Miller, Petitioners' expert actuary, testified that the term "unfairly discriminatory" has been used in the insurance industry for well over 100 years and has always had this cost-based definition. Mr. Miller is a fellow of the Casualty Actuarial Society ("CAS"), a professional organization whose purpose is the advancement of the body of knowledge of actuarial science, including the promulgation of industry standards and a code of professional conduct. Mr. Miller was chair of the CAS ratemaking committee when it developed the CAS "Statement of Principles Regarding Property and Casualty Insurance Ratemaking," a guide for actuaries to follow when establishing rates.5 Principle 4 of the Statement of Principles provides: "A rate is reasonable and not excessive, inadequate, or unfairly discriminatory if it is an actuarially sound estimate of the expected value of all future costs associated with an individual risk." In layman's terms, Mr. Miller explained that different types of risks are reflected in a rate calculation. To calculate the expected cost of a given risk, and thus the rate to be charged, the insurer must determine the expected losses for that risk during the policy period. The loss portion reflects the risk associated with an occurrence and the severity of a claim. While the loss portion does not account for the entirety of the rate charged, it is the most important in terms of magnitude. Mr. Miller cautioned that the calculation of risk is a quantification of expected loss, but not an attempt to predict who is going to have an accident or make a claim. There is some likelihood that every insured will make a claim, though most never do, and this uncertainty is built into the incurred loss portion of the rate. No single risk factor is a complete measure of a person's likelihood of having an accident or of the severity of the ensuing claim. The prediction of losses is determined through a risk classification plan that take into consideration many risk factors (also called rating factors) to determine the likelihood of an accident and the extent of the claim. As to automobile insurance, Mr. Miller listed such risk factors as the age, gender, and marital status of the driver, the type, model and age of the car, the liability limits of the coverage, and the geographical location where the car is garaged. As to homeowners insurance, Mr. Miller listed such risk factors as the location of the home, its value and type of construction, the age of the utilities and electrical wiring, and the amount of insurance to be carried. 2. Credit Scoring as a Rating Factor In the current market, the credit score of the applicant or insured is a rating factor common to automobile and homeowners insurance. Subsection 626.9741(2)(c), Florida Statutes, defines "credit score" as follows: a score, grade, or value that is derived by using any or all data from a credit report in any type of model, method, or program, whether electronically, in an algorithm, computer software or program, or any other process, for the purpose of grading or ranking credit report data. "Credit scores" (more accurately termed "credit-based insurance scores") are derived from credit data that have been found to be predictive of a loss. Lamont Boyd, Fair Isaac's insurance market manager, explained the manner in which Fair Isaac produced its credit scoring model. The company obtained information from various insurance companies on millions of customers. This information included the customers' names, addresses, and the premiums earned by the companies on those policies as well as the losses incurred. Fair Isaac next requested the credit reporting agencies to review their archived files for the credit information on those insurance company customers. The credit agencies matched the credit files with the insurance customers, then "depersonalized" the files so that there was no way for Fair Isaac to know the identity of any particular customer. According to Mr. Lamont, the data were "color blind" and "income blind." Fair Isaac's analysts took these files from the credit reporting agencies and studied the data in an effort to find the most predictive characteristics of future loss propensity. The model was developed to account for all the predictive characteristics identified by Fair Isaac's analysts, and to give weight to those characteristics in accordance to their relative accuracy as predictors of loss. Fair Isaac does not directly sell its credit scores to insurance companies. Rather, Fair Isaac's models are implemented by the credit reporting agencies. When an insurance company wants Fair Isaac's credit score, it purchases access to the model's results from the credit reporting agency. Other vendors offer similar credit scoring models to insurance companies, and in recent years, some insurance companies have developed their own scoring models. Several academic studies of credit scoring were admitted and discussed at the final hearing in these cases. There appears to be no serious debate that credit scoring is a valid and important predictor of losses. The controversy over the use of credit scoring arises over its possible "unfairly discriminatory" impact "based upon race, color, religion, marital status, age, gender, income, national origin, or place of residence." § 626.9741(8)(c), Fla. Stat. Mr. Miller was one of two principal authors of a June 2003 study titled, "The Relationship of Credit-Based Insurance Scores to Private Passenger Automobile Insurance Loss Propensity." This study was commissioned by several insurance industry trade organizations, including AIA and NAMIC. The study addressed three questions: whether credit-based insurance scores are related to the propensity for loss; whether credit- based insurance scores measure risk that is already measured by other risk factors; and what is the relative importance to accurate risk assessment of the use of credit-based insurance scores. The study was based on a nationwide random sample of private passenger automobile policy and claim records. Records from all 50 states were included in roughly the same proportion as each state's registered motor vehicles bear to total registered vehicles in the United States. The data samples were provided by seven insurers, and represented approximately 2.7 million automobiles, each insured for 12 months.6 The study examined all major automobile coverages: bodily injury liability, property damage liability, medical payments coverage, personal injury protection coverage, comprehensive coverage, and collision coverage. The study concluded that credit-based insurance scores were correlated with loss propensity. The study found that insurance scores overlap to some degree with other risk factors, but that after fully accounting for the overlaps, insurance scores significantly increase the accuracy of the risk assessment process. The study found that, for each of the six automobile coverages examined, insurance scores are among the three most important risk factors.7 Mr. Miller's study did not examine the question of causality, i.e., why credit-based insurance scores are predictive of loss propensity. Dr. Patrick Brockett testified for Petitioners as an expert in actuarial science, risk management and insurance, and statistics. Dr. Brockett is a professor in the departments of management science and information systems, finance, and mathematics at the University of Texas at Austin. He occupies the Gus S. Wortham Memorial Chair in Risk Management and Insurance, and is the director of the university's risk management and insurance program. Dr. Brockett is the former director of the University of Texas' actuarial science program and continues to direct the study of students seeking their doctoral degrees in actuarial science. His areas of academic research are actuarial science, risk management and insurance, statistics, and general quantitative methods in business. Dr. Brockett has written more than 130 publications, most of which relate to actuarial science and insurance. He has spent his entire career in academia, and has never been employed by an insurance company. In 2002, Lieutenant Governor Bill Ratliff of Texas asked the Bureau of Business Research ("BBR") of the University of Texas' McCombs School of Business to provide an independent, nonpartisan study to examine the relationship between credit history and insurance losses in automobile insurance. Dr. Brockett was one of four named authors of this BBR study, issued in March 2003 and titled, "A Statistical Analysis of the Relationship between Credit History and Insurance Losses." The BBR research team solicited data from insurance companies representing the top 70 percent of the automobile insurers in Texas, and compiled a database of more than 173,000 automobile insurance policies from the first quarter of 1998 that included the following 12 months' premium and loss history. ChoicePoint was then retained to match the named insureds with their credit histories and to supply a credit score for each insured person. The BBR research team then examined the credit score and its relationship with prospective losses for the insurance policy. The results were summarized in the study as follows: Using logistic and multiple regression analyses, the research team tested whether the credit score for the named insured on a policy was significantly related to incurred losses for that policy. It was determined that there was a significant relationship. In general, lower credit scores were associated with larger incurred losses. Next, logistic and multiple regression analyses examined whether the revealed relationship between credit score and incurred losses was explainable by existing underwriting variables, or whether the credit score added new information about losses not contained in the existing underwriting variables. It was determined that credit score did yield new information not contained in the existing underwriting variables. What the study does not attempt to explain is why credit scoring adds significantly to the insurer's ability to predict insurance losses. In other words, causality was not investigated. In addition, the research team did not examine such variables as race, ethnicity, and income in the study, and therefore this report does not speculate about the possible effects that credit scoring may have in raising or lowering premiums for specific groups of people. Such an assessment would require a different study and different data. At the hearing, Dr. Brockett testified that the BBR study demonstrated a "strong and significant relationship between credit scoring and incurred losses," and that credit scoring retained its predictive power even after the other risk variables were accounted for. Dr. Brockett further testified that credit scoring has a disproportionate effect on the classifications of age and marital status, because the very young tend to have credit scores that are lower than those of older people. If the question is simply whether the use of credit scores will have a greater impact on the young and the single, the answer would be in the affirmative. However, Dr. Brockett also noted that young, single people will also have higher losses than older, married people, and, thus, the use of credit scores is not "unfairly discriminatory" in the sense that term is employed in the insurance industry.8 Mr. Miller testified that nothing in the actuarial standards of practice requires that a risk factor be causally related to a loss. The Actuarial Standards Board's Standard of Practice 12,9 dealing with risk classification, states that a risk factor is appropriate for use if there is a demonstrated relationship between the risk factor and the insurance losses, and that this relationship may be established by statistical or other mathematical analysis of data. If the risk characteristic is shown to be related to an expected outcome, the actuary need not establish a cause-and-effect relationship between the risk characteristic and the expected outcome. As an example, Mr. Miller offered the fact that past automobile accidents do not cause future accidents, although past accidents are predictive of future risk. Past traffic violations, the age of the driver, the gender of the driver, and the geographical location are all risk factors in automobile insurance, though none of these factors can be said to cause future accidents. They help insurers predict the probability of a loss, but do not predict who will have an accident or why the accident will occur. Mr. Miller opined that credit scoring is a similar risk factor. It is demonstrably significant as a predictor of risk, though there is no causal relationship between credit scores and losses and only an incomplete understanding of why credit scoring works as a predictor of loss. At the hearing, Dr. Brockett discussed a study that he has co-authored with Linda Golden, a business professor at the University of Texas at Austin. Titled "Biological and Psychobehavioral Correlates of Risk Taking, Credit Scores, and Automobile Insurance Losses: Toward an Explication of Why Credit Scoring Works," the study has been peer-reviewed and at the time of the hearing had been accepted for publication in the Journal of Risk and Insurance. In this study, the authors conducted a detailed review of existing scientific literature concerning the biological, psychological, and behavioral attributes of risky automobile drivers and insured losses, and a similar review of literature concerning the biological, psychological, and behavioral attributes of financial risk takers. The study found that basic chemical and psychobehavioral characteristics, such as a sensation-seeking personality type, are common to individuals exhibiting both higher insured automobile losses and poorer credit scores. Dr. Brockett testified that this study provides a direction for future research into the reasons why credit scoring works as an insurance risk characteristic. 3. The Proposed Rule's Definition of "Unfairly Discriminatory" Petitioners contend that the Proposed Rule's definition of the term "unfairly discriminatory" expands upon and is contrary to the statutory definition of the term discussed in section C.1. supra, and that this expanded definition operates to impose a ban on the use of credit scoring by insurance companies. As noted above, Section 626.9741, Florida Statutes, does not define the term "unfairly discriminatory." The provisions of the Rating Law10 define the term as it is generally understood by the insurance industry: a rate is deemed "unfairly discriminatory" if the premium charged does not equitably reflect the differences in expected losses and expenses between policyholders. Two provisions of Section 626.9741, Florida Statutes, employ the term "unfairly discriminatory": (5) A rate filing that uses credit reports or credit scores must comply with the requirements of s. 627.062 or s. 627.0651 to ensure that rates are not excessive, inadequate, or unfairly discriminatory. * * * (8) The commission may adopt rules to administer this section. The rules may include, but need not be limited to: * * * (c) Standards that ensure that rates or premiums associated with the use of a credit report or score are not unfairly discriminatory, based upon race, color, religion, marital status, age, gender, income, national origin, or place of residence. Petitioners contend that the statute's use of the term "unfairly discriminatory" is unexceptionable, that the Legislature simply intended the term to be used and understood in the traditional sense of actuarial soundness alone. Respondents agree that Subsection 626.9741(5), Florida Statutes, calls for the agency to apply the traditional definition of "unfairly discriminatory" as that term is employed in the statutes directly referenced, Sections 627.062 and 627.0651, Florida Statutes, the relevant texts of which are set forth in Findings of Fact 18 and 19 above. However, Respondents contend that Subsection 626.9741(8)(c), Florida Statutes, calls for more than the application of the Rating Law's definition of the term. Respondents assert that in the context of this provision, "unfairly discriminatory" contemplates not only the predictive function, but also "discrimination" in its more common sense, as the term is employed in state and federal civil rights law regarding race, color, religion, marital status, age, gender, income, national origin, or place of residence. At the hearing, OIR General Counsel Steven Parton testified as to the reasons why the agency chose the federal body of law using the term "disparate impact" as the test for unfair discrimination in the Proposed Rule: Well, first of all, what we were looking for is a workable definition that people would have some understanding as to what it meant when we talked about unfair discrimination. We were also looking for a test that did not require any willfulness, because it was not our concern that, in fact, insurance companies were engaging willfully in unfair discrimination. What we believed is going on, and we think all of the studies that are out there suggest, is that credit scoring is having a disparate impact upon various people, whether it be income, whether it be race. . . . Respondents' position is that Subsection 626.9741(8)(c), Florida Statutes, requires that a proposed rate or premium be rejected if it has a "disproportionately" negative effect on one of the named classes of persons, even though the rate or premium equitably reflects the differences in expected losses and expenses between policyholders. In the words of Mr. Parton, "This is not an actuarial rule." Mr. Parton explained the agency's rationale for employing a definition of "unfairly discriminatory" that is different from the actuarial usage employed in the Rating Law. Subsection 626.9741(5), Florida Statutes, already provides that an insurer's rate filings may not be "excessive, inadequate, or unfairly discriminatory" in the actuarial sense. To read Subsection 626.9741(8)(c), Florida Statutes, as simply a reiteration of the actuarial "unfair discrimination" rule would render the provision, "a nullity. There would be no force and effect with regards to that." Thus, the Proposed Rule defines "unfairly discriminatory" to mean "that adverse decisions resulting from the use of a credit scoring methodology disproportionately affects persons belonging to any of the classes set forth in Section 626.9741(8)(c), F.S." Proposed Florida Administrative Code Rule 69O-125.005(1)(e). OIR's actuary, Howard Eagelfeld, explained that "disproportionate effect" means "having a different effect on one group . . . causing it to pay more or less premium than its proportionate share in the general population or than it would have to pay based upon all other known considerations." Mr. Eagelfeld's explanation is not incorporated into the language of the Proposed Rule. Consistent with the actuarial definition of "unfairly discriminatory," the Proposed Rule requires that any credit scoring methodology must be "demonstrated to be a valid predictor of the insurance risk to be assumed by an insurer for the applicable type of insurance," and sets forth detailed criteria through which the insurer can make the required demonstration. Proposed Florida Administrative Code Rule 69O-125.005(9)(a)-(f) and (h)-(l). Proposed Florida Administrative Code Rule 69O-125.005(9)(g) sets forth Respondents' "civil rights" usage of the term "unfairly discriminatory." The insurer's demonstration of the validity of its credit scoring methodology must include: [d]ocumentation consisting of statistical testing of the application of the credit scoring model to determine whether it results in a disproportionate impact on the classes set forth in Section 626.9741(8)(c), F.S. A model that disproportionately affects any such class of persons is presumed to have a disparate impact and is presumed to be unfairly discriminatory.11 Mr. Parton, who testified in defense of the Proposed Rule as one of its chief draftsmen, stated that the agency was concerned that the use of credit scoring may be having a disproportionate effect on minorities. Respondents believe that credit scoring may simply be a surrogate measure for income, and that using income as a basis for setting rates would have an obviously disparate impact on lower-income persons, including the young and the elderly. Mr. Parton testified that "neither the insurance industry nor anyone else" has researched the theory that credit scoring may be a surrogate for income. Mr. Miller referenced a 1998 analysis performed by AIA indicating that the average credit scores do not vary significantly according to the income group. In fact, the lowest income group (persons making less than $15,000 per year) had the highest average credit score, and the average credit scores actually dropped as income levels rose until the income range reached $50,000 to $74,000 per year, when the credit scores began to rise. Mr. Miller testified that a credit score is no more predictive of income level than a coin flip. However, Respondents introduced a January 2003 report to the Washington State Legislature prepared by the Social & Economic Sciences Research Center of Washington State University, titled "Effect of Credit Scoring on Auto Insurance Underwriting and Pricing." The purpose of the study was to determine whether credit scoring has unequal impacts on specific demographic groups. For this study, the researchers received data from three insurance companies on several thousand randomly chosen customers, including the customers' age, gender, residential zip code, and their credit scores and/or rate classifications. The researchers contacted about 1,000 of each insurance company's customers and obtained information about their ethnicity, marital status, and income levels. The study's findings were summarized as follows: The demographic patterns discerned by the study are: Age is the most significant factor. In almost every analysis, older drivers have, on average, higher credit scores, lower credit-based rate assignments, and less likelihood of lacking a valid credit score. Income is also a significant factor. Credit scores and premium costs improve as income rises. People in the lowest income categories-- less than $20,000 per year and between $20,000 and $35,000 per year-- often experienced higher premiums and lower credit scores. More people in lower income categories also lacked sufficient credit history to have a credit score. Ethnicity was found to be significant in some cases, but because of differences among the three firms studied and the small number of ethnic minorities in the samples, the data are not broadly conclusive. In general, Asian/Pacific Islanders had credit scores more similar to whites than to other minorities. When other minority groups had significant differences from whites, the differences were in the direction of higher premiums. In the sample of cases where insurance was cancelled based on credit score, minorities who were not Asian/Pacific Islanders had greater difficulty finding replacement insurance, and were more likely to experience a lapse in insurance while they searched for a new policy. The analysis also considered gender, marital status and location, but for these factors, significant unequal effects were far less frequent. (emphasis added) The evidence appears equivocal on the question of whether credit scoring is a surrogate for income. The Washington study seems to indicate that ethnicity may be a significant factor in credit scoring, but that significant unequal effects are infrequent regarding gender and marital status. The evidence demonstrates that the use of credit scores by insurers would tend to have a negative impact on young people. Mr. Miller testified that persons between ages 25 and 30 have lower credit scores than older people. Petitioners argue that by defining "unfairly discriminatory" to mean "disproportionate effect," the Proposed Rule effectively prohibits insurers from using credit scores, if only because all the parties recognize that credit scores have a "disproportionate effect" on young people. Petitioners contend that this prohibition is in contravention of Section 626.9741(1), Florida Statutes, which states that the purpose of the statute is to "regulate and limit" the use of credit scores, not to ban them outright. Respondents counter that if the use of credit scores is "unfairly discriminatory" toward one of the listed classes of persons in contravention of Subsection 626.9741(8)(c), Florida Statutes, then the "limitation" allowed by the statute must include prohibition. This point is obviously true but sidesteps the real issues: whether the statute's undefined prohibition on "unfair discrimination" authorizes the agency to employ a "disparate impact" or "disproportionate effect" definition in the Proposed Rule, and, if so, whether the Proposed Rule sufficiently defines any of those terms to permit an insurer to comply with the rule's requirements. Proposed Florida Administrative Code Rule 69O-125.005(2) provides that the insurer bears the burden of demonstrating that its credit scoring methodology does not disproportionately affect persons based upon their race, color, religion, marital status, age, gender, income, national origin, or place of residence. Petitioners state that no insurer can demonstrate, consistent with the Proposed Rule, that its credit scoring methodology does not have a disproportionate effect on persons based upon their age. Therefore, no insurer will ever be permitted to use credit scores under the terms of the Proposed Rule. As discussed more fully in Findings of Fact 73 through 76 below, Petitioners also contend that the Proposed Rule provides no guidance as to what "disproportionate effect" and "disparate impact" mean, and that this lack of definitional guidance will permit the agency to reject any rate filing that uses credit scoring, based upon an arbitrary determination that it has a "disproportionate effect" on one of the classes named in Subsection 626.9741(8)(c), Florida Statutes. Petitioners also presented evidence that no insurer collects data on race, color, religion, or national origin from applicants or insureds. Mr. Miller testified that there is no reliable independent source for race, color, religious affiliation, or national origin data. Mr. Eagelfeld agreed that there is no independent source from which insurers can obtain credible data on race or religious affiliation. Mr. Parton testified that this lack of data can be remedied by the insurance companies commencing to request race, color, religion, and national origin information from their customers, because there is no legal impediment to their doing so. Mr. Miller testified that he would question the reliability of the method suggested by Mr. Parton because many persons will refuse to answer such sensitive questions or may not answer them correctly. Mr. Miller stated that, as an actuary, he would not certify the results of a study based on demographic data obtained in this manner and would qualify any resulting actuarial opinion due to the unreliability of the database. Petitioners also object to the vagueness of the broad categories of "race, color, religion and national origin." Mr. Miller testified that the Proposed Rule lacks "operational definitions" for those terms that would enable insurers to perform the required calculations. The Proposed Rule places the burden on the insurer to demonstrate no disproportionate effect on persons based on these categories, but offers no guidance as to how these demographic classes should be categorized by an insurer seeking to make such a demonstration. Petitioners point out that even if the insurer is able to ascertain the categories sought by the regulators, the Proposed Rule gives no guidance as to whether the "disproportionate effect" criterion mandates perfect proportionality among all races, colors, religions, and national origins, or whether some degree of difference is tolerable. Petitioners contend that this lack of guidance provides unbridled discretion to the regulator to reject any disproportionate effect study submitted by an insurer. At his deposition, Mr. Parton was asked how an insurer should break down racial classifications in order to show that there is no disproportionate effect on race. His answer was as follows: There is African-American, Cuban-American, Spanish-American, African-American, Haitian- American. Are you-- you know, whatever the make-up of your book of business is-- you're the one in control of it. You can ask these folks what their ethnic background is. At his deposition, Mr. Parton frankly admitted that he had no idea what "color" classifications an insurer should use, yet he also stated that an insurer must demonstrate no disproportionate effect on each and every listed category, including "color." At the final hearing, when asked to list the categories of "color," Mr. Parton responded, "I suppose Indian, African-American, Chinese, Japanese, all of those."12 At the final hearing, Mr. Parton was asked whether the Proposed Rule contemplates requiring insurers to demonstrate distinctions between such groups as "Latvian-Americans" and "Czech-Americans." Mr. Parton's reply was as follows: No. And I don't think it was contemplated by the Legislature. . . . The question is race by any other name, whether it be national origin, ethnicity, color, is something that they're concerned about in terms of an impact. What we would anticipate, and what we have always anticipated, is the industry would demonstrate whether or not there is an adverse effect against those folks who have traditionally in Florida been discriminated against, and that would be African-Americans and certain Hispanic groups. In our opinion, at least, if you could demonstrate that the credit scoring was not adversely impacting it, it may very well answer the questions to any other subgroup that you may want to name. At the hearing, Mr. Parton was also questioned as to distinctions between religions and testified as follows: The impact of credit scoring on religion is going to be in the area of what we call thin files, or no files. That is to say people who do not have enough credit history from which credit scores can be done, or they're going to be treated somehow differently because of that lack of history. A simple question that needs to be asked by the insurance company is: "Do you, as a result of your religious belief or whatever [sect] you are in, are you forbidden as a precept of your religious belief from engaging in the use of credit?" When cross-examined on the subject, Mr. Parton could not confidently identify any religious group that forbids the use of credit. He thought that Muslims and Quakers may be such groups. Mr. Parton concluded by stating, "I don't think it is necessary to identify those groups. The question is whether or not you have a religious group that you prescribe to that forbids it." Petitioners contend that, in addition to failing to define the statutory terms of race, color, religion, and national origin in a manner that permits insurer compliance, the Proposed Rule fails to provide an operational definition of "disproportionate effect." The following is a hypothetical question put to Mr. Parton at his deposition, and Mr. Parton's answer: Q: Let's assume that African-Americans make up 10 percent of the population. Let's just use two groups for the sake of clarity. Caucasians make up 90 percent. If the application of credit scoring in underwriting results in African-Americans paying 11 percent of the premium and Caucasians paying 89 percent of the premium, is that, in your mind, a disproportionate affect [sic]? A: It may be. I think it would give rise under this rule that perhaps there is a presumption that it is, but that presumption is not [an irrebuttable] one.[13] For instance, if you then had testimony that a 1 percent difference between the two was statistically insignificant, then I would suggest that that presumption would be overridden. This answer led to a lengthy discussion regarding a second hypothetical in which African-Americans made up 29 percent of the population, and also made up 35 percent of the lowest, or most unfavorable, tier of an insurance company's risk classifications. Mr. Parton ultimately opined that if the difference in the two numbers was found to be "statistically significant" and attributable only to the credit score, then he would conclude that the use of credit scoring unfairly discriminated against African-Americans. As to whether his answer would be the same if the hypothetical were adjusted to state that African-Americans made up 33 percent of the lowest tier, Mr. Parton responded: "That would be up to expert testimony to be provided on it. That's what trials are all about."14 Aside from expert testimony to demonstrate that the difference was "statistically insignificant," Mr. Parton could think of no way that an insurer could rebut the presumption that the difference was unfairly discriminatory under the "disproportionate effect" definition set forth in the proposed rule. He stated that, "I can't anticipate, nor does the rule propose to anticipate, doing the job of the insurer of demonstrating that its rates are not unfairly discriminatory." Mr. Parton testified that an insurer's showing that the credit score was a valid and important predictor of risk would not be sufficient to rebut the presumption of disproportionate effect. Summary Findings Credit-based insurance scoring is a valid and important predictor of risk, significantly increasing the accuracy of the risk assessment process. The evidence is still inconclusive as to why credit scoring is an effective predictor of risk, though a study co-authored by Dr. Brockett has found that basic chemical and psychobehavioral characteristics, such as a sensation-seeking personality type, are common to individuals exhibiting both higher insured automobile losses and poorer credit scores. Though the evidence was equivocal on the question of whether credit scoring is simply a surrogate for income, the evidence clearly demonstrated that the use of credit scores by insurance companies has a greater negative overall effect on young people, who tend to have lower credit scores than older people. Petitioners and Fair Isaac emphasized their contention that compliance with the Proposed Rule would be impossible, and thus the Proposed Rule in fact would operate as a prohibition on the use of credit scoring by insurance companies. At best, Petitioners demonstrated that compliance with the Proposed Rule would be impracticable at first, given the current business practices in the industry regarding the collection of customer data regarding race and religion. The evidence indicated no legal barriers to the collection of such data by the insurance companies. Questions as to the reliability of the data are speculative until a methodology for the collection of the data is devised. Subsection 626.9741(8)(c), Florida Statutes, authorizes the FSC to adopt rules that may include: Standards that ensure that rates or premiums associated with the use of a credit report or score are not unfairly discriminatory, based upon race, color, religion, marital status, age, gender, income, national origin, or place of residence. Petitioners' contention that the statute's use of "unfairly discriminatory" contemplates nothing more than the actuarial definition of the term as employed by the Rating Law is rejected. As Respondents pointed out, Subsection 626.9741(5), Florida Statutes, provides that a rate filing using credit scores must comply with the Rating Law's requirements that the rates not be "unfairly discriminatory" in the actuarial sense. If Subsection 626.9741(8)(c), Florida Statutes, merely reiterates the actuarial requirement, then it is, in Mr. Parton's words, "a nullity."15 Thus, it is found that the Legislature contemplated some level of scrutiny beyond actuarial soundness to determine whether the use of credit scores "unfairly discriminates" in the case of the classes listed in Subsection 626.9741(8)(c), Florida Statutes. It is found that the Legislature empowered FSC to adopt rules establishing standards to ensure that an insurer's rates or premiums associated with the use of credit scores meet this added level of scrutiny. However, it must be found that the term "unfairly discriminatory" as employed in the Proposed Rule is essentially undefined. FSC has not adopted a "standard" by which insurers can measure their rates and premiums, and the statutory term "unfairly discriminatory" is thus subject to arbitrary enforcement by the regulating agency. Proposed Florida Administrative Code Rule 69O-125.005(1)(e) defines "unfairly discriminatory" in terms of adverse decisions that "disproportionately affect" persons in the classes set forth in Subsection 626.9741(8)(c), Florida Statutes, but does not define what is a "disproportionate effect." At Subsection (9)(g), the Proposed Rule requires "statistical testing" of the credit scoring model to determine whether it results in a "disproportionate impact" on the listed classes. This subsection attempts to define its terms as follows: A model that disproportionately affects any such class of persons is presumed to have a disparate impact and is presumed to be unfairly discriminatory. Thus, the Proposed Rule provides that a "disproportionate effect" equals a "disparate impact" equals "unfairly discriminatory," without defining any of these terms in such a way that an insurer could have any clear notion, prior to the regulator's pronouncement on its rate filing, whether its credit scoring methodology was in compliance with the rule. Indeed, Mr. Parton's testimony evinced a disinclination on the part of the agency to offer guidance to insurers who attempt to understand this circular definition. The tenor of his testimony indicated that the agency itself is unsure of exactly what an insurer could submit to satisfy the "disproportionate effect" test, aside from perfect proportionality, which all parties concede is not possible at least as to young people, or a showing that any lack of perfect proportionality is "statistically insignificant," whatever that means. Mr. Parton seemed to say that OIR will know a valid use of credit scoring when it sees one, though it cannot describe such a use beforehand. Mr. Eagelfeld offered what might be a workable definition of "disproportionate effect," but his definition is not incorporated into the Proposed Rule. Mr. Parton attempted to assure the Petitioners that OIR would take a reasonable view of the endless racial and ethnic categories that could be subsumed under the literal language of the Proposed Rule, but again, Mr. Parton's assurances are not part of the Proposed Rule. Mr. Parton's testimony referenced federal and state civil rights laws as the source for the term "disparate impact." Federal case law under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-2, has defined a "disparate impact" claim as "one that 'involves employment practices that are facially neutral in their treatment of different groups, but that in fact fall more harshly on one group than another and cannot be justified by business necessity.'" Adams v. Florida Power Corporation, 255 F.3d 1322, 1324 n.4 (11th Cir. 2001), quoting Hazen Paper Co. v. Biggins, 507 U.S. 604, 609, 113 S. Ct. 1701, 1705, 123 L. Ed. 2d 338 (1993). The Proposed Rule does not reference this definition, nor did Mr. Parton detail how OIR proposes to apply or modify this definition in enforcing the Proposed Rule. Without further definition, all three of the terms employed in this circular definition are conclusions, not "standards" that the insurer and the regulator can agree upon at the outset of the statistical and analytical process leading to approval or rejection of the insurer's rates. Absent some definitional guidance, a conclusory term such as "disparate impact" can mean anything the regulator wishes it to mean in a specific case. The confusion is compounded by the Proposed Rule's failure to refine the broad terms "race," "color," and "religion" in a manner that would allow an insurer to prepare a meaningful rate submission utilizing credit scoring. In his testimony, Mr. Parton attempted to limit the Proposed Rule's impact to those groups "who have traditionally in Florida been discriminated against," but the actual language of the Proposed Rule makes no such distinction. Mr. Parton also attempted to limit the reach of "religion" to groups whose beliefs forbid them from engaging in the use of credit, but the language of the Proposed Rule does not support Mr. Parton's distinction.
Findings Of Fact Petitioner herein, Kristina V. Tignor, took the Professional Engineers Examination for the State of Florida in Orlando on April 9 and 10, 1987. On July 22, 1987 she was advised by the Department of Professional Regulation's Office of Examination Services that she had failed the examination and was given a cummulative score of principles and practice of 69.1 percent. In her initial request for review and reconsideration, Petitioner objected to the points assigned to her solutions for three problems on the test, Numbers 425, 421, and 124. She contended that as a working engineer, certain criteria and assumptions must be made in approaching any engineering problem and, because the portion of the examination in issue is graded subjectively, her answered should be reconsidered and evaluated in that light. At the hearing, Petitioner contested only the grading of questions number 124 and 421, thereby accepting the grade given for question 425. With regard to Question 124, Ms. Tignor was awarded a score of 5 on her solution to this problem. The National Council of Engineering Examiners, in its Standard Scoring Plan Outline awards a "qualified" evaluation to scores from 10 down to 6 on this question. Scores from 5 to 0 are rated, "unqualified." A score of 5 indicates the applicant has failed to demonstrate adequate knowledge in one aspect of one category. Specifically, a rating of 5 in this question indicates that the examinee displayed an inadequate knowledge of weight/volume and concrete mix design. Her computations were displayed and an incomplete or erroneous solution was arrived at which gave a generally unrealistic result. Dr. Bruce A. Suprenant a civil engineer registered in four states and who teaches engineering at the University of South Florida, reviewed the question, the Petitioner's solution, the solution proposed by the examiners, and the grading scheme for this problem and found a number of illogical items in Petitioner's solution which, to him, were difficult to understand. He found several items which had no basis and which were possibly assumed. As to Part a of Petitioner's answer, a mixture of answers, (correction for moisture), which should have been in Part b, was located in Part a. As to density, the value used by Petitioner does not appear to be reasonable based on information provided in the problem. In Dr. Suprenant's opinion, there are at least three approaches to this problem. One is the water/cement ration method. Another is the weight method. The third is the absolute volume method. The water/cement ratio method would be difficult to apply here and neither Petitioner nor the examiners used it. As to the weight method, much the same problem exists. There is insufficient information provided to satisfactorily apply this method and while the examiners did not use it, Petitioner did. Petitioner's answer has a correction for moisture in the absolute volume method on the first page of the solution form at the top. The calculations by Petitioner are assumed information not known, (volume). In addition the correction for moisture in the second part of page one is included on the top of page two. It is not a part of the solution for subpart a and should not be there. Petitioner used 150 pounds per cubic foot for concrete density in her solution and this choice is not explained. Most publications utilized by engineers suggest using tables which were not provided to the examinees and it is, therefore, illogical to assume concrete density with no history for that assumption. Petitioner's answer of 5.41 cubic yards is only slightly off the suggested answer of 5.44 cubic yards but the fact that the answers are close does not justify her assumption. It might well not come so close in other cases. As to Part b of the question calling for the water/cement ratio, the corrections for moisture of fine and coarse aggregate on page one are acceptable. On the second page, a problem arises in when the correction for moisture should decrease. Petitioner got the right factor but applied it in the wrong manner. As a result, her answer to Part b of the examination question is wrong. Her answer was 4.40 as opposed to the correct answer of 4.34. This small degree of error can be attributed to the smallness of the amount in question. Were the amounts greater, the error would be greater. As to part c of the question, which deals with the cement factor in a yard of concrete, Petitioner's approach of dividing sacks of cubic yards is correct, but the cubic yard content was determined from Part a of the question, and Dr. Suprenant does not agree with how she got her solution. He therefore questions her carryover. The standard weight of a sack of concrete is 94 pounds. The individual grading Petitioner's response to Question 124 indicates she displayed inadequate knowledge and reached a solution which gives "unrealistic results." Dr. Suprenant agrees, contending that Petitioner's performance in regard to this question indicates inadequate knowledge of weight/volume relationship. She made inadequate assumptions in formulating her answer to the question. The fact that in this problem she arrived at a solution close to the correct one does not indicate that in other problems, she would achieve the same closeness using the same procedure. In his opinion, Petitioner showed some confusion regarding the basis for solving this problem and Dr. Suprenant believes that a grade of 5 as awarded by the examiner is correct. Petitioner questioned the fact that the various technical weights and volumes, such as 94 pounds in a sack of concrete, 8.33 pounds for a gallon of water, and 27 cubic feet in a cubic yard do not appear in the problem statement. This, in the opinion of Dr. Suprenant, compounds the gravity of Petitioner's deficiency. They are routine "givens" generally accepted in the practice by engineers and it would be difficult to assume that anyone familiar with the practice of engineering would use different "givens" for these specifics. Petitioner's employer, Mr. Bishop, himself a registered civil engineer in Florida since 1958, also reviewed Petitioner's solution to Question 124. He admits that on the first page of the answer sheet, Petitioner began solving the problem in an inappropriate way. Her calculations for moisture content were correct, however. On the second paged the correction factor was put in with the wrong sign and the aggregate was given the wrong factor. As a result, the answer was off. In his practice, however, the error committed by Petitioner in these regards is both minimal and acceptable. Her choice of 150 pounds per square foot is reasonable and produced a close result, and while it is true that if the project were of a greater scale, the error might be significant for a test question, as here, the error, in his opinion, is insignificant. He feels much the same way regarding the error in Part c of the examination question. While the factors used by petitioner were wrong, the process used was correct and the answer was not unreasonably incorrect for a test solution. In an examination situation, the calculations are not being done on a continuous basis, and he feels the grade of 5 awarded is unduly harsh since the error was numerical rather than operational. In his opinion, a more reasonable grade would have been a 6 or 7. Petitioner began her solution to this problem by using one similar to that used by the examiners in their publications. Shortly, however, she realized she would not get the answer she needed by doing so and abandoned her solution. She forgot to cross it out, however, and now recognizes she should have done so. She thereafter began to accomplish a series of new calculations on the first page of the answer sheet but did not necessarily utilize that data for her solution to Part a. She admits she made an error in calculation for moisture on the second page. In that calculation, she used the study manual and admits now that she should have cited the figure she used. As to Parts b and c, her use of some figures from Part a may have thrown her answer off somewhat. However, the 5 awarded her, indicating her solution was unrealistic, is, in her opinion unfair as she considers her answer to be quite realistic. The problem did not state what solution method to use and she feels her use of givens from recognized manuals such as the 150 pounds, should not be held against her. 94 pounds for a sack of cement used by the grader was also not given and her use of other accepted numbers should not, she contends, be held against her. Petitioner believes a grade of 7 would more accurately describe the quality of her answer. A 7 means that the examinee obtained an appropriate solution but chose a less than optimum approach. The solution is, therefore, awkward but nonetheless resonable. Ms. Tignor believes that while her approach may have been awkward, she achieved reasonable solution demonstrated by the fact that it was only slightly off the correct figure. Therefore, she believes a grade of 6 would be appropriate. This examination was an open book examination and Petitioner had her manuals with her. She could have easily determined the appropriate weights an "givens" from these manuals without choosing those she used. Ms. Tignor's conclusions that her results are realistic are contradicted by the Board's expert. Realistic results are, in engineering practice, not only the figure reached but also the method used in arriving at that figure. Here, though Petitioner's results are close, the approach utilized in arriving at her solution is unrealistic. Her approach showed an inadequate knowledge of weight/volume and calculations. Consequently it is found the grade is valid and was not arbitrarily assigned. According to the Standard Scoring Plan Outline, each score from 10 through 6 has an indispensable criteria that all categories must be satisfied. Since Ms. Tignor's examination response did not satisfy all categories, the best she can be given is a 5 and that award appears to be justified by the evidence presented. Question 421 was a four part drainage problem. Petitioner used as a part of her solution calculations based on a 100 year storm and this was determined by the examiners to be inappropriate. Ms. Tignor was awarded a grade of 8 and contends she was not given appropriate credit. She relates that even Mr. Smith, the Executive Director of the Board of Professional Engineers, advised her she may not have been given full credit for her answer. She was given full credit for Part a but lost two points for part c which included a calculation error to which Petitioner admits. She contends however, it was so minor, only one point should have been deducted. Were Petitioner to receive an additional one point on this question, she would pass the examination which she failed by only one point. However, this issue must be resolved on the basis of lawfully admitted evidence and Mr. Smith's comment, being unsupported hearsay evidence, cannot itself sustain the rasing of the grade. The Standard Scoring Plan Outline for this question reflects that to receive an 8, the examinee must demonstrate that all categories are satisfied, that errors are attributable to misread tables or calculating devices, and that errors would be corrected by routine checking. The results must be reasonable if not correct. For a 9, the examinee must demonstrate that all categories are satisfied; that a correct solution is arrived at but the examinee has been excessively conservative in the choice of working values; and that examinee's presentation is lacking in completeness or equations diagrams or orderly steps in solution, etc. Subqualifications for a 9 indicates that the answer is correct but that the organization of the solution is not logical. One error in calculation in any of the Parts from a to d, which does not affect the other parts of the solution, is acceptable. Mr. Kenneth Weldon, the Assistant State Drainage Engineer for the Department of Transportation, an expert in the area of drainage to which this problem relates, reviewed the question and the Petitioner's answer thereto and would award a grade of 8 to her answer. He found various numerical mathematical errors which led to the wrong solution. In addition, Petitioner made various assumptions that, though supposedly supported, were, he felt, in error through her misinterpretation. In general, none of the actual solutions she arrived at were correct. Specifically, that portion of the problem to determine the cross sectional area of the waterway for establishing normal depth flow was done incorrectly. Because the Petitioner used incorrect equations throughout the problem, the depth flow computed is high. Petitioner did no analysis to determine whether or not any of the several situations relating to flow control were pertinent. Mr. Weldon initially felt Petitioner's answer to the question merited a grade of 6. This means that the examinee knew all the proper steps but failed to interpret some of the criteria properly. He could not award her a grade of 9 which would indicate all categories were satisfied and the solution was correct, if conservative. Petitioner's solutions were incorrect. He subsequently changed his award to an 8, however, on the basis that the Petitioner's errors were attributable to a misread table or calculating device and would be corrected by routine checking. The result was reasonable, though not correct. Mr. Weldon did not like this question even though he believed it appropriate for a one-hour exam. As written, it involves establishing and making judgements beyond what someone minimally competent would be expected to do. It requires materials that are beyond what are normally available to someone taking the exam. However, Petitioner failed to make proper provision to protect herself in a case where the question is inappropriate or incomplete. If she felt something was wrong with the question, she should have clearly stated the assumption she was making to solve the problem. This was her responsibility and she failed to do so. In Mr. Weldon's opinion, Petitioner's answer might merit a grade slightly higher but not significantly higher. His reasoning is that Petitioner misinterpreted the criteria she stated for writing the problem. Her comment that the Department of Transportation uses 100 year storm criteria was incorrect even though that statement is made in outdated Department of Transportation publications. The basis for her answer is not well established or correct, or based on engineering calculations or judgement, and at best he could award no more than an 8.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that a Final Order be entered affirming the score awarded to Petitioner on questions 124 and 421, respectively, of the Civil Engineering Examination administered to her in April, 1987. RECOMMENDED this 10th day of June, 1988, at Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of June, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-5110 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. For the Petitioner None For the Respondent Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated except for the characterization of several assumptions as guesses. No evidence exists to support such a characterization even though they are incorrect. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. COPIES FURNISHED: Kristina V. Tignor, pro se 2160 North Oval Drive Sarasota, Florida 34239 H. Reynolds Sampson, Esquire Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32399-0750 Allen R. Smith, Jr. Executive Director DPR, Board of Professional Engineers 130 North Monroe Street Tallahassee, Florida 32399-0750
Findings Of Fact In the United States in the twentieth century credit unions were conceived as cooperative societies incorporated for the two-fold purpose of promoting thrift among their members and creating a source of credit for their members at legitimate rates of interest for provident purposes. This has remained the raison d'etre of credit unions since their proliferation which began in the first third of this century. As such cooperative lending associations they have allowed people with limited means a way of pooling their savings to make a source of funds available for low interest loans. In Florida there have been several methods of withdrawal traditionally used by members of credit unions to withdraw funds from their deposit or share accounts. The first of these methods has been a direct personal visit by the member to the credit union to execute the withdrawal. Over the years however it has become common for many withdrawals by members to be made pursuant to telephone instructions by the member to the credit union, by letter from the member to the credit union, or by continuing instructions from the member to the credit union ordering the withdrawal of certain sums periodically. Frequently the recipient of these withdrawals has been the member himself or herself. However it is common for these withdrawals to be paid to third parties such as the member's creditors, family members, insurance companies or other financial institutions, at the member's direction. These withdrawals have usually been paid by a check from the credit union drawn on the credit union's local bank account or in cash. However, credit unions have also utilized methods of payment such as drafts, electronic funds transfer or other internal or external accounting transactions between and among institutions where the credit union may have established accounts. The Florida Statutes and the Florida Administrative Code are silent with regard to the manner in which a credit union member may withdraw his or her shares or deposits or a part thereof. Over their years of development credit unions have instituted many programs for their members which have been accepted as furthering the purpose of the credit union as a thrift institution. These programs presently include debt proration and automatic payment of bills, financial counsel inn, traveler's checks, money orders, share and deposit accounts, and certificates of deposit. A share draft is a negotiable or non-negotiable draft which directs a credit union to pay funds from a member's share or deposit account to either the member or a third party designated by the member. The four credit union Petitioners have share draft programs which function in essentially the same manner, their distinctions being slight. A share draft is payable through a bank and is similar to other forms of payable through drafts drawn against other non-bank institutions such as money order companies and insurance companies. A member of one of the four Petitioner credit unions who desires to use share drafts must first establish a separate share or deposit account with the credit union. The member contracts with the credit union for participation in the program. All share drafts are paid out of that account. The member receives a book of drafts with the member's name pre- printed on each draft. To the layman these drafts look like checks. However, they are not checks. A share draft can be made payable to cash or any payee in any amount, provided the draft does not exceed the available balance in the member's share draft account. A share draft may be presented directly to the credit union by a member to withdraw cash from the member's share draft account, or, a payee who has received a share draft from a member may bring it to the credit union for payment from the member's share draft account. Ordinarily, however, a payee who has received a share draft from a member will deposit the draft in the payee's own bank account. The draft will then be delivered to the credit union's payable through bank through the normal bank clearing channels used also for checks. The information on the draft is extracted by the payable through bank and converted either to an electronic medium or some other form of communication medium which is then used to deliver a request to the credit union for payment of the draft. Three of the credit union Petitioners in this cause, Pinellas County Teachers' Credit Union, Duval County Teachers' Credit Union, and Publix Employees' Credit Union participate in the share draft program originated and sponsored by ICU Service Corporation, and use the Chase Manhattan Bank as the payable through bank. The fourth credit union Petitioner, Leon County Teachers' Credit Union, is not a part of the ICU Service Program, and utilizes the Capital City First National Bank of Tallahassee as its payable through bank. One of the differences between the ICU program and that utilized by the Leon County Teachers' Credit Union is the manner in which the payable through banks collect from the credit unions the money they paid out each day on drafts delivered to them. In the ICU program, the payable through bank (Chase) collects by the issuance of a pre-authorized draft drawn on the involved credit union's regular bank. In the Leon County Teachers' Credit Union there is no such draft and the collection is effected by debit entries on the credit union's account at the payable through bank (Capital City). Unlike the other three credit union Petitioners, Leon County Teachers' Credit Union, Petitioner herein, refers to its program as a "thrift account program" and refers to the instruments used by the members as "withdrawal checks", as opposed to share drafts. However, these are differences of form and not substance. The programs of all four credit union Petitioners are herein referred to as "share draft programs" and the payment instruments used in those programs are referred to as "share drafts". The instruments are, in their design, drafts and not checks. Drafts are a common instrument of commerce and are drawn on, and paid by, a wide variety of organizations other than banks. The share draft programs of the credit union Petitioners were instituted to allow credit unions to provide a contemporary means of withdrawing funds maintained in a member's share or deposit account and to offer a transaction account, i.e. an account into which funds could be deposited and on which a payment instrument could be drawn for the depositor to pay his obligations to third parties. Without regard to the share draft programs many members of credit unions, at least in recent years, have deposited a substantial portion of their pay check in their credit union accounts with the apparent intention of quickly withdrawing the bulk of the deposit to meet their current expenses. Thus, members of credit unions who have so acted have in effect used their share and deposit accounts for transaction purposes on a regular basis. A program very important to a credit union's performance of its responsibilities is the payroll deduction system whereby a member may authorize his or her employer to deduct from his or her pay check an amount which will automatically be deposited in the credit union each pay day. This payroll deduction system enables members to establish regular patterns of thrift and savings. It further enables members who have previously borrowed money from the credit union to liquidate their debts in a financially prudent and systematic manner. The payroll deduction system also provides a regular and steady flow of funds into members' accounts thus giving credit unions relatively stable assets with which to meet the loan needs of their members. Various governmental agencies have recently attempted to establish for the beneficiaries or employees of their programs direct deposit systems for the transfer of government benefits such as social security, retirement, payroll, and disability compensation into an account at the beneficiary's or employee's chosen financial institution. To maintain the economy of these direct deposit programs, the governmental agencies who disburse the funds have mandated or may reasonably be expected to mandate in the future, that the entire check must go to one financial institution, thus eliminating the possibility that the recipient would direct a portion of the check to his or her credit union with the remainder going to another financial institution. The expansion of this direct deposit concept, with its limitation on dividing the check, to include payroll checks, is a possibility in the near future. The Petitioners herein are seriously concerned that without the ease of withdrawal promoted by the share draft programs, the members who are now depositing a portion of their check in a payroll deduction system will, with the advent of limitations on dividing checks, choose to deposit their funds elsewhere than a credit union, thus depriving the credit union of funds presently available for the meeting of their statutory responsibilities. The share draft programs offer a transaction account which provides a convenient vehicle for the withdrawal of funds by members from their credit union, thereby making the credit union an attractive repository for the entire pay check of its members in a payroll deduction system or other benefits deduction system wherein it is required that the entire check be deposited in one institution. As noted above the concept of a share or deposit account being used as a transaction account by credit union members predates share draft programs. Thus, while the share draft programs provide a more convenient method of withdrawal to credit union members, the share draft programs themselves do not introduce the concept of using credit union accounts as transaction accounts. This concept already exists. The share draft programs do, however, offer the opportunity for extensive expansion of this concept. To the extent that the business world readily accepts share drafts as payment of debt in lieu of a check or cash, share draft programs, in their practical effect, are essentially identical to the checking account system of this country which traditionally has been a unique function of commercial banks. Prior to the commencement of their share draft programs, each of the Petitioner credit unions sought and received the permission of the Office of the Comptroller, State of Florida, for the conduct of the programs. In each case this permission was received, by letter, from Daniel T. Burnette, Director, State Credit Unions, Office of the Comptroller, State of Florida. Beginning prior to the commencement of the share draft programs and continuing to the date of hearing, the Office of the Comptroller has been kept fully informed by the Petitioner credit unions of the institution and conduct of their share draft programs. The Petitioner credit unions have had no reason to believe that the Director of State Credit Unions for the Office of Comptroller did not speak with the authority of that office. By letter dated November 1, 1976, the Comptroller of the State of Florida notified the Petitioner credit unions of his intent to terminate their share draft programs, which termination led to this proceeding. The By-laws of the Publix Employees' Credit Union, in Article X, Section 5, state that "[a]ll payments or withdrawals of money for any purpose may be made by cash or check." The By-laws of the Pinellas County Teachers' Credit Union, in Article X, Section 5, state that "[a]ll payments or withdrawals of money for any purpose shall be made by check." The By-laws of the Leon County Teachers' Credit Union, in Article X, Section 5, state that "[a]ll payments or withdrawals of money for any purpose shall be made by check, excepting share and deposit withdrawals and loan advances which may be made in cash in accordance with policies set forth by the Board of Directors." The By- laws of the Duval County Teachers' Credit Union do not contain any restrictions or prohibitions on the manner in which payments or withdrawals may be made or allowed by the credit union.
Findings Of Fact The Respondents, Lowell W. Langmade and L. A. D. Realty, Inc., are licensed real estate brokers holding license numbers 0050033 and 0215301, respectively. The complaining witness who ultimately purchased the property involved in this proceeding, and the Respondent Lowell W. Langmade, were introduced to each other by the attorney for the seller of the property in December of 1980. In January,1981, the seller requested the Respondent to find a buyer for the subject property, consisting of two triplex apartments situated in Broward County. The Respondent contacted the prospective purchaser later in January, 1981, and showed him the triplex apartments which were offered for sale at a price of $195,000. The property was encumbered by two mortgages, and the Respondent informed the prospective purchaser what the approximate amounts thereof were, namely $62,000 and $38,000. Several days later the prospective purchaser called the Respondent and instructed him to prepare a contract offering to buy the property for $175,000. This contract was prepared showing existing mortgage balances of approximately $62,000 and $38,000, and with the monthly payments shown as an approximate amount. The prospective purchaser read and signed this contract. Thereafter, it was sent to the seller who also signed it. Copies were distributed to the attorneys representing both parties to the contract. On February 19, 1981, the seller's attorney called the office of the attorney for the buyer and gave the closing figures including estoppel information on the mortgages. These figures consisted of current mortgage balances, taxes, rents and other prorations. On March 2, 1981, the seller's attorney gave updated closing figures to the office of the buyer's attorney. On March 9, 1981, the closing took place. By then the actual amounts of the mortgages encumbering the subject property had been ascertained, and the closing statement reflected these actual amounts, namely, $60,708.66 and $35,428.96, respectively. The buyer objected to the differences between the actual mortgage balances and the approximations on the contract, but he proceeded to close the transaction and took title to the subject property. The buyer contends that he had asked for exact mortgage balances throughout the negotiations, and assumed that he would get them. Yet he signed the contract setting forth approximate figures, and proceeded to close after the actual balances had been ascertained. The documentary evidence contradicts the buyer's uncorroborated, self-serving assertions relative to his requirement for actual mortgage balances. Thus, there is insufficient evidence to support a finding of fact that the buyer was misled or tricked by the Respondent, or that the Respondent violated a duty imposed upon him in connection with this transaction.
Recommendation From the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Administrative Complaint against the Respondents, Lowell W. Langmade and L. A. D. Realty, Inc., be dismissed. THIS RECOMMENDED ORDER entered this 6 day of April, 1983, in Tallahassee, Florida. WILLIAM B. THOMAS 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 6 day of April, 1983. COPIES FURNISHED: Stephen Cohen, Esquire Post Office Box 14723 Fort Lauderdale, Florida 33302 C. Lavon Ward, Esquire 629 South West First Avenue Fort Lauderdale, Florida 33301 Harold Huff, Executive Director Florida Real Estate Commission Post Office Box 1900 Orlando, Florida 32802 Fred Roche, Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 William M. Furlow, Esquire Department of Professional Regulation Post Office Box 1900 Orlando, Florida 32802
The Issue Whether the Petitioner is entitled to additional credit as stated in his challenge to question 121 of the October 1996 examination for licensure.
Findings Of Fact Petitioner, Hector Fernandez, is a candidate for licensure by examination with the Department. Petitioner seeks to be licensed as a civil engineer and took the examination administered by the Department in October 1996. Petitioner received a score of 69.00 on this examination and therefore failed to achieve the minimum score required for licensure, 70.00. As an unsuccessful candidate, Petitioner reviewed the examination on March 21, 1997, and timely filed the instant challenge to the scoring of his test results. Question 121 on the examination required a candidate to compute two responses. As the latter response was dependent on the first calculation, Petitioner maintained that a mathematical error in the initial response would necessarily render the subsequent answer incorrect. Since Petitioner believed he had demonstrated, by virtue of his overall presentation of the problem, that he understood the material requested, he claimed his score for this question should have been higher. For question 121 Petitioner received 4 of the possible 10 points. The scoring for question 121 was divided into objective levels for each point assignment available. A candidate did not have to make all mathematical calculations correctly to receive a level of competence on the question (a grade of 6). However, a candidate did have to demonstrate competence within the guidelines set. In Petitioner's case, the score of 4 reflected his failure to set forth the correct calculation needed to properly complete the question. Despite Petitioner's claim that his error was minor and would have been caught in review by another engineer, the answer provided by Petitioner failed to set forth the energy balance equation (Bernoulli) needed to accurately compute the problem. The question in dispute was unambiguously worded. The scoring system for question 121 was logically defined and appropriately implemented. The question included all information needed to correctly solve the problem posed. Petitioner was entitled to use reference materials which would have included the equation needed to solve the question in issue. All current techniques were considered when Petitioner's answer was reviewed and scored as insufficient to demonstrate competence.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Business and Professional Regulation, Board of Professional Engineers enter a Final Order dismissing Petitioner's challenge. DONE AND ENTERED this 29th day of May, 1998, in Tallahassee, Leon County, Florida. J. D. PARRISH 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 Filed with the Clerk of the Division of Administrative Hearings this 29th day of May, 1998. COPIES FURNISHED: Angel Gonzalez, Executive Director Board of Professional Engineers Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0750 Lynda L. Goodgame, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0750 Thomas G. Thomas Assistant General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0750 Hector Fernandez, pro se 4610 Southwest 135 Avenue Miami, Florida 33175
The Issue The issue for consideration in this matter is whether Petitioner is entitled to recover attorney's fees and costs expended as a result of the Department's initiation of disciplinary proceedings against it because, as alleged, there was no substantial justification for such disciplinary action.
Findings Of Fact By Administrative Complaint dated April 23, 1991, the Department sought to take disciplinary action against Prospective for alleged unlicensed activity as a private investigative agency and private investigator. Respondent initiated its action on the basis of a newspaper article which described Prospective's business of providing landlords with reports on prospective tenants. This article, in pertinent part, described Prospective's activities as follows: Taking information from a prospective tenant's rental application, Burnes telephones previous landlords, uses his computer to get credit information and drives downtown to check public records for law suits, judgements, evictions, misdemeanor and felony convictions. His search of public records has turned up applicants who've been convicted of murder, rape and child molesting, he said. When the work's done he gives a detailed report to the landlord who decides how to use it. Prospective does not perform a credit check or make direct contact with other than prior landlords. All other information is derived from computer data or public records. No recommendation is made nor is advice given to the client by the Petitioner. On the basis of the newspaper article, which appeared in The Tampa Tribune, Respondent initiated an investigation into Petitioner's activities. No evidence was offered of any complaints having been filed against Petitioner either by clients or those upon whom it reported. In the course of its investigation, the Department's investigator conferred with Petitioner, Burnes, and his attorney, and thereafter concluded that Petitioner's activities fell within the definition of private investigation which required a license from the state. An Administrative Complaint was thereafter filed against the Petitioner which resulted in Petitioner requesting an informal hearing. By Recommended Order dated November 26, 1991, entered after the informal hearing was held, the Department's Hearing Officer recommended dismissal of the Administrative Complaint concluding that Petitioner's activities were exempt from licensure requirements because it was a consumer credit reporting agency regulated under 15 U.S.C. 1681 et. seq. as listed in Section 493.6102(7), Florida Statutes. Notwithstanding the recommendation of its Hearing Officer, the Department, by Final Order dated April 28, 1992, overruled his Conclusions of Law and, while dismissing the Administrative Complaint, ordered Petitioner to "cease and desist performing investigations for consideration, other than credit history background checks, without first becoming licensed pursuant to Chapter 493, Florida Statutes." Petitioner then filed an appeal with the Second District Court of Appeal which, in an opinion dated November 17, 1993, reversed the Department's Final Order. The Department's Motion for Rehearing was denied by the Court. The parties stipulated at hearing that Petitioner is a prevailing small business party, and that the Department initiated the disciplinary proceeding. There is no issue of fact regarding what actions Petitioner was carrying on as a part of its business. The parties also stipulated that the amount claimed by Petitioner, $7,600.00 in attorneys fees and $160.14 in costs, for a total of $7,760.14 is appropriate and reasonable, in the event finding herein is for the Petitioner.
