The Issue The issue is whether Respondent committed the offenses alleged in the Administrative Complaint and, if so, what disciplinary action should be imposed on his licenses and appointments as a life and variable annuity contracts agent, a life, health and variable annuities contracts agent, health agent, and general lines agent.
Findings Of Fact Respondent received a Bachelor's degree in business administration from the University of Florida in 1969. From the time of his graduation until 1985, he worked in the contracting business, both for himself and others. For nine years, including the years of his employment with Prudential, Respondent taught courses designed to prepare candidates for the Florida contractor's examination requirements. Respondent began work for Prudential in April 1985; this was his first employment in the insurance industry. Respondent worked continuously for Prudential until 1994, when he resigned. Respondent's resignation was prompted by Prudential's decision to exit the property and casualty market in Florida after Hurricane Andrew affected the scope of insurance products that could be provided. Currently, Respondent is an independent insurance agent and the major part of his business now involves group health insurance and working with employers and employee groups. Immediately upon his employment with Prudential in 1985, Respondent attended a Department-required 40-hour training course administered by Prudential, after which he took the required examination, and received his Department license to sell life and health insurance. He received other licenses within the next year, including property and casualty, and the federal licenses necessary to sell investment-based insurance products. At all times material and relevant to this matter, Respondent was a duly licensed life and health, life and variable annuity, and property and casualty insurance agent in the State of Florida, having been first licensed by the Department in June 1985. After receiving his initial license, Prudential required that Respondent, as a new agent, to undergo approximately six months of training. During this training period, Respondent was assigned to work with a more experienced agent, Mr. Herb Wagner, whom he accompanied on sales calls. Generally, Respondent and Mr. Wagner split any commissions earned on sales that they made together. Also, Respondent was paid for service calls made to his assigned Prudential clients. The Walter Richards, Ronald Richards, and Ann Munkittrick sales discussed below were made during this time. Although Respondent was the newly assigned servicing agent for each of these three policyholders, Mr. Wagner either made or participated in each of the sale presentations. Respondent's intent with regard to each sale he made, including those at issue in this proceeding, was to benefit the customer. Respondent approached the business of insurance sales as a teacher; he tried to make each person he talked to about insurance aware of the things that he would want to know if he were in the position of the customer, both in servicing and in sales. During sales presentations, Respondent habitually informed customers to whom he offered a financed insurance option that loans were the mechanism by which cash values could be taken from the old policy by a statement to the effect that, "There are only three ways to take values from an insurance policy: the first is to die, which you don't want to do; the second is to cash surrender the policy, which you don't want to do; and the third is to take a loan against the policy, and that is the way we will get the money to pay the premium on the new policy." This statement was made as part of each of the sales at issue here. Respondent's presentation included: (1) a review of existing coverage and an update of existing policies, using the Ordinary Policy Service Record (OPSR) cards; (2) a review of the insured's other assets and policies; (3) a discussion of insurance needs; (4) a discussion of the cost of insurance that would meet their needs; (5) a determination that the older policies were held for their death benefit, not for a lifetime or savings need, if the policyholder expressed an unwillingness or inability to pay the premium cost; (6) a statement of the option to use values from the old policy to pay the premiums on a new policy; and (7) an explanation of how a financed insurance program could work, if the policyholder was interested. The OPSR cards used by Respondent during presentations summarized an insured's policy and was provided by Prudential to the agent responsible for servicing the customer. The OPSR cards contain such information as: the face amount of the policy; the guaranteed cash value of the policy; the dividend option; the amount of accumulated dividends; the cash value of paid-up additional insurance (if the paid-up additional insurance dividend option had been chosen); the most recent dividend; the amount of any paid-up additions; the beneficiary; the amount of the premium; the frequency of premium payment; any outstanding loan balances; and the loan interest rate contained in the insurance contract. When Respondent presented an option for financed insurance, to aid in explaining the proposal, he started with the guaranteed cash value block and the dividend value block on the OPSR card to show the customer the values available in the old policy. In each of the six sales presentations at issue in this proceeding, and in all of Respondent's 1985-1986 presentations, Respondent used Prudential's computer-generated illustrations to show how the proposed policy would perform based on certain assumptions. The illustration included a statement that the illustration was based upon the assumption that the then current dividend scales would remain the same; that dividends were not guaranteed; and that a decline in dividend scales would result in the necessity to pay premiums for a longer period of time before dividends would reach the point where the dividends would fully fund the policy's own premiums. With respect to each sale Mr. Ricketts reviewed orally with the customer the disclosures relating to dividend fluctuations. With respect to each sale in this case, Respondent, using the illustration, would explain the various columns, including an oral review of the fact (a) that dividends can change; (b) that the columns on the illustration marked with an asterisk were affected by dividends; (c) that values in the old policy would support an additional policy in the face amount suggested for a specific number of years, based on current dividends; (d) that if the abbreviated payment option were elected, there is a point at which the past, current and future dividends will take care of remaining premiums; and (e) that because dividends are not guaranteed, the abbreviation point could be a greater or lesser number of years depending on whether dividend scales rose or fell. "Dividend scales" in connection with mutual life insurance policies refer to the entire list of dividends paid on a class or type of policy. The term does not refer to a rate or a formula, but to the dollar results within classes of policies of the division of company profits in a mutual insurance company. The illustrations used by Respondent during his presentations were usually left with the insured and when the policy as issued differed from the illustration, Mr. Ricketts would deliver a new illustration with the policy. If after the presentation described in paragraph 9, the policyholder was interested, the presentation would continue with a description of the mechanics of the financed insurance plan: (a) using the OPSR cards again, the values, both dividends and cash values, would be explained; (b) the recitation of the ways to access the values (to die, to surrender, or to take loans); (c) a statement that the old policies were valuable and should never be surrendered; (d) an explanation that when the annual premium due notice came, the policyholder should call Respondent, who would prepare a loan form or request a loan check; and (e) an offer to re-explain the plan at the anniversary date if requested. In each of the instances involved in this case, Respondent used the same presentation. In those cases where Mr. Wagner made the sales presentations, the substance of the presentations was also the same. When a policy was issued, it was sent to the agent for delivery, and Respondent (or in the case of the sales with Herb Wagner, Respondent and Mr. Wagner) personally delivered the policy, repeated the foregoing explanation, and reviewed the policy itself. Respondent offered the option of financed insurance to each of the complainants only when he determined they met certain criteria: (a) the customer had need for increased death benefits; (b) the customer held his old policy not for any lifetime or "savings" need, but for its death benefit; (c) the customer was unwilling or unable fully to pay the premiums of the new policy out of pocket; and, (d) the ability of the existing policy or policies to carry the new policy for a finite number of years, at which time there was a viable plan to pick up the premium at the end of the financing period. During interviews with clients, if a person otherwise a candidate for financed insurance told Respondent that his or her old policy was intended or held to provide funds for a lifetime or savings need, Respondent did not suggest or offer the financed insurance option. In July 1985, Walter Richards had a life insurance policy with Prudential which was issued in 1965 or 1966, with a face value of $5,000. This policy was purchased by his mother when he was 19 or 20 years old. On or about July 15, 1985, Respondent and Herb Wagner, met with Walter Richards, his wife, his brother and mother. The meeting included the standard presentation by Respondent, resulting in a determination that Walter Richards was an appropriate client who might benefit from financed insurance. Respondent explained how such a policy would work as detailed in paragraph 9 above. After Respondent's standard presentation, Walter Richards believed that he could purchase a $30,000 policy with the premiums on the new policy being paid for by the $5,000 policy. Moreover, Walter Richards believed that at the end of seven years the $5,000 policy would “fade away” or “lapse,” and the $30,000 would make enough to pay its own premiums. At the conclusion of the presentation, and based on Walter Richards' interpretation of Respondent's presentation, Walter Richards signed an application for the $30,000 policy. Respondent received a first-year commission of approximately $146.26 from the sale of the $30,000 policy issued to Walter Richards. At hearing, Walter Richards testified that Respondent did not discuss the fact that loans would be taken from the $5000 policy to pay the premium on the $30,000 policy or that there was the possibility that there would not be enough money in the $5,000 to pay off the $30,000 policy in the projected seven-year period. Also, Walter Richards testified that he never requested loans on either of the insurance policies and was never told that checks he received from Prudential were loans against the old or new policies. Walter Richards' memory is taxed about some details of the transaction. For example, Walter Richards did not remember which of the agents did most of the talking at the meeting. Herb Wagner's name was familiar, but he could not remember whether Mr. Wagner was the other agent at the initial meeting even after being informed that Mr. Wagner had signed his brother's application at that time. While he had in his possession a 1989 illustration of the $30,000 policy, Walter Richards does not know how it came into his possession. He remembers tables and charts from the first meeting with Respondent, but he could not recall what they were or any specifics about them. During the initial year following the purchase of the $30,000 policy, premium payments for the policy were made from loans taken against Mr. Walter Richards' $5,000 policy. In 1990, 1991, and 1992, the funds in the $5,000 policy were insufficient to pay for the $30,000 policy. As a result, values from the $30,000 policy were used to pay the premium during those years. These loans were authorized by the Disbursement Request Forms used by Prudential. The signature of the policyholder on the Disbursement Request Form was not required for a loan check to be disbursed. Agents of Prudential were allowed to request such disbursements. However, all checks disbursed pursuant to these forms were mailed directly to the owner of the policy. Printed on the back each check immediately above the line designated for the endorsee’s signature was the following or similar language: This check is for the net proceeds of the LOAN made under the contract and described on the statement of loan attached to the check. By endorsing this check, YOU, the payee(s) (1) confirm the payee(s) application for the LOAN; (2) agree to pay interest on the LOAN at the contract rate; (3) agree that INTEREST NOT PAID when due will be added to the LOAN amount and the INTEREST charged on it will be the same rate(s) as the LOAN itself; (4) assign to The Prudential the contract and all benefits due or to become due or granted under it in order to secure payment of the LOAN with INTEREST; (5) certify that no proceeding in bankruptcy or on account of insolvency are filed or pending, and that the contract is free and clear of any encumbrance or other assignment. Walter Richards received notices from Prudential documenting the loans as well as checks with notices attached thereto. During the time relevant to this proceeding, Walter Richards endorsed several “loan checks.” Sharon Richards, wife of Walter Richards, acknowledged that checks from Prudential were mailed to her home and that after she or her husband endorsed the checks, she would deposit the checks and write checks to Prudential for the premium payment on the $30,000 policy. Prior to depositing the checks, Ms. Richards did not read the language on the checks nor the language on the notice attached to the checks. The plan submitted to Walter Richards resulting in the sale of the $30,000 policy to him was that his existing $5000 policy's values would support an approximately $500 annual premium on a $30,000 policy for 7 years, after which the dividends on the additional policy would be sufficient to cover its own premiums. Because of the reduced dividend scales beginning in 1990, the plan did not work as contemplated, and two and part of a third premium payment were financed from the values that were building up in the $30,000 policy rather than being fully funded by the old policy. Notwithstanding the reduced dividend scale in 1990, 1991, and 1992, Mr. Walter Richards has continuously achieved at least $36,000 in net death benefits with no additional out-of- pocket payment for ten years, demonstrating that the plan proposed in 1985 was a conservative and reasonable plan. Walter Richards filed a complaint with the Department and instituted legal action against Prudential after he read an article in the Tampa Tribune which stated that Prudential had been sued for "churning." Mr. Walter Richards then concluded that what was described in the article was the plan he was using to fund his $30,000 policy. Notwithstanding his filing a complaint, Walter Richards stated at hearing. "My policy was working the way it was supposed to. But my brother's policy had not come out at all the way it was supposed to." At all times relevant to this proceeding, Ronald Richards had a life insurance policy with the Prudential which was issued in 1966 with a face value of $5,000. On or about July 15, 1985, the Respondent and Herb Wagner visited the home of Ronald Richards in Valrico, Florida, for the purpose of servicing Ronald Richards' existing Prudential life insurance policies. The appointment was set up by an agent for Prudential as Respondent had only recently began working for Prudential. Present at the meeting were Ronald Richards; his brother, Walter Richards; their mother; and Sharon Richards, Walter’s wife. After Respondent reviewed Ronald Richard’s insurance policy and inquired as to Mr. Richard’s needs relative to insurance, Respondent made the standard presentation detailed in paragraph 9, Ronald Richards was offered and expressed an interest in purchasing a $30,000 policy. This appeared to be a reasonable plan to assist Ronald Richards to achieve a recognized need for additional death benefits. Ronald Richard’s understanding of Respondent's presentation was that $500 a year would come out of the old policy for seven years; at the end of the seven years, no additional premiums would be due on the $30,000 policy; and that after the seven years, the $5,000 policy would “disappear.” Both Ronald and Walter Richards' understanding that their $5,000 policies would disappear or lapse as a result of their financed insurance program was erroneous. At the conclusion of the July 15, 1985, meeting and presentation, Ronald Richards decided to purchase the $30,000 policy. The new policy was issued on October 2, 1985. The Respondent received a first-year commission of approximately $254.79 from the sale of the $30,000 policy to Ronald Richards. At the time of the application, there was no indication that there would be any problems with Ronald Richards' policy. However, Prudential's underwriting department refused to issue the policy as applied for at standard rates because of Ronald Richards' health history. Because the policy was rated and issued at Prudential's highest risk category, when Ronald Richards' policy was issued by Prudential, it was offered at an increased premium of about $900 per year, rather than the approximate $500 standard rate. In 1985, when Ronald Richards' policy was returned rated with a higher annual premium, Respondent and Mr. Wagner delivered the policy and, at that time, told Ronald that the proposed program of insurance payments would not work for him. Respondent and Mr. Wagner also informed Ronald Richards that an additional policy with a face amount of $10,000 could be supported by the values in the 1966 policy if he would like to reduce the face value. Ronald refused this alternate plan, insisted that his documented blood pressure problem did not exist, and further insisted on obtaining $30,000 coverage like his brother, Walter. In reaction to the fact that the old policy would not support the $900 premium for more than two or three years, Mr. Ronald Richards responded that he would "cross that bridge when I get there." Ronald Richards claims that he was unaware that loans from the value of the old policy were used to pay the new policy. However, during the time period relevant to this proceeding, Ronald Richards received routine loan notices as well as "loan" checks. These checks, which contained the language clearly indicating that the proceeds were loans, were endorsed by Ronald Richards. In or about December 1985 Prudential mailed a "loan" check to Mr. Ronald Richards from the old policy in the amount of $926.50, representing the first year's premium. Mr. Richards endorsed the "loan" check from Prudential, deposited the check in his bank in Tampa, and wrote a check from his own account to pay the $926 first year's premium on the $30,000 policy. In October 1986, Ronald Richards, unsuccessfully sought a reduction of his rating, on the grounds of a weight loss, addressing one of the reasons for the special rating of his policy. This application was suggested to Mr. Richards by Respondent in an attempt to reduce the premium payment to the $30,000 policy. Respondent and Mr. Wagner, again, suggested at the next two anniversary dates that the policy be reduced to $10,000, but Mr. Richards refused. In the third year of the policy being in force, Ronald Richards was informed by the Respondent that he would have to pay a premium of $900 for the $30,000 policy because the values in the $5,000 policy had been used up. In 1987, Mr. Ronald Richards allowed the $30,000 policy to lapse. As expected, the values in the old policy were insufficient to finance another year's premium. In 1989, two years after the policy lapsed, Respondent prepared for Mr. Richards an application for reinstatement of the policy at a reduced $10,000 face amount. Ronald Richards signed the application for reinstatement at the reduced amount and Respondent was successful in getting Prudential's approval for the reinstatement. However, Mr. Ronald Richards did not pay the necessary premium and the reinstatement was not accomplished. Ronald Richards testified that he did not remember receiving the information that his policy was rated and that the old policy would not support a new policy in the amount of $30,000. He further stated that he only realized his policy required a $900 payment in the third year, when the value in the old policy would not sustain the third $900 premium. These statements conflict with accounts given by Respondent as well as those of Walter Richards who was present when Ronald's policy came back with a higher risk rating because of health problems and when the problems with Ronald's policy were explained to him by Respondent and Mr. Wagner. Also, a letter was mailed to Ronald Richards' home notifying him of the special rating required because of his elevated blood pressure and weight. This letter required the signature of Ronald Richards acknowledging that he was aware that the proposed policy could not be issued as initially presented due to the special rating. Ronald Richards acknowledged that Respondent and Mr. Wagner "probably explained the details" and "how the program would work". Nonetheless, Mr. Ronald Richards testified that he filed a complaint with the Department DOI after seeing television reports in about 1995, involving a lawsuit against Prudential for the "churning." In October 1997, Ronald Richard's $5,000 policy was reinstated and all loans against it were canceled by Prudential. In August 1985, Ann M. Munkittrick had a life insurance policy with Prudential, which was issued November 11, 1964, with a face value of $2,000. On or about August 5, 1985, Respondent and another Prudential agent, Herb Wagner, met with Mrs. Munkittrick. This meeting took place during Respondent's initial training period. Also present at the hour-long meeting was Mrs. Munkittrick's husband. During the hour-long meeting, Respondent made the standard presentation as described in paragraph 9. During the meeting, Respondent or Mr. Wagner explained to Ms. Munkittrick that she could purchase an additional $6,000 policy at no out-of- pocket costs to her. This offer was made based on Mrs. Munkittrick's responses to Respondent's inquiries after which Respondent determined that Mrs. Munkittrick was an appropriate candidate for financed insurance and was interested in such policy. Based on the standard presentation made to her during the August 5, 1985, meeting, Mrs. Munkittrick understood that the new policy was not free but rather would come from values in her old policy's value and dividends. After Respondent's standard presentation, Mrs. Munkittrick signed an application for the $6,000 policy, which was issued on August 24, 1985. Respondent received a first-year commission of approximately $91.26 from the sale of the Mrs. Munkittrick's $6000 policy. The premium payments for Mrs. Munkitrrick's new policy were paid by loans taken against her old policy. To accomplish this, Prudential routinely provided Mrs. Munkittrick with Disbursement Request Forms which she signed, and notices which reported (1) that loan(s) had been taken against her old policy; (2) that the loan(s) paid the premium on her new policy; (3) the rate of interest; (4) the interest accrued; and (5) the total outstanding loan principal. In addition to the Prudential notices concerning loans and interest on such loans, Mrs. Munkittrick received "loan" checks from Prudential which she endorsed, and sent back to Prudential. The acknowledgment on the back of the checks endorsed by Mrs. Munkittrick clearly stated that the funds were the proceeds of a "loan" and also indicated the corresponding conditions. At hearing, Mrs. Munkittrik admitted that she received the notices attached to the checks, but was unsure if she read the notices. According to Mrs. MunKittrick, if she read the notices, she did not "absorb" the fact that the loans were taken against her policy. As to the actual sales presentation, Mrs. Munkittrick acknowledged in her testimony at hearing that the events occurred "a long time ago" and, consequently, she could not recall many of the details of the meeting with Respondent. Specifically, Mrs. Munkittrick could not recall or simply doubted: whether Respondent reviewed her old policy with her during the August 1985 meeting; whether Respondent used an illustration; whether Respondent told her how much value was available from her old policy; whether Disbursement Request Forms were filled out when she signed them; and whether she read the print on the back of Prudential loan checks she endorsed. In September 1986, John Anderson Jr., then a resident of Plant City, Florida, had three life insurance policies with Prudential. These policies were issued November 17, 1961, November 6, 1969, and June 6, 1979, with face values of $5,000, $3,000, and $6,000, respectively. In September 1986, Betty Anderson, wife of John Anderson Jr., then a resident of Plant City, Florida, had a life insurance policy with Prudential. The value of the policy, issued on June 6, 1979, was approximately $6,920.00. On or about September 18, 1986, the Respondent met with John Jr., and Betty Anderson (Andersons), at their home in Plant City, Florida. Respondent was the Anderson's assigned Prudential agent and was meeting with them for the purpose of servicing their existing Prudential life insurance policies. During this meeting, Mr. Anderson, who was 59 years old at that time, advised Respondent that he planned to retire in a few years and did not have any minor children. Mr. Anderson further indicated that Mrs. Anderson had no source of income independent of him. Respondent made the standard presentation described in paragraph 9 and provided the Andersons with illustrations. Mr. Anderson was concerned about providing additional financial resources for Mrs. Anderson in the event he predeceased her; he believed that this could be accomplished by securing additional life insurance. However, the Andersons informed Respondent that they couldn't afford another policy if they had to pay out of pocket. Respondent addressed the Andersons' concerns and, again, explained to them that loans against the old policy would be used to pay the premium payments on the proposed $25,000 policy. Based on the Respondent's standard presentation, on or about September 18, 1996, the Andersons signed an application for the $25,000 Prudential life insurance policy recommended by the Respondent. Respondent received a first-year commission of approximately $630.00 from the sale of the additional $25,000 policy. From 1987 through 1992, Disbursement Request Forms were prepared by the Respondent requesting loans on each of the four old policies held by Mr. Anderson. One Disbursement Request Form had the signature of Mr. Anderson. Consistent with Prudential's procedures, when Disbursement Request Forms were completed by the agent, the checks generated by such requests were sent directly to the insured, Mr. Anderson. The standard language regarding loans was printed on the back of the check. When the annual loan checks came from Prudential, Mr. and Mrs. Anderson endorsed the checks, deposited them in the bank account, and then wrote a check to Prudential for the premium payment. Mr. Anderson also received coupon books annually, which provided information regarding the loan status; the interest on loan; a description of dividends; and current loans and interest rate. This notice, along with the loan checks and the notice attached thereto, plainly shows that loans were used to make the premium payments on the new policy. In 1991 and 1992 loans were taken out against the $25,000 policy due to a reduction in the dividend scales. Because of the reduced dividend scales, the 1986 policy would not abbreviate until after the September 2000 premium payment was made. In 1995, Mr. Anderson received notice that the $25,000 policy was going to lapse. However, when the Andersons contacted Prudential, they agreed to "fix everything back, which they did." Mrs. Anderson stated that, "[Prudential] put everything back the way it was." However, in May 1995, Mr. Anderson authorized Prudential to cancel his $25,000 policy and simply refund all premium payments. In 1995, about the time the Andersons received the lapse notice, Mrs. Anderson heard a news telecast related to Prudential and told her husband. "They're talking about our situation." The television broadcast included a telephone number to call regarding complaints. Thereafter, the Andersons called the Department to file a complaint against Prudential. On or about May of 1986, Harold E. Welch of Hillsborough County, Florida, had three life insurance policies with Prudential including one issued in 1957 with a face value of $5,000, and a second issued in 1976, with a face value of $5,000. Harold Welch first met the Respondent at his office at the Tampa Port Authority after Mr. Welch moved to Tampa. Respondent was Mr. Welch's assigned agent, and Mr. Welch had requested his help in changing beneficiaries on his existing insurance policies. On or about April 22, 1986, Mr. Welch again met with the Respondent at the Tampa Port Authority Office. After making his standard presentation and determining that Mr. Welch might be a person who could benefit from financed insurance, Respondent talked to him about purchasing a $10,000 policy. Using his standard presentation, the Respondent told Mr. Welch that the premiums on the new policy would be paid out of the values of the older policies, and that they would pay the premiums for a period of nine years, after which the new policy would pay for itself. During the presentation, the Respondent used a printed illustration to explain the nine-year payment plan. Copies of the same was given to Mr. Welch. Mr. Welch testified that the Respondent gave him a print-out with a lot of numbers on it. Mr. Welch further stated that the only part he understood was the bracketed part on the first page that showed nine payments and then "zeros after that." Mr. Welch understood the 1986 policy premiums would be paid with the accrued values of his existing policies over nine years, after which time the new policy would pay for itself and values could be returned to the older policies. The following language appeared on the illustration: Dividend amounts are scheduled on basis of current Prudential scale and are not guarantees or estimates for the future. Illustrated dividends on permanent policies assure current rate of investment earnings on funds attributable to policies since January 1, 1989, and will continue each year into the future. Based upon the Respondent's representations, Harold Welch signed an application for the $10,000 Prudential life insurance policy on or about April 20, 1986. The Respondent received a first-year commission of approximately $255.75, from the sale of the $10,000 additional life insurance policy to Mr. Welch. Mr. Welch admitted that he could not recall whether or not Respondent discussed the dividend scale disclaimer and likewise could not remember whether he read the disclaimer. Although Mr. Welch testified that he did not recall Respondent's talking about loans, he admitted he had understood that the "values" would be taken from his policies, and that at the time he did not "particularly care" how the values were obtained. Mr. Welch admitted signing Disbursement Request Forms authorizing loans against his policy, but that he "didn't really pay any attention to those things.” According to Mr. Welch, “All I wanted to do was get the premium paid." In fact, Mr. Welch signed Disbursement Request Forms in 1987, 1988, 1991, 1992, 1993, and 1994, authorizing loans, including one to pay for the very first 1986 premium. On or about April 20, 1989, Mr. Welch received and endorsed a check from Prudential which represented a loan from the value of his older policies to pay the premium for the new policy. Printed on the back of the check just above the line on which the endorser was to sign, was the language quoted in paragraph 27. Mr. Welch acknowledged receipt of various documents between 1986 and 1994 providing information that loans were taken against his policies to pay premiums on the additional policy, admitted that he made no inquires about the loans and raised no objections about the loans. As to the 1986 policy, Mr. Welch stated that the notices caused him no concern. Respondent was taking care of the payment on the new policy and this "was just part of the whole plan." Mr. Welch admits that he has a fundamental understanding of dividend usage and related insurance terminology. This is evidenced on several insurance transactions initiated by Mr. Welch prior to Respondent's 1986 presentation regarding the $10,000 policy. In 1985, Mr. Welch wrote a letter to Prudential requesting that the premium be paid with the policy dividends and that any balance be forwarded to him. Also, prior to meeting Respondent, Mr. Welch took two loans against one of his policies which he knew based on "common sense" would reduce the death benefit if not repaid. Finally, Mr. Welch understood how dividends and loans may work together. In response to a 1994 notice of loan interest payment due, Mr. Welch wrote on the payment coupon "please take care of this interest payment through policy dividend." Mr. and Mrs. Welch qualified much of their testimony with comments concerning their inability to remember. Specifically, when questioned about the details of Respondent's presentation, Mr. Welch testified that "sometimes I forget these things. . ." Nonetheless, and although inconsistent with relevant documentation, Mr. Welch stated that in 1986 he was not aware that loans were being taken against his policies. Moreover, Mrs. Welch acknowledged that she did not attend the meeting and therefore, didn't hear Respondent's presentation of the 1986 policy to Mr. Welch. Due to a decline in the dividend scale, Mr. Welch had to make an out-of-pocket interest payment of $142.40, and a loan was taken out on his $10,000 policy to pay the premium in 1996. This exceeded the nine years that Respondent told Mr. Welch premium payments would have to come from the values in the old policies. However, Mr. Welch had no reason to believe that Respondent "knew at all" at the time of the sale that the abbreviated payment plan would not work. Only after Mr. Welch heard media reports involving Prudential did he question the 1986 transaction in which he purchased the 1986 policy. According to Mr. Welch, "I saw an article in the local newspaper about the 'churning' at Prudential; and when I read it, I thought . . . 'It applies to me perfectly.'" Thereafter, he contacted the a law firm through the newspaper, and filed suit. By the time he read the news account, Mr. Welch had had cancer surgery and considered himself uninsurable, and he was afraid his old policies had been depleted and that he was going to lose all his insurance. However, this was not the case. On or about May 1986, John Evenson, then of Valrico, Florida, had several life insurance policies with Prudential, including a policy issued June 7, 1955, with a face amount of $5,000; a policy issued June 1960, with a face amount of $3,000; a policy issued February 11, 1969, with a face amount of $2,500; a policy issued July 11, 1981, with a face amount of $2,000; and a policy issued February 11, 1983, with a face amount of $6,000. His wife, Doreen Evenson, also had a Prudential policy issued January 24, 1972, with a face amount of $2,000. In late 1985, Respondent contacted Mr. Evenson with respect to the above described policies. Mr. Evenson worked in the same business complex as Respondent, and meetings concerning Mr. Evenson's life insurance matters occurred at Mr. Evenson's office. Mrs. Evenson was not present at these meetings. In 1986, Respondent met with Mr. Evenson at least three times concerning a proposed $10,000 policy. The application for a $10,000 policy was signed at the second meeting, on April 18, 1986, after Respondent made his standard presentation described in paragraph 9. Prior to purchasing the $10,000 policy in 1986, Mr. Evenson possessed at least a fundamental knowledge of dividend and loan concepts in the context of his insurance policies. For example, prior to Mr. Evenson's 1986 purchase, he had taken approximately $3,200 in loans against his policies for his son's tuition and for a down payment on a home. Mr. Evenson knew that dividends from his policies could be used to reduce the loans. Also, Mr. Evenson understood dividends; options; the use of dividends, that dividends are not guaranteed; cash value; accessing cash value through loans; and that loans reduce death benefits. Mr. Evenson participated in the payment plan for the 1986 policy, through receipt, endorsement, and deposit of loan checks to pay premiums, and signed disbursement requests consistent with the safeguards established by Prudential. Also, Mr. Evenson received notices of loan interest due from Prudential which specified the amount and source of the loans. Mr. Evenson endorsed several of the "loan" checks. These Prudential loan checks were accompanied by an attached statement plainly stating that the funds were to be loan proceeds and directed the payee to the conditions on the back of the check which further advised that the checks were loan proceeds, and the effect of the loan on the subject policy. Each of the loan checks contained such language immediately above the Evensons' endorsements. The Evensons knew the checks were to be used to pay of the 1985 policy premium, and thus, they deposited the "loan" checks into their own account and wrote checks in the corresponding amounts to Prudential to pay the annual premium. The Evensons also received dividend checks during the relevant period of time which are distinguishable from loan proceeds checks in that no acknowledgment or conditions are printed on the back of the checks. Consistent with Prudential safeguards to prevent imposition of loans against policies without knowledge and participation of the insured, Respondent and Prudential rejected the Evensons' requests to consolidate or simplify the annual premium payment process by having Prudential automatically apply the funds. During his testimony, Mr. Evenson repeatedly stated that his memory was vague concerning certain details of the purchase because it occurred "so long ago." However, Mr. Evenson understood that the 1986 policy was not "free," but that a premium would need to be paid annually. Second, Mr. Evenson testified that during Respondent's presentation and prior to the sale of the new policy, Respondent had a list of Mr. Evensons's policies which included information concerning outstanding loans against some policies. Third, Mr. Evenson acknowledged his need for death benefits, indicating that if he passed away, his wife would need the money to help pay for the mortgage. Finally, Mr. Evenson understood dividends are not guaranteed. The notices, check statements, and checks reflecting loans against his policies did not cause Mr. Evenson to make inquiries about the loans or about the loan proceeds checks. Other than asking that the process occur automatically, the Evensons did not question the payment plan until learning through newspaper and television about churning allegations against Prudential. The Evensons contacted the author of the Tampa Tribune newspaper article, who referred them to James, Hoyer and Newcomer law firm. The Evensons thereafter hired James, Hoyer and Newcomer to sue Prudential. There was no replacement or intent by Respondent to replace any policy in connection with any of the sales in issue. In fact, there was no replacement on any of these sales. Respondent's intent was only to use values in the old policy to leverage an increase in death benefits for the policy holder by financing the new policy for a period of time. Each year the decision to finance the premium or to pay out-of-pocket is a fresh one, and while the option to use financed insurance for a number of years may be the basis on which the insured decided he could afford the program, there was no commitment to use old policy values for more than one premium at a time. All the sales transactions relevant to this proceeding occurred during Respondent's first year and a-half as a licensed insurance agent. The fist six (6) months of this time period Respondent was being trained by Prudential and was usually accompanied by a more experienced agent. Respondent has worked continuously in the insurance industry since 1985, and except for the instant case, Respondent has not been the subject of disciplinary proceedings related to his licenses issued pursuant to Chapter 626, Florida Statutes. Internal policies and requirements respecting loan disbursements for the purpose of paying premiums on the same or another policy required the insured's signature on the disbursement forms, or a signature below a loan agreement on the reverse of a loan check, and were accompanied by a series of notices, all to the policy holder's home address of record, thus bypassing the agent. These were followed by annual status reports and interest billings. Respondent was fully aware of the foregoing safeguards with respect to policy loans at all times. In each of sales at issue in this case, there was an objective need for more insurance to provide additional death benefits, and in most cases a subjective need as well. In each case, the insured held his old policy for death benefits, and not for lifetime cash or savings need. Also, in each case, with one exception, the values in the preexisting policy were sufficient to finance premiums on the proposed additional policy until the point the dividends on the new policy could pay its own premiums, assuming dividend scales remained constant. The exception is Mr. Anderson's sale, as he agreed that a portion of his pension was to be dedicated to premium payments. In each of the cases, beginning in 1990, dividend scales declined for the first time in many years. The reduction in dividend scales necessitated alteration of any plan to use funds from the old policy as the only source for payment of premiums on the new policy until the abbreviation point which was now extended farther into the future than it would have been had the 1985 or 1986 dividend scales continued. In most instances, where there was an insufficient amount in the old policy to pay for the next annual premium, the policyholders in this case requested Respondent to arrange for payment from other sources, such as the cash values in the new policy itself. By 1990, these values were sufficient to pay or contribute toward payment of annual premiums. In each case herein, the insured understood from the outset that the new policy was not "free" but that there were values in the old policy which could be used as a source of payments for the new policy. Similarly, in each of the six sales in issue, the analysis made and communicated at the time of sale was that, assuming dividend scales remained the same, the dividends on the new policy would reach a point when its dividends would be sufficient to pay its own premiums at a time varying between seven years. Each of the policyholders in this case became convinced they had been wronged after reading or watching newspaper and/or television reports about "churning." In the insurance industry, "churning" is considered an improper insurance sales practice involving financed insurance which requires that the sale or transaction is not in the best interest of the insured; it involves misrepresentation or deception; and is motivated by the salesman's desire for a commission, not the welfare of the insured. The sale of financed insurance without more does not constitute churning. Nonetheless, based on their interpretation of the various news accounts about "churning" by Prudential agents which they saw and/or read, each complainant except Mr. Welch contacted the Department to file complaints. Mr. Welch instead contacted an attorney.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that all counts of the Administrative Complaint filed on April 22, 1996, be DISMISSED. DONE AND ENTERED this 10th day of June, 1998, in Tallahassee, Leon County, Florida. CAROLYN S. HOLIFIELD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 10th day of June, 1998. COPIES FURNISHED: Stephen C. Fredickson, Esquire Michael H. Davidson, Esquire Division of Legal Services 612 Larson Building Tallahassee, Florida 32399-0300 Peter Winders, Esquire Stephanie J. Young, Esquire Carlton Fields, P.A. One Harbor Place 777 South Harbor Island Boulevard Tampa, Florida 33602 Daniel Y. Sumner General Counsel The Capitol, Lower Level 26 Tallahassee, Florida 32399-0300 Bill Nelson State Treasurer and Insurance Commissioner The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
Findings Of Fact At all times pertinent to this proceeding Respondent, HOWARD P. HAUSER, was eligible for licensure and licensed in this state by the Florida Department of Insurance as a Life and Health Insurance Agent; General Lines Insurance Agent - Property, Casualty, Surety, and Miscellaneous Lines; and Legal Expense Insurance Agent. At all times pertinent hereto, Respondent was the registered agent and an officer or director of Hauser and Associates Insurance Agency, Incorporated of 7770 Davie Road Extension, Hollywood, Florida. Beginning on or about January 1, 1986, and continuing through August 31, 1987, Respondent represented to one of his clients that he had obtained insurance coverage for that client's three restaurants. This representation of coverage was false. Respondent received from the client insurance premium payments of $56,550.00, more or less, for the insurance of the client's three restaurants. These funds were obtained by Respondent under false pretenses. Respondent provided the mortgagee of one of the restaurants owned by his client with a document purporting to be a certificate of insurance on that restaurant from Scotsdale Insurance Company insuring the restaurant for the period December 11, 1985, to December 11, 1986. Respondent further provided the mortgagee with a declaration sheet stating that Protective Insurance Company would insure the restaurant from January 1, 1987, to January 1, 1990. Respondent falsified these declaration sheets. Respondent's client suffered no loss, other than the loss of his premium dollars, because of Respondent's misrepresentations as to coverage. Respondent was charged with one count of Grand Theft of the Second Degree, a second degree felony, based on the dealings with his client. Respondent entered a plea of nolo contendere to the charge of Grand Theft of the Second Degree. The Circuit Court, in and for Broward County, Florida, placed Respondent on probation for a period of three years and withheld adjudication of guilt. As a condition of the Order of Probation, the court required that Respondent make restitution to his client in the amount of $56,550.00 and further required that $15,000.00 be paid toward restitution on October 24, 1988, the date Respondent entered his plea of nolo contendere and the date the court entered the Order of Probation. Respondent made a restitution payment of $15,000.00 on October 24, 1988. Respondent has been licensed by Petitioner since April 1972. Although Petitioner has received other complaints about Respondent, no formal action has been previously taken against him. Respondent has been a good citizen, except for this misconduct, and a good family man. Respondent regrets his misconduct. Respondent timely requested a formal hearing after the Administrative Complaint was served upon him.
Recommendation Based on the foregoing findings of fact and conclusions of law it is RECOMMENDED that the Department of Insurance enter a final order which revokes all licenses issued by the Department of Insurance to Respondent, Howard Paul Hauser. DONE and ENTERED this 21st of July, 1989, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON 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 21st day of July, 1989. APPENDIX The proposed findings addressed as follows: of fact submitted on behalf of Petitioner are 1. Addressed in paragraph 1. 2. Addressed in paragraph 2. 3. Addressed in paragraph 6. 4. Addressed in paragraph 3. 5. Addressed in paragraph 4. 6. Addressed in paragraphs 3-4. The proposed findings of fact submitted on behalf of Respondent are addressed as follows: Addressed in paragraph 9. Addressed in paragraph 6. Addressed in paragraph 6. Rejected as being unnecessary to the conclusions reached. Addressed in paragraph 7. Addressed in paragraph 5. Addressed in part in paragraph 7. Rejected in part as being speculative. Rejected as being a conclusion of law and not a finding of fact. COPIES FURNISHED: Robert G. Gough, Esquire, (at the hearing) and Charles Christopher Anderson, Esquire, (on the proposed recommended order) Office of Legal Services 412 Larson Building Tallahassee, Florida 32399-0300 Gary D. Weiner, Esquire, Glendale Federal Building Suite 209 901 Southeast 17th Street Fort Lauderdale, Florida 33316 Honorable Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, FL 32399-0300 Don Dowdell, General Counsel Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, FL 32399-0300
The Issue Whether the licensure and eligibility for licensure as an insurance agent in Florida held by Respondent Michael David Garrett should be disciplined based on the allegations of the Administrative Complaint filed against him and, if so, the extent of such discipline.
Findings Of Fact Petitioner is the state agency that is responsible for the regulation of insurance agent conduct and licensure. Respondent is currently eligible for licensure as an insurance agent and is licensed in this state as a life, variable annuity and health agent, life and health agent, and health agent. The Association for Independent Managers (AIM) is an entity that was founded in 1979 for the purpose of providing educational and other services or benefits to a membership base that is comprised primarily of small businesses. In February 2002, Jack Winebrenner, AIM’s chief executive officer, desired to secure health insurance benefits for AIM’s members. On or about February 7, 2002, Winebrenner delivered applications for health insurance and a cashier’s check in the amount of $23,920.77 to Respondent. The pertinent applications were intended to secure health insurance with an entity known as Mutual Service Life Insurance Company and/or an entity known as United States Life Insurance Company. Winebrenner agreed to gather the applications on behalf of AIM and to forward them to Respondent and Respondent’s company, known as Eastwich Re, Inc. Respondent had represented that he was a licensed insurance agent. The identifying number of the $23,920.77 cashier’s check referred to hereinabove that was delivered to Respondent is 381524555. Respondent’s company, Eastwich Re, Inc., had a business checking account at Flagship National Bank (Flagship) in Sarasota, Florida. On February 12, 2002, the $23,920.77 check that Winebrenner had delivered to Respondent was deposited into Eastwich Re’s Flagship account. Respondent was a signatory on Eastwich Re’s Flagship account. Respondent did not secure health insurance from United States Life Insurance Company or Mutual Service Life Insurance Company or any other company for any of the AIM applicants. Respondent did not forward any premium moneys in the year 2002 to United States Life Insurance Company or Mutual Service Life Insurance Company for the purpose of securing health insurance for any of the AIM applicants. Respondent returned only $10,000.00 from the amount that Winebrenner gave to him in the $23,920.77 cashier’s check. Winebrenner testified that he requested several times of Respondent that the full amount ($23,920.77) of the cashier’s check be returned, once it was clear that no health insurance had been secured for any AIM applicants. AIM engaged private counsel to seek return of the entire $23,920.77 amount, but the efforts of private counsel were not successful. No reason was offered for Respondent only returning $10,000.00. On September 19, 1991, Respondent’s licenses and appointments as an insurance agent were surrendered as part of a Consent Order into which he entered with the Department of Insurance. In 1996, Respondent’s application for licensure as an insurance agent was denied. Respondent’s application for licensure was denied based on information “indicating that Respondent transacted insurance in 1992, in violation of the September 19, 1991 Consent Order which resulted in the surrender of all licenses and appointments held by Respondent . . . [and] had the same force and effect as a revocation.” Respondent was again granted a license as an insurance agent in 1997. Respondent was a licensed insurance agent in Florida at the relevant times that are material to the Administrative Complaint that is the basis for the instant action.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order finding Michael David Garrett guilty of violating the provisions of Section and Subsections 626.561(1); 626.611(7), (9), (10), and (13); 626.621(6); 626.9521; and 626.9541(1)(o)1., Florida Statutes. As penalty for these violations, it is recommended that Petitioner (1) revoke Respondent's insurance licenses and eligibility for licensure; (2) that Respondent be required to pay an administrative fine of $20,000.00; and (3) that Respondent be required to pay restitution to AIM for the benefit of the defrauded insurance applicants in the amount of $13,920.77. DONE AND ENTERED this 28th day of June, 2005, in Tallahassee, Leon County, Florida. S JEFF B. CLARK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of June, 2005.
The Issue The central issue in this case is whether the Respondent is guilty of the violations alleged in the Administrative Complaint and, if so, what penalty should be imposed.
Findings Of Fact Based upon the testimony of the witnesses and the documentary evidence received at the hearing, I make the following findings of fact: At all times material to allegations of the Administrative Complaint, Respondent, William John Harnett, has been licensed or been qualified for licensure as an insurance agent in the State of Florida. Respondent currently holds licenses for service lines insurance, debit insurance, ordinary life and health insurance, and general lines insurance (which is property, casualty, or surety). The Department is charged with the administration of Chapter 626, Florida Statutes. On December 15, 1975, the Department was appointed to serve as Receiver of Southern American Fire Insurance Company (Southern) . The purpose of this receivership was to seek the rehabilitation of the insurance company. On February 10, 1976, Southern was determined to be insolvent pursuant to Section 631.011(3), Florida Statutes and the Department, as Receiver, obtained an Order of Liquidation. The Department was charged with the responsibility of marshalling the company's assets in order to settle the outstanding claims against it. To this end, the Department filed civil suits against insurance agents and agencies which had allegedly failed to remit premium monies owed to Southern. One such suit was against Harnett, Inc., Respondent, and other individuals associated with Harnett, Inc. From April 9, 1947 until November 14, 1986, Harnett, Inc. was a corporation organized under the laws of the State of Florida whose general business was insurance. Respondent served as the treasurer and a director for Harnett, Inc. Respondent was authorized to and did sign checks and correspondence on behalf of Harnett, Inc. The Department's civil suit against Harnett, Inc. (Case No. 76-23143) was filed in Dade County on July 26, 1976. This suit claimed Harnett, Inc. had failed to remit premium monies owed to Southern and that Respondent, as an officer and director of Harnett, Inc. having direct supervision or control over individuals acting on behalf of Harnett, Inc., was personally liable for the amounts owed. On March 6, 1981, a final judgment (Case No. 76-23143) was entered in favor of the Department as Receiver of Southern. This judgment found against Respondent and Harnett, Inc., jointly and severally, in the sum of $78,617.85. This judgment was affirmed on appeal. 1/ The Department has attempted to collect the funds awarded in this judgment. From October 26, 1962 until November 14, 1986, Franklin Insurance Agency of Miami, Inc. (Franklin) was a corporation organized under the laws of the State of Florida. At all times material to this cause, Respondent was president and a director of Franklin. On October 20, 1976, the Department as Receiver of Southern filed a civil suit against Respondent and Franklin. This suit (Case No. 76-32799) claimed monies were owed to Southern for premiums Franklin had failed td remit. Further, the suit alleged that Respondent, as Franklin's president and director, was personally liable for the refusal and continued refusal of Franklin to pay the premiums. A final judgment was entered for the Department as Receiver of Southern in the Franklin suit on December 9, 1980. This judgment (case No. 76- 32799) provided for recovery against Franklin and Respondent, jointly and severally, in the sum of $35,983.39. The Department has attempted to collect the funds awarded in this judgment. Gables Insurance Agency, Inc. (Gables), organized on November 28, 1967, continues as an active corporation in this state. At all times material to the allegations in the Administrative Complaint, Respondent was the sole officer and director for Gables. Norfolk & Dedham Mutual Fire Insurance Company, Inc. (Norfolk) entered into Agency Agreements with Gables and Harnett, Inc. on February 1, 1976. Subsequently, Norfolk sued Harnett, Inc. (Case No. 84-03815) and Gables (Case No. 84-03816) for premium monies it was claimed to be owed. These suits resulted in final judgments in favor of Norfolk. The suit against Harnett, Inc. (Case No. 84-02815) found the sum of $54,556.00 was owed to Norfolk. The suit against Gables (Case No. 84-03816) found the sum of $18,843.20 was owed to Norfolk. The four judgments identified herein (paragraphs 8, 11, 14 and 15) total $188,000.44 and remain unsatisfied. These judgments represent money damages owed for unpaid insurance premiums. An applicant for licensure with outstanding judgments incurred during the course of doing the business of insurance would not be approved by the Department without a showing of restitution or rehabilitation. The Department deems such an applicant to be untrustworthy, incompetent, and not fit to become qualified and licensed in Florida. Respondent offered no evidence of restitution or rehabilitation. Respondent maintained that no monies were owed by the respective debtor companies or Respondent individually.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That Department of Insurance and Treasurer enter a Final Order revoking the licenses held by Respondent, William John Harnett. DONE and RECOMMENDED this 5th day of July, 1988, in Tallahassee, Florida. JOYOUS D. PARRISH 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 5th day of July, 1988.
Findings Of Fact The Respondent is, and at all times material to the allegations in the Administrative Complaint, was a licensed ordinary life insurance salesman in the State of Florida. He first became licensed in 1977, and went to work initially for Occidental Life Insurance Company in Orlando, Florida. After approximately three to four weeks with Occidental Life, he went to work for Lincoln National Life and was transferred to St. Petersburg, where he worked for about three or four months selling health insurance and some life insurance as a rider to the health insurance policies. After leaving Lincoln National Life, he left the insurance business and went to work for a sign company. He worked for no further insurance companies before he joined Coordinated Planning Associates (hereinafter referred to as COPA). He went to work for COPA in April of 1979. In July, 1980, Mr. Wheeler was terminated by COPA and he then became employed by United Companies Life, his present employer. In June or July of 1979, Mr. Wheeler contacted James and Ruby Clinton about purchasing insurance from him. He met with them in their home to discuss his product. At that time, Mr. and Mrs. Clinton had four policies in effect. (See Petitioner's Exhibits 8, 9, 10, and 11.) One policy covered Mr. Clinton and had a rider for his wife, and the other three policies were on each of their three children. When there was an initial contact made by Mr. Wheeler with the Clintons, Mr. Clinton informed Mr. Wheeler that they had more insurance than they could afford. Prior to purchasing insurance from Mr. Wheeler, the Clintons showed Mr. Wheeler their policies, and he went through the policies and explained to the Clintons that he could obtain the same or better coverage from his company for less premium. He also informed them that they could obtain coverage for the children by paying a set premium per year per child per thousand dollars of coverage. After the Clintons purchased their policy from Mr. Wheeler, Mrs. Clinton actually requested insurance on the children, and Mr. Wheeler came by their home once again to pick up the $4.00 payment or deposit for the additional coverage for the children. At the time that Mr. Wheeler sold the new insurance policy to Mr. and Mrs. Clinton, no replacement form was prepared or shown to the Clintons. The Clintons were not knowledgeable in insurance matters and relied upon Mr. Wheeler's representations as to the comparative coverages of his company's policy and their existing policies. The coverage under the policy sold by Mr. Wheeler to the Clintons was not the same or better coverage than those which existed under the policies which were replaced. The policies replaced were whole life policies and covered the entire family. The program being sold by Mr. Wheeler was a retirement savings plan with a term insurance rider and was intended to only supplement and not replace existing coverage. Mr. Wheeler was aware that the Clintons intended to cancel their existing policies and replace them with the policy which he was selling. Mr. Wheeler testified regarding the Clintons on direct examination as follows: Q. Did they mention anything about re- placing their insurance? A. No. They insinuated that yes, they were going to drop it because they needed the money. The original reason we were there was because they needed money, and that's why we were there. And if they could get a good deal on their insurance, or if they could buy a good program and they could turn the other in and get money for it, that's what they were interested in. In fact, Mr. Wheeler's wife actually picked up the existing policies and took care of mailing them to the company after their cancellation. In October of 1979, Mr. Wheeler met with Gary and Darlene Davis of Orlando, Florida, for the purpose of attempting to sell life insurance to them. At the time that they were approached by Mr. Wheeler, Mr. and Mrs. Davis had three life insurance policies issued by Prudential Life Insurance Company in effect. Mr. Wheeler was made aware of these three policies. During the course of the sales presentation, the Respondent went through the existing policies and compared some of the benefits with those of the ITT policy he was attempting to sell. He represented to the Davises that the ITT policy would provide them with better coverage for the entire family for less premium than they were paying for the existing policies. Mr. Wheeler was informed by the Davises that they intended to cancel their existing policies when they purchased the ITT coverage. When Mr. Wheeler met with Mrs. Davis, she showed him the insurance policies on her and her husband. The policy on Mr. Davis had a rider for the children and Mrs. Davis's policy contained an IRA. Mr. Wheeler represented to Mrs. Davis that the COPA program would give her family these same benefits plus a cancer policy for less money. He explained to Mrs. Davis that he could charge a lower premium because he was not an insurance man per se and that because of this his company did not have to pay high commissions like Prudential. He also explained that he worked more with helping people with their finances than with selling insurance and was salaried. In fact, Mr. Wheeler was an insurance salesman working on commissions. The COPA program did not contain an IRA and the cheaper insurance was a term rider not whole life. The basic COPA program which Mr. Wheeler sold to the Davises also did not contain coverage for the Davis children. The true reason the premium was lower was because of the different coverage and different type of insurance. The ITT policy sold to the Davises in fact did not provide the same coverage as that of the policies which were cancelled by the Davises at the time of purchasing the ITT policy. The ITT policy specifically did not provide coverage for the Davis' children, and as a result of this lack of coverage, Mr. and Mrs. Davis were unable to recover any insurance proceeds after their daughter's death during the coverage period of the ITT policy. The ITT policy was a retirement plan designed to supplement existing life insurance and was not intended as a complete life insurance program for a family. Mrs. Davis understood the ITS policy to contain an IRA as part of the policy. The evidence was unclear as to whether Mr. Wheeler actually represented that it contained an IRA or whether he represented that there was a tax benefit within the retirement savings program which the Davises interpreted to mean an IRA. It was clear, however, that Mr. and Mrs. Davis were not knowledgeable in matters of insurance and relied upon the expertise and representations of Mr. Wheeler in cancelling their existing policies and replacing them with the ITT policy. No replacement form comparing the coverage of the existing policies and the ITT policy was prepared or presented to the Davises at the time that they purchased the ITT policy. Mr. Wheeler admitted that he filled out the applications on behalf of the Davises and the Clintons. Question No. Nine on the application forms for ITT of both the Clintons and the Davises asked whether the proposed policies were being issued in a replacement situation. This question on both applications was answered "No" by Mr. Wheeler. Question No. One of the agent's report reads: "Will insurance on any proposed insured now applied for replace or change any life insurance or annuity?" This question was answered "No" on the agent's report for both the Davises and the Clintons. The signature block of the agent's report reflected that they were prepared by Mr. Richard Wheeler. The Respondent admitted that he customarily intentionally avoided information from prospects which might reveal to him the fact that insurance was being replaced and did so in this instance. When Mr. Wheeler began with COPA, he received two weeks' training. The training was designed to teach the "canned" presentation which COPA salesmen were required to use. This presentation was prepared by the more experienced and more knowledgeable officers and managers of COPA. This same presentation was utilized by Mr. Wheeler in the sales presentation to the Clintons and Davises. There was no training regarding replacement of other insurance. Sometime in 1980, after the sales to the Clintons and Davises, Mr. Wheeler was informed by another COPA employee, Greg Gustin, as to particular representations within the canned presentation Mr. Gustin considered to be false. Sometime after this, Mr. Wheeler discussed this with Mr. Larry Taylor of COPA and an official of ITT Life Insurance Company. When Mr. Wheeler tried to change the presentation to eliminate the misrepresentations, he was fired. This occurred July 17, 1980. Mr. Wheeler claimed ignorance of the misleading nature of the canned presentation prior to his discussions with Mr. Gustin. However, Mr. Wheeler admitted that he had intentionally avoided getting information from customers which indicated they were going to cancel their existing policies. The sales presentation also stated "Let me assure you I am not here to sell you anything. Mr. Wheeler's only purpose for visiting these people was to sell them insurance. Mr. Wheeler sold approximately 250 policies while with COPA and has continued to sell life insurance since leaving COPA in July, 1980. The two complaints which are the subject of this administrative proceeding were the only two complaints made against Mr. Wheeler. Since going to work for United Companies Life, Mr. Wheeler has been trained in using replacement forms and now uses those forms whenever his policy replaces existing insurance.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED: 1. That the Department of Insurance enter a final order suspending Respondent's license for a period of 30 days. This case is more appropriately a case for a civil fine or probation. However, a violation of Florida Statute Section 626.611 involves a mandatory suspension. There are strong mitigating factors which justify that the mandatory suspension be of short duration. At the tinge the sales were made to Mr. and Mrs. Clinton and Mrs. and Mrs. Davis, the Respondent was relatively new in the insurance business. Upon being employed by COPA, he was given a prepared sales presentation to memorize and use in each sales contact. This presentation was prepared by the officers and managers of COPA who were more experienced and more knowledgeable than Mr. Wheeler about insurance matters. Mr. Wheeler later tried to change the presentation and was fired as a result. These incidents occurred in 1979 and since that time Mr. Wheeler has continued to work as a licensed insurance salesman with no complaints or evidence of violations of the Florida Statutes or Rules of the Department of Insurance. The circumstances giving rise to the violations and the fact that the Respondent was advised by more experienced and knowledgeable individuals clearly bear upon the appropriateness of the particular penalty assigned. See, Drew v. Insurance Commissioner and Treasurer, 330 So.2d 794 (Fla. 1st DCA 1976). RECOMMENDED this 11 day of April, 1983, in Tallahassee, Florida. MARVIN E. CHAVIS Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 12th day of April, 1983. COPIES FURNISHED: David A. Yon, Esquire Legal Division Department of Insurance 413-B Larson Building Tallahassee, Florida 32301 Paul H. Bowen, Esquire Swann & Haddock, P.A. Post Office Box 7838 Orlando, Florida 32854 Honorable William Gunter State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32301
