Findings Of Fact Respondent holds a property and casualty insurance license, life and health insurance license, and life insurance license for the State of Florida. She has held her property and casualty license for about 20 years. In 1976, she was employed as an agent for the Orlando office of Commonwealth insurance agency, which she purchased in 1977 or 1978. She continues to own the Commonwealth agency, which is the agency involved in this case. Respondent has never previously been disciplined. In 1979 or 1980, Respondent was appointed to the board of directors of the Local Independent Agents Association, Central Florida chapter. She has continuously served on the board of directors of the organization ever since. She served as president of the association until September, 1991, when her term expired. During her tenure as president, the local association won the Walter H. Bennett award as the best local association in the country. Since May, 1986, Commonwealth had carried the insurance for the owner of the subject premises, which is a 12,000 square foot commercial block building located at 923 West Church Street in Orlando. In July, 1987, the insurer refused to renew the policy on the grounds of the age of the building. Ruth Blint of Commonwealth assured the owner that she would place the insurance with another insurer. Mrs. Blint is a longtime employee of the agency and is in charge of commercial accounts of this type. Mrs. Blint was a dependable, competent employee on whom Respondent reasonably relied. Mrs. Blint contacted Dana Roehrig and Associates Inc. (Dana Roehrig), which is an insurance wholesaler. Commonwealth had done considerable business with Dana Roehrig in the past. Dealing with a number of property and casualty agents, Dana Roehrig secures insurers for the business solicited by the agents. Dana Roehrig itself is not an insurance agent. In this case, Dana Roehrig served as the issuing agent and agreed to issue the policy on behalf of American Empire Surplus Lines. The annual premium would be $5027, excluding taxes and fees. This premium was for the above- described premises, as well as another building located next door. The policy was issued effective July 21, 1987. It shows that the producing agency is Commonwealth and the producer is Dana Roehrig. The policy was countersigned on August 12, 1987, by a representative of the insurer. On July 21, 1987, the insured gave Mrs. Blint a check in the amount of $1000 payable to Commonwealth. This represented a downpayment on the premium for the American Empire policy. The check was deposited in Commonwealth's checking account and evidently forwarded to Dana Roehrig. On July 31, 1987, Dana Roehrig issued its monthly statement to Commonwealth. The statement, which involves only the subject policy, reflects a balance due of $3700.86. The gross premium is $5027. The commission amount of $502.70 is shown beside the gross commission. Below the gross premium is a $25 policy fee, $151.56 in state tax, and a deduction entered July 31, 1987, for $1000, which represents the premium downpayment. When the commission is deducted from the other entries, the balance is, as indicated, $3700.86. The bottom of the statement reads: "Payment is due in our office by August 14, 1987." No further payments were made by the insured or Commonwealth in August. The August 31, 1987, statement is identical to the July statement except that the bottom reads: "Payment is due in our office by September 14, 1987." On September 2, 1987, the insured gave Commonwealth a check for $2885.16. This payment appears to have been in connection with the insured's decision to delete the coverage on the adjoining building, which is not otherwise related to this case. An endorsement to the policy reflects that, in consideration of a returned premium of $1126 and sales tax of $33.78, all coverages are deleted for the adjoining building. The September 30 statement shows the $3700.86 balance brought forward from the preceding statement and deductions for the returned premium and sales tax totalling $1159.78. After reducing the credit to adjust for the unearned commission of $112.60 (which was part of the original commission of $502.70 for which Commonwealth had already received credit), the net deduction arising from the deleted coverage was $1047.18. Thus, the remaining balance for the subject property was $2653.68. In addition to showing the net sum due of $944.59 on an unrelated policy, the September 30 statement contained the usual notation that payment was due by the 12th of the following month. However, the statement contained a new line showing the aging of the receivable and showing, incorrectly, that $3700.86 was due for more than 90 days. As noted above, the remaining balance was $2653.68, which was first invoiced 90 days previously. Because it has not been paid the remaining balance on the subject policy, Dana Roehrig issued a notice of cancellation sometime during the period of October 16-19, 1987. The notice, which was sent to the insured and Commonwealth, advised that the policy "is hereby cancelled" effective 12:01 a.m. October 29, 1987. It was the policy of Dana Roehrig to send such notices about ten days in advance with two or three days added for mailing. One purpose of the notice is to allow the insured and agency to make the payment before the deadline and avoid cancellation of the policy. However, the policy of Dana Roehrig is not to reinstate policies if payments are received after the effective date of cancellation. Upon receiving the notice of cancellation, the insured immediately contacted Mrs. Blint. She assured him not to be concerned and that all would be taken care of. She told him that the property was still insured. The insured reasonably relied upon this information. The next time that the insured became involved was when the building's ceiling collapsed in June, 1988. He called Mrs. Blint to report the loss. After an adjuster investigated the claim, the insured heard nothing for months. He tried to reach Respondent, but she did not return his calls. Only after hiring an attorney did the insured learn that the cancellation in October, 1987, had taken effect and the property was uninsured. Notwithstanding the cancellation of the policy, the October 31 statement was identical to the September 30 statement except that payment was due by November 12, rather than October 12, and the aging information had been deleted. By check dated November 12, 1987, Commonwealth remitted to Dana Roehrig $3598.27, which was the total amount due on the October 30 statement. Dana Roehrig deposited the check and it cleared. The November 30 statement reflected zero balances due on the subject policy, as well as on the unrelated policy. However, the last entry shows the name of the subject insured and a credit to Commonwealth of $2717 plus sales tax of $81.51 minus a commission readjustment of $271.70 for a net credit of $2526.81. The record does not explain why the net credit does not equal $2653.68, which was the net amount due. It would appear that Dana Roehrig retained the difference of $125.87 plus the downpayment of $1000 for a total of $1125.87. It is possible that this amount is intended to represent the earned premium. Endorsement #1 on the policy states that the minimum earned premium, in the event of cancellation, was $1257. By check dated December 23, 1987, Dana Roehrig issued Commonwealth a check in the amount of $2526.81. The December 31 statement reflected the payment and showed a zero balance due. The record is otherwise silent as to what transpired following the issuance of the notice of cancellation. Neither Mrs. Blint nor Dana Roehrig representatives from Orlando testified. The only direct evidence pertaining to the period between December 31, 1987, and the claim the following summer is a memorandum from a Dana Roehrig representative to Mrs. Blint dated March 24, 1988. The memorandum references the insured and states in its entirety: Per our conversation of today, attached please find the copy of the cancellation notice & also a copy of the cancellation endorsement on the above captioned, which was cancelled effective 10/29/87. If you should have any questions, please call. Regardless of the ambiguity created by the monthly statements, which were not well coordinated with the cancellation procedure, Mrs. Blint was aware in late March, 1988, that there was a problem with the policy. She should have advised the insured, who presumably could have procured other insurance. Regardless whether the June, 1988, claim would have been covered, the ensuing litigation would not have involved coverage questions arising out of the cancellation of the policy if Mrs. Blint had communicated the problem to the insured when she received the March memorandum. Following the discovery that the policy had in fact been cancelled, the insured demanded that Respondent return the previously paid premiums. Based on advice of counsel, Respondent refused to do so until a representative of Petitioner demanded that she return the premiums. At that time, she obtained a cashiers check payable to the insured, dated June 1, 1990, and in the amount of $2526.81. Although this equals the check that Dana Roehrig returned to Commonwealth in December, 1987, the insured actually paid Commonwealth $1000 down and $2885.16 for a total of $3885.16. This discrepancy appears not to have been noticed as neither Petitioner nor the insured has evidently made further demands upon Respondent for return of premiums paid. The insured ultimately commenced a legal action against Commonwealth, Dana Roehrig, and American Empire. At the time of the hearing, the litigation remains pending.
Recommendation Based on the foregoing, it is hereby recommended that the Department of Insurance and Treasurer enter a final order finding Respondent guilty of violating Sections 626.561(1) and, thus, 626.621(2), Florida Statutes, and, pursuant to Sections 626.681(1) and 626.691, Florida Statutes, imposing an administrative fine of $1002.70, and placing her insurance licenses on probation for a period of one year from the date of the final order. If Respondent fails to pay the entire fine within 30 days of the date of the final order, the final order should provide, pursuant to Section 626.681(3), Florida Statutes, that the probation is automatically replaced by a one-year suspension. RECOMMENDED this 5th day of February, 1992, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 5th day of February, 1992. COPIES FURNISHED: Hon. Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, FL 32399-0300 Bill O'Neil, General Counsel Department of Insurance The Capitol, Plaza Level Tallahassee, FL 32399-0300 James A. Bossart Division of Legal Affairs Department of Insurance 412 Larson Building Tallahassee, FL 32399-0300 Thomas F. Woods Gatlin, Woods, et al. 1709-D Mahan Drive Tallahassee, FL 32308
Findings Of Fact Sonin Marcus, Respondent, is licensed as a general lines agent and is president of Insurance Town, Inc., which sells insurance, principally automobile, to the public. He was so licensed and operating at all times relevant hereto. Marcus has been in the insurance business for some 23 years during which time he has operated as independent agent, managing general agent, adjuster, and executive vice president and regional manager of Heritage Insurance for ten years before starting Insurance Town. Central Insurance Underwriters (CIU) located in Altamonte Springs, Florida, is a managing general agent for several insurance companies in whose names it issues policies, collects premiums, etc. CIU was exclusive general agent for Atlas Mutual Insurance Company and National Fire and Casualty Company at all times relevant hereto. CIU had a brokerage relationship with Insurance Town during 1982 and the early part of 1983 in that it issued policies sold by Insurance Town. International Bankers Insurance Company owns General Risk Underwriters, Inc. (GRU) and both are located at Hialeah, Florida, as is General Risk Acceptance Corporation (GRAC), the finance arm of the group. During the period of approximately one year ending in September, 1982, International Bankers Insurance Company and General Risk Underwriters issued policies sold by Insurance Town, who acted as agent for these underwriters. Insurance Town was on an account-current basis with both CIU and GRU during the period Insurance Town acted as an agent for these underwriters. At the end of each month the underwriters would bill Insurance Town for the policies issued during the previous month, and the oral agreement between the parties provided that Insurance Town remit amount owed within approximately two weeks. When a policy was sold by Insurance Town which was to be financed by a premium finance company (PFC), Insurance Town would get a down payment at least equal to the commission due Insurance Town and forward the application to CIU less the commission earned on the policy. Insurance Town, pursuant to its agreement with the PFC, had the insured sign a finance agreement which was forwarded to the PFC, who remitted the funds to Insurance Town, who paid CIU upon receipt of the monthly statement. GRAC financed the premiums on some policies sold by Insurance Town. During the approximately one-year period Insurance Town sold policies as agent for CIU, Insurance Town remitted over $500,000 to CIU as premiums. During this period automobile policies were sold by Insurance Town and issued by CIU to, inter alia, Mary Mayo, Alfred Limaruro, Shirley Gilbert, Mabel Green, Ruth Sprague, Walter Burk, Paul Schumann, Odell Lewis, Carla Kibbe, Steve Valdes, Vernon Peaslee, and Mary Porter (Exhibits 1-12). Each month a statement was submitted to Insurance Town by CIU for the charges accrued the previous month. Oftentimes, changes in the premiums came to light after the application was filed and CIU included this additional premium on the statement before issuing a policy or endorsement containing the reason for the additional charge. When these charges appeared on the statement which Insurance Town could not understand, the procedure developed whereby Insurance Town would return a copy of the statement with its check for the amount paid which included those policies checked on the statement. Those items not checked were understood by both parties to be items for which Insurance Town needed additional information. When Insurance Town started selling policies for CIU in January, 1982, the January, 1982, statement showed Insurance Town owed $6,890.82. Insurance Town paid this amount less commissions, which CIU subsequently allowed, leaving a balance owed of $0. Each month thereafter, there was a difference in the amount shown on the monthly statement and the amount Insurance Town paid caused by lack of documentation provided Insurance Town for debits and failure to allow for credits. The amount of business generated by Insurance Town on behalf of CIU increased each month during 1982 so that in the latter months some $85,000 of business was generated. When the accounting difficulties became a problem, Insurance Town stopped selling policies for CIU in January, 1983. In September, 1982, the difference between CIU figures and Insurance Town payments had reached some $19,000 and, at the insistence of CIU, Insurance Town paid this sum and requested an accounting showing each policy to which these funds were credited. This accounting was never received by Insurance Town. In January, February, and March, 1983, CIU notified the 12 policyholders listed in Finding of Fact 6 above that their policies would be cancelled for nonpayment of premiums. At the suggestion of the Department of Insurance the policyholders were advised that if they could produce evidence of payment the policies would not be cancelled. All of these policyholders presented such evidence and their policies were not cancelled by CIU. Most of the premiums allegedly unpaid resulted from additional premiums to the policies due to errors in drivers records submitted by the insured, changes in coverage in policy, and type of automobile insured. Some of these endorsements had not been received by Insurance Town when notices of proposed cancellations were sent out by CIU. All these insureds had paid Insurance Town the premiums owed but, due to the delays in applying credits, in providing insurance Town an accounting for the funds paid to CIU, and in providing Insurance Town with endorsements supporting the charges on the statements, Insurance Town had not paid all of the premiums alleged due. Insurance Town sent a payment forthwith to cover those premiums for Mayo and Porter. After Insurance Town and CIU ceased doing business, the amount CIU claimed to be owed by Insurance Town in February, 1983, was approximately $24,000. Before July 11, 1983, due to cancellation of policies, payments made by Insurance Town through March, 1983, changes in policies, and applying various credits to Insurance Town's account, all debts of Insurance Town to CIU had been settled. As of August, 1983, CIU owes a credit of $140.81 to Insurance Town. General Risk Underwriters and General Risk Acceptance Corporation had an agency relationship with Insurance Town from February until September, 1982, at which time they terminated Insurance Town's agency privileges. They too had an account-current method of billing Insurance Town monthly, with payments to be made within 30 days. In October, 1982, GRU sent a letter to Insurance Town (Exhibit 17) enclosing a summary of accounting activities and claiming Insurance Town owed GRU $41,232.90, GRAC $10,369.07, and demanding payment. At the time of the hearing, after certain credits were allowed, it is claimed Insurance Town owes these companies $49,160.97 which includes unearned commissions of approximately $16,000. Respondent's records indicate a valid dispute to some of the charges alleged to be owed by Respondent to GRU and GRAC. Records presented by Respondent to GRU's witness induced testimony inconsistent with the amount claimed due from Insurance Town. There is a valid dispute between GRU, GRAC, and Insurance Town regarding exactly what is owed by Insurance Town to the former and on which accounts. The Department of Insurance has no record that Respondent filed an annual report for 1982. No acknowledgement of receipt of these reports is sent out by the Department, nor is any notice of nonreceipt sent to those agents who fail to submit such a report. No action is taken on these reports but they become part of the Department's file on each licensee. Petitioner's witness has no recollection that disciplinary action has ever been taken against a licensee solely by reason of failure to file an annual report. Respondent submitted Exhibit 19, a copy of the Annual Questionnaire of 1982 dated June 1, 1982, signed by Sonin Marcus as evidence that the Annual Questionnaire was submitted. Respondent has no personal recollection of completing this report or mailing it but obtained Exhibit 19 from the files of Insurance Town.
The Issue Should Petitioner impose discipline against the licenses held by Respondent as a Life (2-16), Life and Health (2-18), General Lines, Property and Casualty Insurance (2-20), Health (2-40) and Legal Expense (2-56) agent pursuant to provisions within Chapter 626, Florida Statutes?
Recommendation Based on the facts found and the conclusions of law reached, it is RECOMMENDED: That a Final Order be entered finding Respondent in violation of Counts I through V pertaining to his obligations as a fiduciary set forth in Section 626.561(1), Florida Statutes, his violation of Section 626.611(7), (9) and (10), Florida Statutes, and his violation of Section 626.621(4), Florida Statutes, in effect when the violations transpired and that the various licenses held by Respondent be suspended for six months as suggested by counsel for Petitioner. DONE AND ENTERED this 2nd day of December, 2003, in Tallahassee, Leon County, Florida. S CHARLES C. ADAMS 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 2nd day of December, 2003. COPIES FURNISHED: James A. Bossart, Esquire Department of Financial Services 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0333 William Franklin Outland, III 10840 Northwest 100th Street Reddick, Florida 32686 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Financial Services The Capitol, Lower Level 11 Tallahassee, Florida 32399-0300
The Issue The issues in the case are whether the Respondent has failed to comply with a Final Order issued by the Petitioner or is otherwise conducting business in a manner which is hazardous or injurious to policyholders or the public, and, if so, what penalty should be imposed.
Findings Of Fact The Petitioner is the state agency responsible for licensure and regulation of insurance companies transacting business in Florida. The Petitioner was formerly identified as the Department of Insurance. The Respondent is an insurance company licensed to transact business in Florida and holding a Certificate of Authority to engage in the domestic automobile insurance business. The Respondent owns Superior American Insurance Company and Superior Guaranty Insurance Company, both of which are licensed Florida insurance companies. The Respondent is wholly owned and managed by Superior Insurance Group, Inc. (SIG). SIG is owned by Goran Capital, Inc. Douglas Symons is the President and Chief Executive Officer of Goran Capital, Inc., as well as the other aforementioned companies. SIG and its parent are not required to be licensed by, and are not regulated by, the Petitioner. The Respondent was acquired by current ownership in 1996 with the consent of the Petitioner. At the time of acquisition, the Respondent entered into a management agreement with SIG (identified at that time as GGS/Superior Insurance Group, Inc.) also with the consent of the Petitioner. According to the Consent Order dated April 30, 1996 (the date of the acquisition), the compensation for services provided to SIG by the Respondent was not to exceed 32 percent of gross written premium. The management agreement provided that the Respondent was to compensate SIG for payment of agent's commissions (not to exceed 15 percent) and for administrative services (at the rate of 17 percent of gross written premium). In July 2000, the Petitioner filed a Notice of Intent to Issue a Cease and Desist Order against the Respondent based upon the Respondent's practice of forwarding "Finance and Service Fees" to SIG in addition to the approved compensation set forth in the management agreement. "Finance and Service Fees" are fees charged by the Respondent to policyholders who choose to pay premiums by monthly installments. In January 2001, the Petitioner amended the July 2000 Notice of Intent to include allegations that the Respondent had filed misleading financial statements with the Petitioner which were intended to obscure the transfer of the fees to SIG. A formal administrative hearing on the allegations was conducted on February 7 and 8, 2001, and a Recommended Order was entered on June 1, 2001. In the Final Order filed on August 30, 2001, the Petitioner adopted the Recommended Order's determination that the financial statements filed by the Respondent had been misleading as to disclosure of the "Finance and Service Fees" transfer to SIG. In the Final Order, the Petitioner further found that the payment of "Finance and Service Fees" outside the approved management agreement "constitutes an immediate hazard to the policyholders and to the public and demonstrates a lack of fitness or trustworthiness to engage in the business of insurance" apparently because the Respondent's surplus had substantially declined during the period the fees were being forwarded to SIG. As set forth in the Final Order: Surplus as to policyholders is the source of funds used when claims payments exceed established reserves, or when expenses otherwise exceed anticipated amounts. The insurer's surplus is a statutorily mandated cushion to assure that insurers have adequate funds to perform their obligations. It must be noted, however, that it is not just the policyholders who have a stake in making sure the Respondent can pay its claims, but also all members of the public who may become involved in an automobile accident with these policyholders. By Final Order, the Petitioner directed the Respondent to "immediately cease and desist from making any such payments until such time as it had filed all required documentation seeking, and has received from the Department in writing, approval for these payments." The Final Order also required that the Respondent obtain "the immediate repayment of the net amount of approximately $15 million that was paid from 1997 through 1999, and any additional Finance and Service Fees paid thereafter." In the alternative, the Final Order provided that in lieu of immediate repayment the Respondent could request Department approval of a repayment schedule. The Final Order stated that "[i]f the Department determines in its sole discretion that the repayment schedule is in the best interests of policyholders and the public, such repayment schedule for the total amount of Finance and Service Fees that have been paid shall be implemented by the Respondent and the Respondent shall collect all such amounts from GGS/Superior in accordance therewith." Because the Respondent and SIG were owned and controlled by the same parties, the Petitioner's Final Order essentially required that the owners of the Respondent obtain the repayment of the fees from themselves. On September 28, 2001, the Respondent filed a Notice of Appeal of the Final Order with the District Court of Appeal, State of Florida, First District. The filing of the Notice of Appeal did not stay the Final Order. Despite the Final Order's prohibition on transfer of the fees, the Respondent continued to forward the "Finance and Service Fees" to SIG. On March 4, 2002, the Petitioner filed a Petition to Enforce Agency Action in the Leon County Circuit Court, Case No. 02-CA-602, seeking to enforce the prohibition on the fee forwarding arrangement. On March 14, 2002, the Respondent filed a Motion both with the Petitioner and with the First District Court seeking to stay enforcement of the Final Order. On March 20, 2002, the First District Court denied the request for the stay on the basis that the Petitioner was the appropriate entity to address the request. On April 5, 2002, the Petitioner entered an Order Conditionally Granting Stay Pending Appeal, granting a stay as to the repayment of the $15 million and requiring in lieu thereof, that the Respondent post a $15 million bond. The Petitioner's Order denied the Respondent's request to stay the Final Order's prohibition against forwarding "Finance and Service Fees" to SIG. The Respondent filed an appeal of the Order Conditionally Granting Stay Pending Appeal with the First District Court on May 6, 2002. By Order of June 19, 2002, the First District Court issued an Order vacating the obligation to post a $15 million bond. The First District Court's Order did not modify the Petitioner's denial of the Respondent's request for stay regarding the prohibited payment of "Finance and Service Fees" to SIG. The District Court of Appeal affirmed the Petitioner's Final Order by per curium opinion entered on September 26, 2002. The Respondent discontinued the practice of forwarding "Finance and Service Fees" to SIG at that time. From September 2001 through September 2002 (the period of time between issuance and affirmation of the Final Order, the Respondent forwarded to SIG a net total of $4,442,079 in "Finance and Service Fees" in direct contravention of the Final Order. The net total reflects gross fees of $8,392,079 with an offset allowed for capital contributions and retained management fees totaling $3,950,000. As of the May 2003 administrative hearing, the Respondent had not obtained repayment from SIG of the approximately $15 million that was paid from 1997 through 1999. The Respondent's sole apparent attempt to obtain repayment of the $15 million was a letter dated October 21, 2002, from Ginger Darrough (Controller and Treasurer for the Respondent) to Douglas Symons as President of SIG demanding repayment of the $15 million. Ms. Darrough is the Treasurer of SIG. As stated herein, Mr. Symons is the President/CEO of the Respondent. In response to the Darrough letter, Mr. Symons proposed a repayment plan by letter dated October 31, 2002. The repayment schedule proposed by the Respondent was to repay installments of one million dollars on January 1, 2003, on October 1, 2003, on April 1, 2004, and on October 1, 2004, followed by the "balance as agreed" on April 1, 2005. The Department determined that the proposed repayment schedule was not acceptable. The evidence fails to establish that the Department's rejection of the proposed repayment plan was inappropriate. The evidence establishes that as of the May 2003 administrative hearing, the Respondent is unable to meet the repayment schedule it proposed in the October 31 letter. The Final Order required that in addition to the $15 million, the Respondent obtain repayment of "Finance and Service Fees" forwarded by the Respondent for subsequent periods. For years 2000 through 2002, the Respondent forwarded net "Finance and Service Fees" totaling $18,467,418 to SIG. The net total reflects gross "Finance and Service Fees" forwarded to SIG totaling $26,318,081 for the three-year period (including $10,981,082 in calendar year 2000, $9,937,400 in calendar year 2001, and $5,399,536 in calendar year 2002) and credits the Respondent for $5,500,600 in paid-in capital (2001) and retained management fees of $950,000 (2001) and $1,350,000 (2002). The Respondent has not obtained repayment of the additional "Finance and Service Fees" paid between 2000 and 2002. The net "Finance and Service Fees" improperly forwarded between 1997 and 2002 by the Respondent to SIG total $33,467,418. During the time the fees have been forwarded by the Petitioner to the parent company, the Petitioner suffered a precipitous decline in surplus. The Respondent had a surplus of approximately $57 million at the end of 1998. By the end of 2002, the surplus had declined to approximately $10 million. The Respondent asserts that discussions and correspondence with the Petitioner regarding compliance with the requirements of the Final Order suggested that a resolution outside the terms of the Final Order was possible and supports the Respondent's lack of compliance. The evidence fails to support the assertion.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Office of Insurance Regulation enter a Final Order suspending the Respondent's Certificate of Authority to transact business in the State of Florida. DONE AND ENTERED this 6th day of August, 2003, in Tallahassee, Leon County, Florida. S WILLIAM F. QUATTLEBAUM 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 6th day of August, 2003. COPIES FURNISHED: James S. Grodin, Esquire Foley & Lardner 111 North Orange Avenue, Suite 1800 Orlando, Florida 32801-2386 Elenita Gomez, Esquire Department of Financial Services Office of Insurance Regulation 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0333 S. Marc Herskovitz, Esquire Department of Financial Services Office of Insurance Regulation 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0333 N. Wes Strickland, Esquire Foley & Lardner 106 East College Avenue, Suite 900 Tallahassee, Florida 32301 Honorable Tom Gallagher, Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue As stated in the Respondent's Motion to Dismiss Petition filed on April 20, 1998.
Findings Of Fact The Petitioners are authorized insurance companies in the State of Florida. Each Petitioner holds a certificate of authority but only one currently writes homeowner insurance in the state. Only The Fidelity and Casualty Company of New York (Fidelity) writes new business in Florida and none of the other Petitioner companies intends to renew a policy except into Fidelity. The rate approved for Fidelity (and presumably the premiums derived from same) is substantially higher than the rates approved for the other Petitioners. Although the record does not precisely define the business relationships, the Petitioners are companies affiliated to "the Continental companies and the CNA companies." After companies were consolidated with "the Continental companies" the group determined it had a rate inadequacy and sought to remedy the problem. As a result, it determined it would combine the business of "the Continental companies and the CNA companies." Thereafter, representatives from the Petitioners met with the Department of Insurance in order to plan how best to accomplish this objective. No one from the Department ever advised Petitioners that such a combining of insurance business would avoid a rate filing. In order to bring the Continental business together with the CNA business, the entities did, in fact, submit a rate filing that was approved by the Department in September 1996. Thereafter, the Petitioners sought to transition their business into Fidelity but did not submit a rate filing. Under the authority of Section 627.7013, Florida Statutes, Petitioners then sought to effect the proposed transition. On July 21, 1997, the Department issued a letter which provided, in part: As I see it, there are two separate issues which must be resolved. First, it must be determined whether CNA may, consistent with the moratorium, legally transfer all of its homeowners policies to the Fidelity and Casualty Company of New York. And second, whether the rate to be charged in the surviving company is actuarially justified. As to the first issue, the moratorium statute, at Section 627.7013(2)(b)5.a. permits an insurer to transfer ". . . risk from one admitted insurer to another admitted insurer. . . ." Therefore, consistent with this statute, the transition of CNA's homeowners policies to the Fidelity and Casualty Company of New York is permitted under an exemption contained in the moratorium statute. However, such a movement of polices from one program to another must be actuarially justified in a rate filing which supports the rate change for the transitioned policyholders. As a consequence, the Department cannot consider the pending base rate filing, since the underlying base rate has not been actuarially supported. I recognize that CNA's ability to continue to write homeowners insurance is contingent on the degree which you are able to achieve what you believe to be rate adequacy. However, any rate changes will have to be justified to the satisfaction of the Department to ensure that such a rate change complies with Florida law. On March 30, 1998, Petitioners filed a Rule Challenge Petition that claims the foregoing statement constitutes a rule as it seeks to implement practices not specifically required by statute or existing rule. Petitioners maintain that Section 627.7013, Florida Statutes, does not require a rate filing nor that a transfer pursuant to its terms be "actuarially justified in a rate filing which supports the rate change for the transitioned policyholders." The allegations as to Petitioners' interests in this matter merely states that "as licensed and authorized personal lines residential property insurers in the State of Florida, with approved rates and forms," they are substantially affected by the Department's July 21, 1997, letter. The Petitioners have not alleged, nor established, how they are "substantially affected." Presumably, the Petitioners perceive the requirement of a rate filing as an adverse consequence or injury. Undoubtedly, they perceive such requirement beyond the scope of Section 627.7013, Florida Statutes. Rate filings are required by the Department whenever an insurer intends to change its rate. In this instance, Petitioners argue that Fidelity will not change its rate. The approved rate for Fidelity will be applied to the non-Fidelity policyholders who will be renewed at the Fidelity rate. The non-Fidelity policyholders will then be charged a premium based upon a rate which is approximately 28 percent greater than the rates now charged by their insurance companies. If successful, the Petitioners will achieve a rate increase for the business going into Fidelity without having filed for same. Thus, the Petitioners will have reduced their exposure in the companies transferring their business and achieved a rate increase through Fidelity. The Department requires rate filings whenever a company seeks to change its rate. When companies combine their insurance business, the result may or may not affect the rate approved for the entity receiving the business. As the "book of business" for the entities is known, it is possible to project the combined business in order to ascertain an appropriate rate. Unlike adding new business (which does not have the history of an established "book of business") the company seeking to assume another company's book of business can readily discern an appropriate rate. The Department's letter dated July 21, 1997, was not issued with an intent to create rights or require compliance or otherwise to have the effect of law. It sought to enforce the provisions of Section 627.062, Florida Statutes, governing rate changes. It required an applicant for a transition under one statute to comply with the provisions of another governing provision. That is, to apply both statutes to the requested action.
Findings Of Fact At all times material hereto Respondent was licensed as an Ordinary Life and General Lines Agent (Exhibit 1) and was the agent for Dixie Insurance Company at the Bartow office. As such, he had the authority to write policies binding the insurer. At all times relevant hereto, Respondent was president and principal stockholder of Friendly Insurance Companies of Bartow, Winter Haven, Lake Wales and Haines City. The corporate records (Exhibit 3 for Polk County) show this to be the same as Friendly Auto Insurance of Lake Wales, Inc. Respondent was the agent for Dixie Insurance Company only at the Bartow office. Dixie Insurance Company qualifies agents, not offices, to sell their policies. Respondent had no authority to act as agent for Dixie Insurance at any of these offices other than the Bartow office as the insurance company has but one agent per office. To support the allegations in count 34 of the Administrative Complaint, Edward Bland testified, and Exhibits 21 through 23 were admitted. Bland applied for automobile insurance at Friendly Auto Insurance at the Winter Haven office, which he paid for by check in the amount of $728 (Exhibit 23) as full payment for the one year premium. Subsequent thereto, a Premium Finance Agreement was prepared on which Bland's signature was forged showing $546 of the premium to be financed. This finance agreement was signed by T. R. Shaw as agent. Upon learning that the finance agreement had been issued on his coverage, Bland contacted the Winter Haven office manager, and after a few weeks of "run around" contacted the Department of Insurance and "got his money back." Bland never saw Shaw or Respondent. Rafael Gomez, M.D. purchased automobile insurance on his three cars from Friendly Auto Insurance of Winter Haven in December 1985 for which he paid $3452.71 for the annual premium. Subsequently thereto, he received a call from the Barnett Bank, which had financed one of the cars, to tell him that the bank needed evidence of insurance on the financed auto. Dr. Gomez contacted Ruth Kent, the office manager at the Winter Haven office, who assured him she would supply the bank with the necessary documentation. When the bank contacted Dr. Gomez later to again demand proof of insurance, Gomez went to the Winter Haven office and demanded to see his file. He made copies of certain documents which he took to the bank. Dr. Gomez subsequently learned that a finance agreement had been entered into on his behalf, but without his knowledge or consent, and that the address shown on the agreement under his name was that of Ruth Kent. Although when accosted by Dr. Gomez with this information, Ms. Kent denied such an intentional act, this would have allowed her to hold the finance coupons and get all information supplied by the finance company to the borrower without Dr. Gomez learning that the policy for which he had paid in full was subsequently financed. After learning of the subterfuge, Dr. Gomez contacted the Department of Insurance. Ruth Judd was office manager at the Friendly Insurance Agency of Haines City for a period of time ending in 1987 when she was terminated by Respondent. Ms. Judd contends she was only the office manager, and Respondent was the boss of the office and hired all employees. During the time she worked in the office, Ms. Judd testified several different people served as the licensed agent for the office, but they spent little time in the office with Donald Leroy Flentke, towards the end of his tenure, coming in only for his weekly paychecks. No evidence was presented from which a determination could be made that for a specific period of time any of the four offices were not being supervised by a licensed agent. Ms. Judd testified she was aware of one policy for which the insured had paid the premium in full being submitted for a premium finance agreement with forged documents. She also was aware that monthly financing payments were made by the Haines City office on some three or four other premium finance agreements. Ms. Judd testified on March 2, 1988, that she was presently unemployed. Respondent called one witness that testified and produced documentary evidence (Exhibits 24 through 26) that on March 2, 1988, this witness purchased insurance from Ms. Judd at New Horizons and was required to buy an accidental death policy in order to obtain PIP coverage. Exhibit 7 shows that an automobile insurance policy was issued to Jackie Bryan, the policy was sold through Friendly Insurance of Winter Haven, Inc., that the premium was financed, the borrower owed an additional $142.66 on the finance agreement, and the policy expired 2-26-86. Respondent acknowledged that his signature appears on the premium finance application. Some 5000 policies are sold by Respondent's agencies per year, and Respondent has no independent recollection of that finance agreement. Dixie Insurance Company issued a policy to Johnny Davis which was also financed through Envoy, but this application was signed by Shaw. Although Dixie Insurance Company had their own premium finance organization and, if the premium is financed, preferred to do the financing, Respondent testified that occasionally, if a client did not want to finance their premium through Dixie, the agency would go through another premium finance company such as Envoy. Exhibits 9, 10, 11 and 12 show premium finance agreements were contracted for on behalf of Raymond Scott, Mark Turner, Kathy Smith and Cathy Phillips, but no auto insurance policies were issued by Dixie Insurance Company to these individuals. Only one of these finance agreements (Exhibit 12) purports to be prepared at the Bartow office, and two of the drafts (Exhibits 9 and 12) purport to be signed by Respondent. Respondent testified he neither signed those drafts nor authorized someone else to sign for him. The forgery on both Exhibits 9 and 12 appear to have been perpetrated by the same person. Cathy Phillips, a friend of Ruth Kent, testified without contradiction that the signature purporting to be hers on Exhibit 12 was forged, that she never entered into a premium finance agreement with Envoy Finance Corporation, and that she had never seen Exhibit 14 until presented to her by the Petitioner's attorney. Ms. Phillips did receive a past-due notice on one occasion and called Ruth Kent who told her not to worry about it, that everything was taken care of. Subsequently, Ms. Phillips' husband wrote a letter to Envoy Finance Corporation denying any knowledge of any insurance policy written by Friendly Insurance of Bartow. Considerable testimony was submitted regarding the activities of Chuck Evans who was, at one time, employed by Respondent at the Winter Haven agency as a non-licensed employee with authority to write checks on the Trust Account. While the statements made by Evans to Department of Insurance officials contributed to the initiation of the investigation of Respondent's agencies, none of this testimony was relevant to the charges here at issue.
The Issue The issue for consideration is whether the Respondent's license as an insurance agent should be disciplined because of the misconduct alleged in the Administrative Complaint filed herein.
Findings Of Fact At all times pertinent to the issues herein, Respondent, Shirley Ann Cramer, was licensed as a life, health and general lines insurance agent in Florida, and was the sole owner and operator of Consolidated Insurance Associates, Inc., an incorporated general lines life and health insurance agency in Clearwater, Florida. The Department of Insurance was and is the state agency responsible for the licensing and regulation of insurance professionals in this state. In February, 1987, Mercedes Wescott went to the Respondent's agency in Clearwater where she spoke with whom she assumed to be an employee, an individual named Jack. "Jack" is Jack Jarr, Respondent's former husband and a licensed insurance professional who works in a different agency from Respondent, but who was licensed with Respondent's agency at the time in question as well. Ms. Wescott wanted a policy of life insurance, and after talking with Jack, wrote and delivered a check for $167.00, payable to Consolidated Insurance Associates, Inc., as initial down payment therefor. About a week later, she took the required insurance physical but never received the policy she had bought. She called the agency several times about the matter and was repeatedly told the policy was coming. Finally, in June, 1987, she received a letter from American Health and Life Insurance Company, the company with whom, apparently, she was to be insured, advising her that her application for insurance was being cancel led because certain required information was not received. When she called the agency, (Jack), to get her money back, he promised to send it but never did. As a result, she finally called Respondent who, in November, 1987, mailed her a check on the account of Consolidated Insurance Associates, Inc., dated November 24, 1987, in the amount of $117.00, $50.00 less than the initial payment. Ms. Wescott admittedly did not deposit that check immediately. For one thing, it was not for the correct amount, and in addition, she overlooked it. When she finally did deposit it for collection, it was dishonored and returned because of insufficient funds, and she was charged a $12.00 service charge. On January 9, 1988, Ms. Wescott wrote to Respondent outlining what had happened and requested a replacement check in the amount of $179.00, ($167.00 plus $12.00). In this letter, which was mailed to Respondent's home address since the agency had, in the interim, been sold, Ms. Wescott recited the lack of Respondent's response to prior calls and threatened to report the matter to the Insurance Commissioner. Even with this, she received no response from Respondent. Ms. Wescott determined that Respondent was working at a real estate office and when called there, too, failed to return calls. Ms. Wescott ultimately received a check for the entire amount from, she believes, the Department of Insurance. Though she is not sure from whom the check was received, she is certain it was not Respondent or Respondent's agency. When she contacted the new owner of the agency, her request for reimbursement was denied and the new owner suggested she contact the Department. Admittedly, Ms. Wescott dealt only with Mr. Jarr up until the time the cancellation letter was received. Only at that point did she talk with Respondent, and the check, purportedly in reimbursement for the premium paid, which was dishonored, was signed by Respondent. Respondent claims that she was only the subagent for the company with whom Mr. Jarr placed Ms. Wescott but paid Ms. Wescott back herself with a check she claims was good when written. However, since the check in question is dated November 24, and even though held by Ms. Wescott for a while, it had been deposited and dishonored by January 9, 1988 when Ms. Wescott's letter to Respondent was written. This accounts for a total time of 46 days from date of check to date of letter, and with mail times and bank processing times deducted, the time the check was held before deposit cannot be considered unreasonable. Ms. Cramer sold the agency in December, 1987 to an individual who was to assume all the agency liabilities. At the time she sent Ms. Wescott the check for $117.00, she was, she claims, unsure of the amount owed since she no longer had the books in her possession. Considering the probabilities of her testimony and it's corroboration or lack thereof by other evidence of record, it is considered unworthy of belief. On April 4, 1988, Thomas J. Secondo, who was, at the time, having a personal relationship with the Respondent, went to her to get insurance on his two automobiles. He wrote a check that day for $1,641.00 for what he believed was the total premium for the coverage sold and gave it to Respondent personally. He never received a policy of insurance for his money but on June 9, 1988, was notified that his coverage would be cancelled on June 18, 1988 for "underwriting reasons." Somewhat before that time, he also received a book of payment coupons, the reason for which he could not fathom, since it was his understanding he had paid for his policy in full by the check he had given Respondent. Documents introduced into evidence by the parties reflect that on May 18, 1988, Mr. Secondo's policy, purportedly with American United Insurance Company, was to be financed through Express Premium Finance, Inc. in Hollywood, Florida. Mr. Secondo denies having signed the premium finance agreement which bears what is purported to be his signature, and examination of that document clearly reveals that the signature thereon is not his. Just as all this was happening, Respondent contacted Mr. Secondo in writing on June 15, 1988 and requested he come to the office to sign a new application for the requested coverage. Enclosed with that request was a copy of an insurance binder for auto coverage with Bankers Insurance Company, to be effective on June 18, 1988. Again, Mr. Secondo was sent a premium finance notice by Bankers representing a total premium of $1,358.00. This notice, dated August 29, 1988, reflected the first premium of $14.30, due on August 12, 1989, the second in the amount of $193.34, and the remainder, also at $193.34, due on the 28th of each month thereafter. By memo of August 19, 1988, Bankers Insurance Company notified Mr. Secondo that his policy was being cancelled for nonpayment of the initial $14.30 premium. However, by notice of September 1, 1988, the company reinstated the coverage and included a new billing schedule reflecting a slightly higher monthly premium of $197.54. On August 16, 1988, Respondent wrote to Mr. Secondo informing him of a change in policies and noting that the new policy was somewhat less expensive than the former. Notwithstanding this, by letter dated September 25, 1988, she advised him of the need for him to pay an additional $171.31. Mr. Secondo did not understand the reason for this additional charge in light of the fact that the second policy, that issued, was less costly than the first which was never issued. This discrepancy was not successfully explained at hearing nor has it yet been clearly explained. Notwithstanding his confusion, on the advice of a representative from the Department's St. Petersburg office, Mr. Secondo paid the additional sum requested. Ms. Cramer claims that all she asked from Mr. Secondo at the time she sold him the insurance was the down payment on the policy. However, he insisted on giving her more money to impress her with how much money he had. She further claims she put the balance over the down payment in the account of ASAP Insurance, (not further identified). On examination, she claimed this was a unique situation and she never does business this way. Ms. Cramer has been licensed as an insurance agent in Florida for almost 20 years and claims never to have had a problem with the Department before now. There is no evidence of any prior complaints against her or of prior disciplinary action. She had known Mr. Secondo for about 3 months before he came to her for insurance on his vehicles. She admits to having received his check for $1,641.00 for the premium for that coverage. Because of some difficulty with his driver's license, which she discussed with him at the time, she processed the application, sending in only the required 30% down payment so that if the application was rejected, he would not have to wait to get back the full amount of his premium. She claims to have advised him at the time there might be a problem and that the policy, when issued, might carry a higher or lower premium. When she sent the deposit for the auto insurance to the broker with whom she was dealing, he required a premium finance agreement which she filled out and sent in without, she claims, affixing Mr. Secondo's signature thereto. She claims to have no knowledge as to who signed it, but this is unworthy of belief. The automobile insurance was not issued by the first company because of some underwriting problem. Respondent claims she told Mr. Secondo this but by then he had received a payment schedule and was upset about that. Ms. Cramer claims that Mr. Secondo had been fully advised that only a part of the $1,641.00 he had paid originally was to go to payment of premium, but she does not explain where the balance went, other than into the account of ASAP. She also claims to have procured insurance for him from Bankers Insurance Company without financing any part of the premium, but it is clear from the documents introduced that this coverage was financed as well. Her exculpatory comments are confusing and far less than convincing, and are not believed. Respondent asserts she made the premium payments for Mr. Secondo, (presumably from the sums deposited to ASAP), until she got an accounting from the company. She then wrote to Mr. Secondo, (their personal relationship having dissolved by then), and claimed the amount she felt was due her, (the $171.31). She admits that in the interim, while she was awaiting the refund from the first policy deposit, she neglected to make the initial $14.30 premium payment on the second policy, causing it to be cancelled. At that point, she made the payment to have the policy reinstated. The reinstatement notice, however, does not show the policy paid in full, but calls for continuing installments. Ms. Cramer now claims that the $1,641.00 figure she gave Mr. Secondo was tentative and subject to change and that he knew it. She claims the discrepancy involving his policy was a bookkeeping error, and at no time did she intend to take his money and not get him insurance. The evidence, however, shows otherwise.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that the Insurance Commissioner issue a Final Order in this case suspending Shirley Ann Cramer's license and eligibility for license as an insurance agent of any kind in Florida for one year. RECOMMENDED this 6th day of August, 1990, in Tallahassee, Florida. ARNOLD H. POLLOCK, 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 6th day of August, 1990. COPIES FURNISHED: Robert V. Elias, Esquire Department of Insurance Division of Legal Services 412 Larson Building Tallahassee, Florida 32399-0300 John L. Waller, Esquire 100 2nd Avenue, North Suite 210 St. Petersburg, Florida 33701 Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Don Dowdell General Counsel Office of the Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300
