Findings Of Fact At all times relevant to these proceedings, the Petitioner was an applicant for licensure as a life including variable annuity and health insurance agent. On or about February 2, 1994, the Petitioner was scheduled to take the life including variable annuity and health insurance agent examinations at Florida Technical College in Orlando, Florida. On February 2, 1994, the Petitioner chose to take only the life including variable annuity examination. He did not receive a passing grade on this examination. On February 4, 1994, the Petitioner returned to the Florida Technical College after the test had started. He attempted to use another test admittance authorization card to be able to re-test. At that time, the Petitioner was advised by Tom Bastedo, Test Site Computer Operator, that he could not use the authorization card to gain admittance to the examination since the Petitioner had already taken the life including variable annuity examination and the computer scoring system would report that the examination had already been scored. The Petitioner became angry and tore up the card. The Petitioner then discussed his personal situation with Tom Bastedo, which included a reference to some "emeralds" that the Petitioner owned. The Petitioner removed from his briefcase what appeared to be real emeralds and offered them as a bribe to Mr. Bastedo if he would make it look like the Petitioner had passed the examination which he had previously failed on February 2, 1994. Mr. Bastedo refused the offer and advised the Petitioner that he must reapply to be tested. The Petitioner hung around the testing site for awhile and then left the area. This incident was reported immediately by Mr. Bastedo to his supervisors. On or about March 9, 1994, the Petitioner's application for license as a life including variable annuity and health insurance agent was denied because of the events which had occurred at the Florida Technical College on February 4, 1994. Petitioner's explanation of the events that occurred on February 4, 1994 is not credible.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Insurance and Treasurer enter an Order denying the license application of Dario Albert Alvarez for licensure as a life including variable annuity and health insurance agent. DONE AND ENTERED this 27th day of September, 1994, in Tallahassee, Florida. DANIEL M. KILBRIDE 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 27th day of September, 1994. APPENDIX Petitioner did not submit proposed findings of fact. Respondent's proposed findings of fact. Accepted in substance: paragraphs 1-7. COPIES FURNISHED: Dario Albert Alvarez 13329 Laver Lane Orlando, FL 32824 John R. Dunphy, Esquire Division of Legal Services 612 Larson Building Tallahassee, FL 32399-0333 Tom Gallagher State Treasurer and Insurance Commissioner Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, FL 32399-0300 Bill O'Neil, Esquire General Counsel Department of Insurance and Treasurer The Capitol, PL-11 Tallahassee, FL 32399-0300
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: At all times material to this proceeding, Respondent was eligible for, and licensed as, an insurance agent in the State of Florida. The Respondent is currently eligible for, and licensed as, an insurance agent in the State of Florida. At all times material to this proceeding, Respondent was a licensed agent for United States Fidelity and Guaranty Company (USF&G). At all times material to this proceeding, Respondent was an officer, director, and stockholder of D.E. Brewer and Company (Company), an incorporated general lines insurance agency primarily located in Jacksonville, Florida. On or about April 24, 1986, the Company entered into an agency agreement with USF&G whereby the Company was given authority to solicit and sell insurance on behalf of USF&C. This agency agreement was cancelled unilaterally by USF&G on November 24, 1986. At all times material to this proceeding, all funds received by the Company on behalf of USF&G represented premium funds paid by consumers for the purpose of obtaining insurance and were trust funds received in a fiduciary capacity to be paid over to USF&G in the applicable regular course of business. Under the agency agreement with USF&G, accounts of premium funds received by the Company on behalf of USF&G were to be "rendered at the end of each month" and any "balance shown to be due to" USF&G was to "be paid to the designated reporting office not later than the twentieth day of the second succeeding month". On or about October 27, 1986, Southland Services of Jacksonville, Inc. (Southland) issued a check to the Company in the amount of $15,799.00 as a monthly installment for an auto policy and a general liability policy issued by USF&G. These premium funds were collected by the Company on behalf of USF&G. On or about November 21, 1986, Southland issued a check to the Company in the amount of $13,785.00 as a monthly installment for auto policy and a general liability policy issued by USF&G. These premium funds were collected by the Company on behalf of USF&G. On or about November 12, 1986, S. Gordon Blalock (Blalock) issued a check to the Company in the amount of $1,341.00 as a premium on an auto policy issued by USF&G. These premium funds were collected on behalf of USF&G. On or about December 3, 1986, USF&G notified Blalock that USF&G had not received the premium and unless Blalock remitted the premium within 15 days his policy would be cancelled. This matter was cleared up by Blalock with USF&G and the policy was not cancelled. On or about November 5, 1986, Anita Grusenmeyer, on behalf of Grusenmeyer & Associates, Inc. (Grusenmeyer) issued a check to the Company in the amount of $2,810.00 as a premium payment for insurance policies issued by USF&G. These premium funds were collected by the Company on behalf of USF&G. On or about December 15, 1986, USF&G requested documentation from Grusenmeyer as to proof of premium payment to the Company on these insurance policies since the Company had not rendered the premium payment to USF&G. This documentation was furnished and there was no interruption of the coverage. On or about November 24, 1986, USF&G unilaterally terminated its agency agreement with the Company due to the Company's failure to remit premium funds collected on behalf of USF&G. Prior to, and at the time of the termination of the agency agreement by USF&G, Respondent was Vice President, a director and stockholder (11%) of the Company, but on or about November 24, 1986, the date of the termination of the agency agreement, Respondent became president of the Company. By letter dated December 12, 1986 and addressed to Respondent, USF&G, under paragraph 9 of the agency agreement, made a demand on the Company for the records pertaining to business dealings between the Company and USF&G. This demand was again made by letter on January 21, 1987. However, there was some concern on Respondent's part in turning these records over to USF&G and it was determined that USF&G could make copies of such records with someone from the Company being present. Due to conflicts in schedules of both parties this was never accomplished, and, in the interim, USF&G concluded that it had the capability to reproduce the records on its computer. No further demand for the records was made and the records were never turned over to USF&G by the Company. Also in its letter dated January 2, 1987, USF&G advised the Company that the premium funds received in November, 1986, were overdue as well as the August, 1986, and October, 1986, account. The August, 1986, and October, 1986, account would be for premium funds received in June, 1986, and August, 1986, respectively. The September, 1986, account had been paid on or about November 20, 1986, using premium funds received from Southland on November 21, 1986, in the amount of $13,785.00 to cover a check previously issued by Donald Brewer on an account that did not have sufficient funds to cover the check. The deposit of the Southland check into the account made the check written by Donald Brewer "good". In accordance with the agency agreement, the premium funds received from Southland ($15,799.00) in October, 1986, were due and payable on December 20, 1986, and the premium funds received from Southland ($13,785.00), Blalock ($1,341.00) and Grusenmeyer ($2,810.00) during November, 1986, were funds due and payable on January 20, 1987. However, these premium funds had been disposed of prior to Respondent becoming president of the Company on November 24, 1986, and the Company having insufficient funds that could be used to pay USF&G after Respondent became president, the funds were not remitted to USF&G in the regular course of business set forth in the agency agreement. All the premium funds received by the Company from Southland ($15,799.00 and $13,785.00), Blalock ($1,341.00) and Grusenmeyer ($2,810.00) in October and November of 1986 were deposited in the Southeast Bank, N.A., of Jacksonville, Florida, Account No. 001632637, an account on which Respondent had no check writing authority. All of the above-referenced funds were deposited in that account prior to Respondent becoming president on November 24, 1986. The Respondent was not the responsible agent for the three insurance accounts: Southland; Blalock; and Grusenmeyer, and none of the premium funds remitted to the company by these accounts were "received by" the Respondent. There is no evidence that these premium funds were "received by" any employee of the Company who was under the Respondent's direct supervision and control. There is no evidence that Respondent had access to, or responsibility for, the premium funds paid by Southland, Blalock and Grusenmeyer during October and November of 1986. Likewise, there is no evidence that the Respondent diverted or appropriated any of such premium funds to his own use or to the use of anyone other than to those entitled to receive them. Upon becoming president, Respondent opened a new bank account with the Florida National Bank, but there was no evidence that the account ever had sufficient funds, other than possibly premium funds belonging to other insurers which had been received on their behalf by the Company, to pay USF&G the premium funds due it from the Southland, Blalock and Grusenmeyer accounts. There was evidence that the Respondent had paid salaries to the employees out of the account, but no amount was established. Upon becoming president, Respondent began negotiating a settlement with USF&G on the amount of premium funds due USF&G. There was a dispute as to the amount but a settlement of approximately $52,000.00 was reached. Some of this amount has been paid, but there is a remaining balance. There was no evidence that Respondent, prior to becoming President of the Company, took any part in the policy decisions or administration of the Company, such as determining the manner in which the Company's receipts would be spent or to direct, control or supervise the activities of the employees or other insurance agents of the Company.
Recommendation Based upon the Findings of Fact, Conclusions of Law, the evidence in the record and the candor and demeanor of the witnesses, it is RECOMMENDED that the Petitioner, Department of Insurance and Treasurer enter a Final Order dismissing all counts of the Administrative Complaint filed against the Respondent, John Lanahan, Brewer in Case No. 87-2692. Respectfully submitted and entered this 26th day of July, 1988, in Tallahassee, Leon County, Florida. WILLIAM R. CAVE 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 26th day of July, 1988. APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 87-2692 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on the proposed findings of fact submitted by the parties in this case. Specific Rulings on Proposed Findings of Fact Submitted by Petitioner Adopted in Finding of Fact 2, except that there was no evidence presented as to the types of insurance licenses Respondent held. Adopted in Finding of Fact 1. 3.-9. Adopted in Findings of Fact 3 through 9, respectively. 10. Adopted in finding of Fact 10 but clarified to show the date of the check to be November 12, 1986, rather than November 21, 1986. 11-14. Adopted in Findings of Fact 11 through 14. 15-16. Adopted in Finding of Fact 15. 17-18. Adopted in Finding of Fact 16. 19. Adopted in Findings of Fact 16 and 17. 20-22. Adopted in Finding of Fact 18. Adopted in Finding of Fact 19 and 22. Adopted in Finding of Fact 20 except that there is competent evidence to show that the Grusenmeyer payment was received and deposited prior to Respondent assuming the Presidency. Adopted in Finding of Fact 18. Adopted in Finding of Fact 23, but although there was a sincere dispute as to the amount there was no competent evidence that that amount was $200,000 or that the settlement figure of $52,000 was not a fair representation of the amount owed to USF&G by the Company. Specific Rulings on Proposed Findings of Fact Submitted by Respondent Adopted in Findings of Fact 1 and 2. Adopted in Findings of Fact 3, 19, and 24. Adopted in Findings of Fact 8, 9, and 19 but clarified. Adopted in Finding of Fact 18. Adopted in Finding of Fact 12. Adopted in Findings of Fact 18 and 19. 7-8. Adopted in Findings of Fact 12, 18 and 19. Adopted in Findings of Fact 20, 21 and 22. Adopted in Finding of Fact 23. 11-12. Rejected as being argument, not a finding of fact. COPIES FURNISHED: S. Marc Herskovitz, Esquire William W. Tharpe, Jr., Esquire 413-B Larson Building Tallahassee, Florida 32399-0300 Judith S. Beaubouef, Esquire Peter L. Dearing, Esquire Post Office Box 4099 Jacksonville, Florida 32201 Honorable William Gunter State Treasurer ana Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300
The Issue Whether proposed rules promulgated by the Florida Department of Insurance related to sale of insurance products by agents affiliated with financial institutions are an invalid exercise of delegated legislative authority.
Findings Of Fact The Florida Department of Insurance is responsible for regulation of insurance transactions in the State of Florida. On January 29, 1997, the Department of Insurance issued a notice to interested parties of a rules workshop to address "parity" of insurance regulation. The workshop was conducted on February 21, 1997. The Department of Insurance published the final rule proposal on May 23, 1997. A public hearing was conducted on June 19, 1997. The record of the public hearing remained open until June 25, 1997, for submission of written comments. A Notice of Change was published on July 18, 1997. A Second Notice of Change was published on August 8, 1997. The Petitioners timely filed petitions challenging the proposed rules. All parties have standing to participate in this proceeding. As set forth in the rule proposal, the purpose and effect of the proposed rules is as follows: Section 626.5715, Florida Statutes, requires the Department to adopt rules to assure parity of regulation in this state of insurance transactions as between an insurance agency owned by or an agent associated with a federally chartered financial institution, an insurance agency owned by or an agent associated with a state- chartered financial institution, and an insurance agency owned by or an agent associated with an entity that is not a financial institution. (Emphasis supplied.) The summary portion of the published rule proposal states that the "proposed rules implement standards to provide parity pursuant to Section 626.5715, Florida Statutes." Section 626.5715, Florida Statutes, the "parity statute," provides as follows: The department shall adopt rules to assure the parity of regulation in this state of insurance transactions as between an insurance agency owned by or an agent associated with a federally chartered financial institution, an insurance agency owned by or an agent associated with a state-chartered financial institution, and an insurance agency owned by or an agent associated with an entity that is not a financial institution. Such rules shall be limited to assuring that no insurance agency or agent is subject to more stringent or less stringent regulation than another insurance agency or agent on the basis of the regulatory status of the entity that owns the agency or is associated with the agent. For the purposes of this section, a person is "associated with" another entity if the person is employed by, retained by, under contract to, or owned or controlled by the entity directly or indirectly. This section does not apply with respect to a financial institution that is prohibited from owning an insurance agency or that is prohibited from being associated with an insurance agent under state or federal law. (Emphasis supplied.) The word "parity" is not defined in the statute. Webster's Dictionary defines "parity" as "[t]he quality or state of being equal or equivalent." Pursuant to the specific statute requiring the Department to adopt rules, the Department's authority to adopt rules related to this issue is limited to those rules which provide for equivalent regulation of insurance transactions without regard to ownership or affiliation of the insurance agent or agency. Rule 4-224.002 (Settings and Circumstances) Proposed Rule 4-224.002 provides as follows: 4-224.002 Setting and Circumstances of Insurance Transactions. The setting and circumstances in which insurance transactions occur shall be structured so as to avoid deception as to, and to assist the consumer in understanding, the nature of the product sold, the identity of the insurer, and the identity and representative capacity of the insurance agent. When an agent is transacting insurance, any business cards and stationery used shall reflect his status as an insurance agent. Other materials used in insurance transactions which address the representative capacity of the agent shall identify the individual as an insurance agent. The published rule proposal indicates that Proposed Rule 4-224.002, Florida Administrative Code, is specifically authorized by Section 624.308, Florida Statutes, and implements Sections 624.307, 626.5715, 626.951, 626.9521, 626.9541, 626.9561 and 626.9611, Florida Statutes. Section 624.308, Florida Statutes, provides the Department with the general authority to adopt "reasonable rules necessary to effect any of the statutory duties of the department...." and states that willful violation of Department rules may result in a range of penalties including revocation of licensure. Section 624.307, Florida Statutes, generally sets forth the powers and duties of the Department. Section 626.5715, Florida Statutes, the "parity" statute, provides as set forth herein. Section 626.951, Florida Statutes, is the "declaration of purpose" for the Unfair Insurance Trade Practices Act, and in part states as follows: The purpose of this part is to regulate trade practices relating to the business of insurance in accordance with the intent of Congress as expressed in the Act of Congress of March 9, 1945 (Pub. L. No. 15, 79th Congress), by defining, or providing for the determination of, all such practices in this state which constitute unfair methods of competition or unfair or deceptive acts or practices and by prohibiting the trade practices so defined or determined. Section 626.9521, Florida Statutes, prohibits and penalizes unfair methods of competition and unfair or deceptive acts or practices and provides penalties. Section 626.9541, Florida Statutes, addresses "unfair methods of competition and unfair or deceptive acts" and provides as follows: UNFAIR METHODS OF COMPETITION AND UNFAIR OR DECEPTIVE ACTS.--The following are defined as unfair methods of competition and unfair or deceptive acts or practices: Misrepresentations and false advertising of insurance policies.--Knowingly making, issuing, circulating, or causing to be made, issued, or circulated, any estimate, illustration, circular, statement, sales presentation, omission, or comparison which: Misrepresents the benefits, advantages, conditions, or terms of any insurance policy. Misrepresents the dividends or share of the surplus to be received on any insurance policy. Makes any false or misleading statements as to the dividends or share of surplus previously paid on any insurance policy. Is misleading, or is a misrepresentation, as to the financial condition of any person or as to the legal reserve system upon which any life insurer operates. Uses any name or title of any insurance policy or class of insurance policies misrepresenting the true nature thereof. Is a misrepresentation for the purpose of inducing, or tending to induce, the lapse, forfeiture, exchange, conversion, or surrender of any insurance policy. Is a misrepresentation for the purpose of effecting a pledge or assignment of, or effecting a loan against, any insurance policy. Misrepresents any insurance policy as being shares of stock or misrepresents ownership interest in the company. False information and advertising generally.--Knowingly making, publishing, disseminating, circulating, or placing before the public, or causing, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public: In a newspaper, magazine, or other publication, In the form of a notice, circular, pamphlet, letter, or poster, Over any radio or television station, or In any other way, an advertisement, announcement, or statement containing any assertion, representation, or statement with respect to the business of insurance, which is untrue, deceptive, or misleading. Defamation.--Knowingly making, publishing, disseminating, or circulating, directly or indirectly, or aiding, abetting, or encouraging the making, publishing, disseminating, or circulating of, any oral or written statement, or any pamphlet, circular, article, or literature, which is false or maliciously critical of, or derogatory to, any person and which is calculated to injure such person. Boycott, coercion, and intimidation.-- Entering into any agreement to commit, or by any concerted action committing, any act of boycott, coercion, or intimidation resulting in, or tending to result in, unreasonable restraint of, or monopoly in, the business of insurance. False statements and entries.-- Knowingly: Filing with any supervisory or other public official, Making, publishing, disseminating, circulating, Delivering to any person, Placing before the public, Causing, directly or indirectly, to be made, published, disseminated, circulated, delivered to any person, or placed before the public, any false material statement. Knowingly making any false entry of a material fact in any book, report, or statement of any person, or knowingly omitting to make a true entry of any material fact pertaining to the business of such person in any book, report, or statement of such person. Stock operations and advisory board contracts.--Issuing or delivering, promising to issue or deliver, or permitting agents, officers, or employees to issue or deliver, agency company stock or other capital stock, benefit certificates or shares in any common- law corporation, or securities or any special or advisory board contracts or other contracts of any kind promising returns or profits as an inducement to insurance. Section 626.9561, Florida Statutes, authorizes the Department to "investigate the affairs of every person involved in the business of insurance in this state in order to determine whether such person has been or is engaged in any unfair method of competition or in any unfair or deceptive act or practice. " Section 626.9611, Florida Statutes, provides for the adoption of Department rules as follows: 626.9611 Rules.--The department may, in accordance with chapter 120, promulgate reasonable rules as are necessary or proper to identify specific methods of competition or acts or practices which are prohibited by s. 626.9541 or s. 626.9551, but the rules shall not enlarge upon or extend the provisions of ss. 626.9541 and 626.9551. (Emphasis supplied.) Proposed Rule 4-224.002 is an invalid delegation of legislative authority. The proposed rule exceeds the Department specific grant of rulemaking authority which is limited in this case to those rules which provide for equivalent regulation of insurance transactions without regard to ownership or affiliation of the insurance agent or agency. The rule does not provide parity of regulation. Proposed Rule 4-224.002 is an invalid exercise of delegated legislative authority because it is vague, fails to establish adequate standards for agency decisions and vests unbridled discretion in the agency. The proposed rule provides no information as to how an insurance transaction may be "structured" so as to "avoid deception" of the purchaser. The determination of whether an insurance transaction has been "structured" to "avoid deception" is at the discretion of the Department. The proposed rule provides no standards for Department decisions which will be made under the rule. The proposed rule provides no assistance or information to regulated parties as to what types of transaction structures are prohibited or acceptable, other than to require that the agent be identified as such during the insurance transaction. Proposed Rule 4-224.002 is an invalid exercise of delegated legislative authority because it is not supported by competent substantial evidence. Neither the testimony of the Department's witnesses, nor the research information offered by the Department in support of the proposed rule, are sufficient to support validation of this rule. The evidence fails to establish the existence of substantial consumer confusion regarding marketing of insurance products by financial institutions. The Department cites a previous administrative action related to the sale of insurance products in a financial institution as evidence that consumer confusion exists. The Department also cites another administrative action where the agency prosecuted an insurer for the misleading sale of insurance products. The evidence establishes that the cited cases were prosecuted under currently existing rules and regulations and does not establish the validity of the proposed rules at issue in this proceeding. The existence of other rules relating to manner and means of insurance product sales is insufficient to establish the validity of the proposed rules at issue in this case. Rule 4-224.004 (Underwriting of Insurance- Authorization Required) Proposed Rule 4-224.004 provides: No entity which is not licensed as an insurer by the Department shall directly or indirectly assume the obligation to provide the benefits of an insurance contract, or otherwise transact insurance as an insurer in this state. As identified in the published rule proposal, Proposed Rule 4-224.004, Florida Administrative Code, is specifically authorized by Section 624.308, Florida Statutes, and implements Sections 624.11, 624.401, 626.5715, 626.051 and 628.151(1), Florida Statutes. Section 624.308, Florida Statutes, provides general rulemaking authority to the Department. Section 624.11, Florida Statutes, prohibits any person from transacting insurance in Florida without complying with the provisions of the Insurance Code, and provides for operation of "risk retention groups" pursuant to law. Section 624.401, Florida Statutes, requires each insurer to obtain a certificate of authority from the Department in order to conduct business either directly or indirectly, and provides that failure to obtain a certificate is a third degree felony. The section also provides for preemption by the state of the field of regulating insurers and their agents and representatives from local regulation. Section 626.5715, Florida Statutes, the "parity" statute, provides as set forth herein. Section 626.051, Florida Statutes, provides a definition of "life agent." Section 628.151(1), Florida Statutes, provides as follows: No domestic insurer shall engage directly or indirectly in any business other than the insurance business and business activities reasonably and necessarily incidental to such insurance business. At the hearing, the Department's witness testified that the proposed rule was in response to comments offered by participants in the rulemaking proceeding suggesting that recent court decisions would permit financial institutions to act as insurers and to assume the obligations of insurance contracts. Proposed Rule 4-224.004 is an invalid exercise of delegated legislative authority because it exceeds the specific grant of rulemaking authority which is limited in this case to those rules which provide for equivalent regulation of insurance transactions without regard to ownership or affiliation of the insurance agent or agency. The proposed rule does not implement, interpret or make specific any provision of Florida law. Proposed Rule 4-224.004 is an invalid exercise of delegated legislative authority because it is not supported by competent substantial evidence. Anecdotal recollections of comments made by unidentified persons during rulemaking workshops do not constitute competent substantial evidence. Rule 4-224.007 (Primary Agent) Proposed Rule 4-224.007 provides: Each agency location where a licensed and appointed insurance agent is engaged in transactions with respect to insurance products shall be considered an insurance agency for purposes of Section 626.592, Florida Statutes. In those instances where an agent legally conducts insurance transactions at two or more agency locations, a separate primary agent need not be designated at each location, provided that no insurance transactions shall occur at any location when the agent is not present, and no unlicensed employee at the location has engaged in insurance activities requiring licensure. In those instances the agent shall be responsible for insurance transactions occurring at each location and one location shall be designated as the primary location. As identified in the published rule proposal, Proposed Rule 4-224.007, Florida Administrative Code, is specifically authorized by Section 624.308, Florida Statutes, and implements Sections 626.5715, 626.031, 626.041, 626.0428, 626.051, 626.062, 626.094, 626.112, 626.592, Florida Statutes. Section 624.308, Florida Statutes, sets forth the general rulemaking authority of the Department. Section 626.5715, Florida Statutes, the "parity" statute, provides as set forth herein. Section 626.031, Florida Statutes, provides a definition of "agent." Section 626.041, Florida Statutes, provides a definition of "general lines agent." Section 626.0428, Florida Statutes, provides limitations on the activities of agency personnel as follows: 626.0428 Agency personnel powers, duties, and limitations.-- An individual employed by an agent or agency on salary who devotes full time to clerical work, with incidental taking of insurance applications or quoting or receiving premiums on incoming inquiries in the office of the agent or agency, is not deemed to be an agent, customer representative, or solicitor if his or her compensation does not include in whole or in part any commissions on such business and is not related to the production of applications, insurance, or premiums. No employee of an agent or agency may bind insurance coverage unless licensed and appointed as a general lines agent or customer representative. No employee of an agent or agency may initiate contact with any person for the purpose of soliciting insurance unless licensed and appointed as a general lines agent, customer representative, or solicitor. Section 626.051, Florida Statutes, provides a definition of "life agent." Section 626.062, Florida Statutes, provides a definition of "health agent." Section 626.094, Florida Statutes, provides a definition of "insurance agency" as follows: 626.094 "Insurance agency" defined.--An "insurance agency" is a business location at which an individual, firm, partnership, corporation, association, or other entity, except for an employee of the individual, firm, partnership, corporation, association, or other entity, and other than an insurer as defined by s. 624.03 or an adjuster as defined by s. 626.101, engages in any activity or employs individuals to engage in any activity which by law may be performed only by a licensed insurance agent or solicitor. (Emphasis supplied.) Section 626.112, Florida Statutes, requires licensure of agents, agencies and related personnel. Section 626.592, requires the designation of "primary agents" as follows: 626.592 Primary agents.-- On or before January 1, 1990, and annually thereafter, each person operating an insurance agency and each location of a multiple location agency shall designate a primary agent for each insurance agency location and shall file the name of the person so designated, and the address of the insurance agency location where he or she is primary agent, with the Department of Insurance, on a form approved by the department. The designation of the primary agent may be changed at the option of the agency and any change shall be effective upon notification to the department. For the purpose of this section, a "primary agent" is the licensed agent who is responsible for the hiring and supervision of all individuals within an insurance agency location who deal with the public in the solicitation or negotiation of insurance contracts or in the collection or accounting of moneys from the general public. An agent may be designated as primary agent for only one insurance agency location. For the purpose of this section, an "insurance agency" is a location where any agent is engaged in the business of insurance. The department may suspend or revoke the license of the primary agent if an insurance agency employs any person who has had a license denied or any person whose license is currently suspended or revoked. However, when a person has been denied a license for failure to pass a required examination, he or she may be employed to perform clerical or administrative functions for which licensure is not required. The primary agent in an unincorporated agency, or the primary agent in an incorporated agency in which no officer, director, or stockholder is an agent, shall be responsible and accountable for the acts of salaried employees under his or her direct supervision and control, while acting on behalf of the agency. Nothing in this section shall be construed to render any person criminally liable or subject to any disciplinary proceedings for any act unless such person personally committed or knew or should have known of such act and of the facts constituting a violation of this chapter. The department may suspend or revoke the license of any agent who is employed by a person whose license is currently suspended or revoked. No insurance agency location shall conduct the business of insurance unless a primary agent is designated at all times. Failure to designate a primary agent as required under this section shall constitute grounds for requiring that the agency obtain a license in accordance with ss. 626.112 and 626.172. Any insurance agency may request, on a form prescribed by the department, verification from the department of any person's current licensure status. If a request is mailed to the department within 5 working days after the date an agent is hired, and the department subsequently notifies the agency that an employee's license is currently suspended, revoked, or has been denied, the license of the primary agent shall not be revoked or suspended if the unlicensed person is immediately dismissed from employment as an insurance agent with the agency. (emphasis supplied) Proposed Rule 4-224.007 is an invalid exercise of delegated legislative authority because it exceeds the grant of rulemaking authority provided in Section 626.5715, Florida Statutes. The proposed rule does not provide parity of regulation. The proposed rule is not limited to assuring that no insurance agency or agent is subject to more stringent or less stringent regulation than another insurance agency or agent on the basis of the regulatory status of the entity that owns the agency or is associated with the agent. Proposed Rule 4-224.007 is an invalid exercise of delegated legislative authority because it enlarges, modifies and contravenes the specific provisions of law implemented. The proposed rule specifically states that "where an agent legally conducts insurance transactions at two or more agency locations, a separate primary agent need not be designated at each location. " Section 626.592, Florida Statutes, requires the designation of a primary agent for each insurance agency location. An insurance agency is defined as a location where any agent is engaged in the business of insurance. No insurance agency location can conduct the business of insurance unless a primary agent is designated at all times. A primary agent may be so designated for only one insurance agency location. The Department has no authority to waive the requirements of Section 626.592, Florida Statutes. Further, the proposed rule permits an agent to designate one location of several as a "primary location." There is no statutory authorization for designation of a "primary location." Proposed Rule 4-224.007 is an invalid exercise of delegated legislative authority because it is not supported by competent substantial evidence. The only testimony regarding this proposed rule relates to the alleged expense involved in requiring separate primary agent designation for some banks which may choose to offer insurance products. The testimony is not persuasive and does not constitute competent substantial evidence supporting the rule. Rule 4-224-012 (Coercion) Proposed Rule 4-224.012 provides: 4-224.012 Coercion No person shall by words, actions, or distribution of written materials require or imply that the purchase of insurance by a borrower or prospective borrower from a particular agent, agency, insurer or other entity is required as a condition of, or will influence the terms or conditions of, the lending of money or the extension of credit. To the extent that insurance may permissibly be marketed in connection with or in conjunction with any activities described in this section; The agent shall disclose at or before the initial discussion or in response concerning insurance coverage required or offered in connection with a loan or credit application, that: the purchase of insurance from any particular source is not a condition to the provision of, and will not affect the terms of, any loan of money or extension of credit; Insurance is available through agent not associated with a lender or creditor; and The choice of another insurance provider will not affect decisions relating to or terms of any loan or credit extension. 1. A written disclosure which addresses the elements of paragraph (a) above shall be provided to the consumer in a separate documents on Form DI4- (rev /97) or Form DI4- (rev /97) [sic] which are adopted and incorporated herein by reference, or on another form approved in advance by the Department that provides equivalent disclosure, at or before the time the consumer completes an application or enrollment form or otherwise applies for coverage. 2. One copy of the form signed by the consumer shall be retained by the agent. The requirements of this rule 4-224.012 are inapplicable to credit insurance for which disclosures provided satisfy the disclosure requirements for excluding the premium of charge for insurance from the finance charge pursuant to Federal Truth in Lending Regulation Z, Section 12 CFR 226.4(d)(1) and (2), which is adopted incorporated herein by reference. As identified in the published rule proposal, Proposed Rule 4-224.012, Florida Administrative Code, is specifically authorized by Sections 624.308 and 626.9611, Florida Statutes, and implements Sections 626.5715, 626.051, 626.9541, 626.9551, and 626.9641, Florida Statutes. Section 624.308, Florida Statutes, provides the Department's general rulemaking authority. Section 626.9611, Florida Statutes, provides the Department's authority to adopt rules pursuant to Section 120, Florida Statutes, which specifically identify prohibited methods of competition, but limits such rules to those acts prohibited under Sections 626.9541 and 626.9551. Section 626.5715, Florida Statutes, the "parity" statute, provides as set forth herein. Section 626.051, Florida Statutes, defines "life agent." Section 626.9541, Florida Statutes, addresses "unfair methods of competition and unfair or deceptive acts" and is set forth herein. Section 626.9551, Florida Statutes, addresses the issue of coercion or "favoritism" and provides as follows: 626.9551 Favored agent or insurer; coercion of debtors.-- No person may: Require, as a condition precedent or condition subsequent to the lending of money or extension of credit or any renewal thereof, that the person to whom such money or credit is extended, or whose obligation the creditor is to acquire or finance, negotiate any policy or contract of insurance through a particular insurer or group of insurers or agent or broker or group of agents or brokers. Unreasonably disapprove the insurance policy provided by a borrower for the protection of the property securing the credit or lien. For purposes of this paragraph, such disapproval shall be deemed unreasonable if it is not based solely on reasonable standards, uniformly applied, relating to the extent of coverage required by such lender or person extending credit and the financial soundness and the services of an insurer. Such standards shall not discriminate against any particular type of insurer, nor shall such standards call for the disapproval of an insurance policy because such policy contains coverage in addition to that required. Require, directly or indirectly, that any borrower, mortgagor, purchaser, insurer, broker, or agent pay a separate charge in connection with the handling of any insurance policy required as security for a loan on real estate or pay a separate charge to substitute the insurance policy of one insurer for that of another. This paragraph does not include the interest which may be charged on premium loans or premium advances in accordance with the security instrument. Use or disclose information resulting from a requirement that a borrower, mortgagor, or purchaser furnish insurance of any kind on real property being conveyed or used as collateral security to a loan, when such information is to the advantage of the mortgagee, vendor, or lender, or is to the detriment of the borrower, mortgagor, purchaser, or insurer, or the agent or broker, complying with such a requirement. The department may investigate the affairs of any person to whom this section applies to determine whether such person has violated this section. If a violation of this section is found to have been committed knowingly, the person in violation shall be subject to the same procedures and penalties as provided in ss. 626.9571, 626.9581, 626.9591, and 626.9601. Section 626.9641, Florida Statutes, sets forth a series of standards known as Policyholder's Bill of Rights and provides as follows: 626.9641 Policyholders, bill of rights.-- The principles expressed in the following statements shall serve as standards to be followed by the department in exercising its powers and duties, in exercising administrative discretion, in dispensing administrative interpretations of the law, and in promulgating rules: Policyholders shall have the right to competitive pricing practices and marketing methods that enable them to determine the best value among comparable policies. Policyholders shall have the right to obtain comprehensive coverage. Policyholders shall have the right to insurance advertising and other selling approaches that provide accurate and balanced information on the benefits and limitations of a policy. Policyholders shall have a right to an insurance company that is financially stable. Policyholders shall have the right to be serviced by a competent, honest insurance agent or broker. Policyholders shall have the right to a readable policy. Policyholders shall have the right to an insurance company that provides an economic delivery of coverage and that tries to prevent losses. Policyholders shall have the right to a balanced and positive regulation by the department. This section shall not be construed as creating a civil cause of action by any individual policyholder against any individual insurer. Proposed Rule 4-224.012 is an invalid exercise of delegated legislative authority because it exceeds the Department's grant of rulemaking authority. Such authority is limited to those rules which provide for equivalent regulation of insurance transactions without regard to ownership or affiliation of the insurance agent or agency. The evidence fails to establish that this rule provides for parity of insurance regulation. Proposed Rule 4-224.012 is an invalid exercise of delegated legislative authority because it enlarges the specific provisions of law being implemented. The rule mandates a statement of disclosure for which there is no statutory requirement. The statutes cited as being implemented by this proposed rule clearly prohibit coercive activities, but do not impose any disclosure requirement as would be required by the rule. Proposed Rule 4-224.012 is an invalid exercise of delegated legislative authority because there is no competent substantial evidence supporting the rule. The Department asserts that research indicates consumers can be, and are, coerced into purchasing insurance products by lenders during credit transactions. The Department also cites a previous administrative action prosecuted under existing statutes as evidence that coercion occurs. The evidence offered by the Department, including the testimony of the Department's witnesses, fails to support the assertion that coercion by financial institutions in the sale of insurance products is a substantial problem. Neither the cited research nor the related testimony by the Department's witnesses was persuasive. The greater weight of the evidence, including the testimony of Dr. Michael White, establishes that there is little empirical evidence of coercion in the sale of insurance products by financial institutions. As additional support for the rule, the Department offered testimony related to the existence of other regulatory disclosure rules and of model language adopted by the National Association of Insurance Commissioners. Neither the other rules or the model language establish that the proposed coercion rule meets the current requirements of law. Other disclosure regulations were adopted prior to recent amendments to Chapter 120, Florida Statutes, the Administrative Procedures Act (APA), which altered the "reasonableness" standard under which such rules could have been appropriate. The relevant model language of the NAIC has not been adopted by the Florida legislature. Rule 4-224.013 (Remedies) Proposed Rule 4-224.013 provides as follows: 4-224.013 Remedies Any person violating the provisions of the Insurance Code implemented by this rule chapter shall be subject to the issuance of a Cease and Desist Order in accordance with the provisions of Sections 624.310(3) and 626.9581, Florida Statutes, and to the imposition of an administrative penalty pursuant to Sections 624.310(5) and 626.9521, Florida Statutes, and to such other sanctions or proceedings as are authorized by the Florida Insurance Code. If the majority owner, partner, manager, director, officer or other person who manages or controls an insurance agency violates any provision of the Insurance Code or any department rule, or knowingly permits violation of any requirement of these rules by an agent or employee of the agency, the agency must obtain a license as an insurance agency in accordance with the provisions of Section 626.112(8), Florida Statutes. As identified in the published rule proposal, Proposed Rule 4-224.013, Florida Administrative Code, is specifically authorized by Section 624.308, Florida Statutes, and implements Sections 624.310, 624.4211, 646.418, 626.5715, 626.051, 626.112, 626.9521 and 626.9581. Section 624.308, Florida Statutes, provides the Department with general rulemaking authority. Section 624.310, Florida Statutes, provides the Department with enforcement and prosecutorial powers for violations of the Insurance Code, including cease and desist orders, administrative fines, and removal of "affiliated parties." Section 624.4211, Florida Statutes, provides for imposition of administrative fines in lieu of other disciplinary penalties. Section 624.418, Florida Statutes, provides suspension or revocation of certificates of authority for certain violations and other conditions. Section 626.5715, Florida Statutes, the "parity" statute, provides as set forth herein. Section 626.051, Florida Statutes, provides a definition of "life agent." Section 626.112, Florida Statutes, provides for licensure of agencies, agents and other representatives. Section 626.9521, Florida Statutes, prohibits and penalizes unfair methods of competition and unfair or deceptive acts or practices which are statutorily defined or determined pursuant to Sections 626.951 and 626.9651, Florida Statutes. Section 626.9581, Florida Statutes, provides the Department with the ability to issue cease and desist orders related to the commission of unfair or deceptive acts or practices or the unlawful transaction of insurance, and states as follows: 626.9581 Cease and desist and penalty orders.--After the hearing provided in s. 626.9571, the department shall enter a final order in accordance with s. 120.569. If it is determined that the person charged has engaged in an unfair or deceptive act or practice or the unlawful transaction of insurance, the department shall also issue an order requiring the violator to cease and desist from engaging in such method of competition, act, or practice or the unlawful transaction of insurance. Further, if the act or practice is a violation of s. 626.9541 or s. 626.9551, the department may, at its discretion, order any one or more of the following: Suspension or revocation of the person's certificate of authority, license, or eligibility for any certificate of authority or license, if he or she knew, or reasonably should have known, he or she was in violation of this act. Such other relief as may be provided in the insurance code. The Department presented no evidence with respect to Proposed Rule 4-224.013. The Department asserts only that the proposed rule is intended to provide notice to non-traditional sellers of insurance that a violation of the Insurance Code will subject them to the penalties set forth in the Insurance Code. Proposed Rule 4-224.013 is an invalid exercise of delegated legislative authority because it is redundant and unnecessary. The rule does not implement, interpret or make specific any provision of Florida law. There is no competent substantial evidence which establishes the validity of the proposed rule. Rule 4-224.014 (Confidential Information) Proposed Rule 4-224.014 provides: 4-224.014 Confidential Information Obtaining confidential information for a stated purpose unrelated to the transaction of insurance when it is known that the information will or may be used for purposes of marketing insurance, and when the insurance-related purpose is not disclosed, constitutes a deceptive statement or omission and is an unfair and deceptive act or practice under the provisions of the Unfair Insurance Trade practices Act, Part X, Chapter 626, Florida Statutes. (2)(a) Any entity which is a non-insurance transaction obtains confidential information concerning an individual or entity where it is known the information will be used by an affiliate insurance agent or agency for purposes of marketing insurance, or where it is known or reasonably should be known that there is a present intent or plan to use such information in such a manner, shall conspicuously and clearly disclose that fact to the person at the time the information is obtained and the consumer should be afforded an opportunity to object to the utilization of such information. (b) If the disclosure is not provided on a separate form, it must be made on a document signed by the person, in which case the disclosure shall be made in a larger type size than that used elsewhere in the document, or in a manner that is otherwise clearly distinguishable from the remaining text of the document, and must appear immediately adjacent to the person's signature. If the disclosure is made on a separate form and if information obtained as a result of future transaction may be used for marketing purpose; The disclosure shall clearly reflect such fact, and After a period of three years a new disclosure form must be provided if additional confidential information is secured and this paragraph is not complied with. (3)(a) Insurance agents and insurance companies are prohibited under the Insurance Code from engaging in practices which are injurious to policyholders or the public. (b) Use of confidential information concerning any person for purposes of marketing insurance when the person has directed that the information not be used for such purposes entails conduct which is injurious to policyholders or the public. (4) For purposes of this rule 4-224.014, confidential information is information pertaining to an individual or entity that is generally not available, provided that in no event shall the name, address, or telephone number or any person be considered confidential. As identified in the published rule proposal, Proposed Rule 4-224.013, Florida Administrative Code, is specifically authorized by Section 624.308, Florida Statutes, and implements Sections 624.418(1)(b), 626.5715, 626.621(6), 626.9541(1), 626.9611 and 626.964(1), Florida Statutes. Section 624.308, Florida Statutes, provides the Department's general rulemaking authority. Section 624.418, Florida Statutes, provides suspension or revocation of certificates of authority for certain violations and other conditions. Subsection (1)(b) specifically provides for such penalties where the insurer is using such methods and practices in the conduct of its business as to render its further transaction of insurance in this state hazardous or injurious to its policyholders or to the public. Section 626.5715, Florida Statutes, the "parity" statute, provides as set forth herein. Section 626.621(6), Florida Statutes, sets forth grounds for denial or suspension of licensure, and provides as follows: 626.621 Grounds for discretionary refusal, suspension, or revocation of agent's, solicitor's, adjuster's, customer representative's, service representative's, managing general agent's, or claims investigator's license or appointment.--The department may, in its discretion, deny an application for, suspend, revoke, or refuse to renew or continue the license or appointment of any applicant, agent, solicitor, adjuster, customer representative, service representative, managing general agent, or claims investigator, and it may suspend or revoke the eligibility to hold a license or appointment of any such person, if it finds that as to the applicant, licensee, or appointee any one or more of the following applicable grounds exist under circumstances for which such denial, suspension, revocation, or refusal is not mandatory under s. 626.611: * * * (6) In the conduct of business under the license or appointment, engaging in unfair methods of competition or in unfair or deceptive acts or practices, as prohibited under part X of this chapter, or having otherwise shown himself or herself to be a source of injury or loss to the public or detrimental to the public interest. Section 626.9541, Florida Statutes, addresses "unfair methods of competition and unfair or deceptive acts" and is set forth herein. Section 626.9611, Florida Statutes, provides the Department's authority to adopt rules pursuant to Section 120, Florida Statutes, which specifically identify prohibited methods of competition, but limits such rules to those acts prohibited under Sections 626.9541 and 626.9551. Section 626.9641(1), Florida Statutes, is the "Policyholder's Bill of Rights" and is set forth herein. Proposed Rule 4-224.014 is an invalid exercise of delegated legislative authority because it exceeds the Department's grant of rulemaking authority. The evidence fails to establish that the cited statutes provide the Department with the authority to prohibit the collection or utilization of information. The proposed rule exceeds the Department's specific grant of rulemaking authority which is limited in this case to those rules which provide for equivalent regulation of insurance transactions without regard to ownership or affiliation of the insurance agent or agency. Proposed Rule 4-224.014 is an invalid exercise of delegated legislative authority because it is vague, fails to establish adequate standards for agency decisions and vests unbridled discretion in the agency. The rule states that collection of information "when it is known that the information will or may be used for purposes of marketing insurance, and when the insurance-related purpose is not disclosed, constitutes a deceptive statement or omission. " The phrase "when it is known that the information...may be used" is vague and requires a post-collection determination of the intent of the data collector at the time the information was gathered. Further, proposed definition of "confidential information" as that which is "generally not available" is vague. The vagueness of the rule results in a lack of adequate standards for decision making and vests unbridled discretion in the Department. Proposed Rule 4-224.014 is an invalid exercise of delegated legislative authority because it is not supported by competent substantial evidence. The testimony related to this proposed rule consisted primarily of an analysis of the statutory support for the rule. The evidence is insufficient to establish that the undisclosed collection of information which may be used at some time in a non-insurance setting constitutes an unfair or deceptive trade practice. There is no statutory provision which prohibits or restricts the sharing of information between a financial institution and an affiliated insurance agency. There is evidence that such prohibition as the Department intends to impose by this rule may violate the federal Fair Credit Reporting Act, 12 U.S.C. 1681t(b)(2), and the state Banking Code, Section 655.059(2)(b), Florida Statutes.
The Issue The issues in this case are whether Respondents violated Subsections 626.611(7), 626.611(9), 626.611(10), and 626.611(13), Florida Statutes (2008),1 and, if so, what discipline should be imposed.
Findings Of Fact At all times material to the allegations in the Administrative Complaints, Mr. Holliday, III, was a licensed Florida surplus lines (1-20) agent, a life and health (2-18) agent, a general lines (property and casualty) (2-20) agent, an independent adjuster (5-20), and agent in charge at International Brokerage and Surplus Lines, Inc. (IBSL). Mr. Holliday, III, had been associated with IBSL since its inception in 1993. At all times material to the allegations in the Administrative Complaint, Mr. Holliday, IV, was licensed in Florida as a general lines (2-20) agent. At all times material to the allegations in the Administrative Complaint, Mr. Holliday, III, and Mr. Holliday, IV, were officers and owners of IBSL. Most recently, Mr. Holliday, III, was the secretary of IBSL. He handled the underwriting and risk placement for the agency. From approximately March 1993 to April 2009, Mr. Holliday, IV, was the president of IBSL. As president of IBSL, Mr. Holliday, IV's, duties included signing agreements which established IBSL's business function as that of a general managing agent and signing agreements which empowered IBSL to collect premiums on behalf of insureds. IBSL ceased doing business on May 1, 2009. In the insurance industry, a common method of procuring insurance involves a retail producer, a wholesale broker, and a program manager. A customer desiring insurance contacts its local insurance agent, which is known as a retail producer, and applies for insurance. The retail producer has a producer agreement with a wholesale broker, who has a producer agreement with a program manager. The program manager represents insurance companies. The retail producer sends the customer's application to the wholesale broker, and the wholesale broker contacts the program manager and forwards the application to the program manager. The program manager will provide a quote if the insurance company is willing to insure the customer. The quote is passed back to the customer via the wholesale broker and the retail producer. If the customer decides to take the insurance, the program manager will issue a binder to the wholesale broker, who will submit the binder to the retail producer. The wholesale broker will issue an invoice for the premium to the retail producer. The program manager pays a commission to the wholesale broker pursuant to its producer agreement with the wholesale broker, and the wholesale broker pays a commission to the retail producer pursuant to its producer agreement with the retail producer. When the retail producer sends the premium payment to the wholesale broker, the retail producer will deduct its commission. The wholesale broker sends the premium amount to the program manager less the wholesale broker's commission. If the customer is unable to pay the entire amount of the premium, part of the premium may be financed through a premium finance company. The premium finance company may pay the premium to the retail producer or to the wholesale broker. International Transportation & Marine Agency, Inc. (ITMA), is a program manager and is engaged in the business of selling, brokering, and servicing certain lines of policies of insurance written or issued by insurance companies. ITMA is a program manager for Pennsylvania Manufacturers Insurance Association (Pennsylvania Manufacturers), an insurance company. IBSL, a wholesale broker, entered into a producer's contract with ITMA on January 4, 2008. Wimberly Agency, Incorporated (Wimberly), is a retail producer located in Ringgold, Louisiana. In 2008, Wimberly had a producer's agreement with IBSL. Carla Jinks (Ms. Jinks) is the administrative manager for Wimberly. In October 2008, R.L. Carter Trucking (Carter) was a customer of Wimberly and applied for motor truck cargo insurance with Wimberly. Wimberly submitted an application to IBSL and requested that coverage be bound effective October 28, 2008, for Carter. IBSL contacted ITMA and received a binder for a policy with Pennsylvania Manufacturers. The cost of the policy was $9,500.00 plus a policy fee of $135.00 for a total of $9,635.00. Carter paid Wimberly $2,500.00 as a down payment and financed the remainder of the cost with Southern Premium Finance, LLC, who paid the financed portion directly to Wimberly. Wimberly deducted a ten percent commission of $950.00 and sent the remainder, $8,635.00 to IBSL. The check was deposited to IBSL's clearing account. On January 22, 2009, Carter contacted Ms. Jinks and advised that he had received a notice of cancellation effective January 22, 2009, due to non-payment to Pennsylvania Manufacturers. On the same date, Ms. Jinks received a facsimile transmission from IBSL, attaching the notice of cancellation and stating: "There was some confusion with the payment we send [sic] and we are working on getting it reinstated." There were some e-mails between Wimberly and Mr. Holliday, III, concerning the placement of coverage with another company. IBSL was unable to place coverage for Carter. By e-mail dated January 30, 2009, Ms. Jinks advised Mr. Holliday, III, that she had been able to place coverage for Carter and requested a return of the premium paid on a pro rata basis. She advised Mr. Holliday, III, that the return premium should be $7,651.35. By e-mail dated January 30, 2009, Mr. Holliday, III, stated: We will tender the return as quickly as it is processed by accounting. I do sorely regret the loss of this account, and our inability to get the Travelers quote agreed on a timely basis. By February 19, 2009, Wimberly had not received the return premium from IBSL. Ms. Jinks sent an e-mail to Mr. Holliday, III, on February 19, 2009, asking that the return premium be rushed to Wimberly so that it could be used to pay for the replacement policy. As of the date of Ms. Jinks' deposition on November 16, 2009, neither Mr. Holliday, III; Mr. Holliday, IV; nor IBSL had given the return premium to Wimberly. K.V. Carrier Services, Inc. (K.V.), is a retail producer located in Medley, Florida. In 2007, K.V. and IBSL entered into a business arrangement with IBSL. Under the arrangement, K.V. was the retailer, IBSL was the wholesale broker, ITMA was the program manager, and Pennsylvania Manufacturers was the insurance company. K.V. collected the down payments for the policy premiums from its customers and sent the down payments to IBSL. The remainder of the premiums were financed by financing companies, who sent the remainder of the premiums to IBSL. IBSL was supposed to send the monies paid for the premiums to ITMA. The following customers made down payments to K.V. and financed the remainder of their premiums with a financing company. E & E Trucking Service OD Transport, Inc. Fermin Balzaldua Eduardo Bravo Carlos Ramirez Edwin Bello Janet Rodriguez UTL, Inc. Prestige Transport USA JNL Transportation, Inc. Valdir Santos DJ Express PL Fast Carrier Ysis Transport K.V. sent the down payments for these customers to IBSL. The financing company sent the remainder of the premiums for these customers to IBSL. The total amount of premiums sent to IBSL for these customers was $19,768.45. IBSL did not send the premium payments for these customers to ITMA. The policies for these customers were cancelled for non-payment. K.V. found another company that was willing to insure K.V.'s customers. K.V. paid the down payments for the new policies from its own funds, hoping that IBSL would repay the finance company with any unearned premiums that would be returned to IBSL as a result of the cancellations. ITMA sent an invoice called an Account Current Statement to IBSL for the business conducted in the month of November 2008. The total amount owed to ITMA was listed as $55,116.32. The invoice included the premium for the policy issued for Carter, less IBSL's commission. The premiums for the policies issued to Eduardo Bravo; Fermin Bazaldua; JNL Transportation, Inc.; Janet Rodriguez; OD Transport, Inc.; and Prestige Transport USA were also included in the Account Current Statement for the business that IBSL conducted in November. IBSL was required to pay the $55,116.32 by December 15, 2008, but did not do so. ITMA received a check from IBSL dated December 31, 2008, for $25,000.00. A notation on the check indicated that it was a partial payment for the November business. The check was unallocated, meaning IBSL did not state to which premiums the partial payment should be applied. Mr. Holliday, III, claimed that IBSL had sent a bordereaux along with the check showing to which policies the payment applied. Mr. Holliday, III's, testimony is not credited. Donald Kaitz (Mr. Kaitz), the president of ITMA, communicated with one of the Respondents, who advised Mr. Kaitz that he needed another week or so to collect some premiums from his retail producers. On January 12, 2009, ITMA received a telephone call from IBSL, stating that IBSL could not pay the balance owed to ITMA and that ITMA should take whatever action it felt necessary. As a result of the communication from IBSL, ITMA issued notices of policy cancellation on all applicable policies listed in the Account Current Statement which was to be paid on December 15, 2008. Copies of the cancellation notices were sent to the insureds and IBSL. ITMA issued pro rata return premiums based on the number of days that each policy had been in effect. The return premiums were sent to IBSL by a check for $18,790.06. Additionally, ITMA sent IBSL a list of the policies that had been cancelled, showing the earned premiums which had been deducted from the $25,000.00. IBSL received and retained a net of $30,116.32, which was owed to ITMA. This amount is derived by deducting the $25,000.00, which IBSL sent to ITMA, from the $55,116.32, which was owed to ITMA. By letter dated April 2, 2009, IBSL sent K.V. a check for $524.80, which stated: We have totaled all amounts owing to IBSL by KV Carrier Service, and we have totaled all pro rated commissions owing by IBSL to KV Carrier Services for the benefit of your clients and have included our check # 1025 in the final amount of $524.80 to settle the account. All net unearned premiums for other than unearned commissions which are funded herein you must contact the insurance carriers involved and request payment under the provisions of Florida Statutes #627.7283. Federal Motor Carriers Risk Retention Group, Incorporated (FMC), is an insurance company, which sells commercial auto liability insurance, specifically targeted to intermediate and long-haul trucking companies. CBIP Management, Incorporated (CBIP), is a managing general underwriter for FMC. FMC had an agreement effective June 1, 2008, with IBSL, allowing IBSL to act as a general agent for FMC. As a general agent for FMC, IBSL was given the authority to accept risk on behalf of FMC. IBSL was given a fiduciary responsibility to accept insurance applications, provide quotes, and bind coverage. Once IBSL binds a policy for FMC, FMC issues a policy and is responsible for the risk. IBSL would receive the down payment from the retail agency, and, in most cases, the finance company would pay the balance of the premium directly to IBSL. The agreement between FMC and IBSL provided that IBSL was to provide FMC a monthly report of premiums billed and collected, less the agreed commission. The report was due by the 15th of the month following the reported month. In turn, FMC was to issue a statement for the balance due, and IBSL was required to pay the balance due within 15 days of the mailing of the statement following the month in which the policy was written. In August 2008, FMC began to notice that IBSL was selling premiums lower than FMC's rating guidelines. IBSL owed FMC approximately $186,000.00, which was due on August 15, 2008. IBSL sent FMC a check, which was returned for insufficient funds. FMC contacted IBSL and was assured that the check was returned due to a clerical error and an error by the bank. Assurances were given to FMC that funds would be transferred to FMC the following day; however, FMC did not receive payment until five days later. In September 2008, Joseph Valuntas (Mr. Valuntas), the chief operating officer for FMC, paid a visit to Mr. Holliday, III, and Mr. Holliday, IV. Mr. Valuntas expressed his concerns about the delay in receiving payment in August. He also pointed out that IBSL had taken some risks which were not rated properly and that there were some risks in which IBSL was not following the underwriting guidelines. After his visit with the Hollidays, Mr. Valuntas wrote a letter to IBSL, restricting IBSL to writing in Florida and limiting the amount of gross written premium to no more than $100,000.00 per month. IBSL did not adhere to Mr. Valuntas' instructions. An example of IBSL's conduct involved the writing of a policy for Miami Sunshine Transfer, which is a risk category designated as public delivery. Public delivery was not a standard that FMC insured and, as such, was not covered by FMC's reinsurance. Beginning on or about September 21, 2008, FMC began getting complaints from policyholders and retail agents about cancellations of policies that had been paid timely and in full. Although the retail agents had paid the premiums in full to IBSL, IBSL had not forwarded the premiums to FMC. By October 2008, IBSL owed FMC approximately $120,000.00 in past due premiums. FMC officially terminated the IBSL agreement in October 2008. IBSL sued FMC for breach of contract. On December 22, 2008, FMC received a check from IBSL in the amount of $25,122.80, but IBSL did not specify what premiums were being paid by the check. From February 1, 2006, through November 20, 2008, IBSL had a business relationship with Markel International Insurance Company Limited (Markel), an entity for which IBSL was writing insurance. IBSL was a coverholder for Markel, meaning that IBSL could produce insurance business for Markel and had the authority to collect and process premiums and bind insurance on Markel's behalf. Once the premiums were collected by IBSL, they were to be reported to Markel, and, within a maximum of 45 days, IBSL was to remit to Markel the aggregate gross written premiums less IBSL's commission. T. Scott Garner (Mr. Garner) is an expert auditor and financial analyst who currently works for Northshore International Insurance Services (Northshore), an insurance and reinsurance consulting firm. Markel retained Mr. Garner to determine the amount of money that IBSL should have sent to Markel for business transacted by IBSL for the period between February 1, 2006, and November 20, 2008. In doing his analysis, Mr. Garner used the bordereauxs which IBSL prepared and provided to Markel. Bordereauxs are monthly billing reports or accounts receivable reports. Mr. Garner also used data from Omni, which is a software system that was used by IBSL. Mr. Garner used the following procedure to determine what IBSL owed Markel. He determined how much risk IBSL wrote during the time period, that is, the gross written premium. He identified the amount of money that Markel had received from IBSL for the time period. Next he determined the amount that should have been received from IBSL, the gross written premiums minus IBSL's commissions. He compared what should have been remitted to Markel with the amount that was actually received by Markel. Based on his analysis, Mr. Garner calculated that IBSL owed Markel $1,208,656.61. Mr. Garner's analysis is credited. Respondent submitted a FSLSO Compliance Review Summary, which was done by the Florida Surplus Lines Office. At the final hearing, Mr. Holliday, III, viewed the report to mean that Markel was incorrect in the amount of money that was owed to it by IBSL. The report does not indicate that the policies on which the premium variances were noted were policies issued by Markel. Additionally, in his review, Mr. Garner eliminated duplicate transactions in determining the amount owed to Markel. The report did give a long list of policies, which should have been reported to Florida Surplus Lines Office, but IBSL had failed to report the policies.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered finding that Respondents committed the violations alleged in Counts I through V of the Administrative Complaints, dismissing Count VI of the Administrative Complaints, and revoking the licenses of Respondents. DONE AND ENTERED this 15th day of October, 2010, in Tallahassee, Leon County, Florida. S SUSAN B. HARRELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of October, 2010.
The Issue Whether Respondent has violated Section 627.8405, Florida Statutes.
Findings Of Fact Respondent, Capital National Financial Corporation (Capital), is transacting the business of insurance premium financing pursuant to a certificate of authority issued by the Petitioner, Florida Department of Insurance (Department). The Department is responsible for regulating the premium finance business affairs of Capital. On August 30, 1994, the Department issued a Notice of Intent to Non- renew Capital's certificate of authority to transact premium financing in Florida pursuant to Section 627.829, Florida Statutes. As authority for issuing the Notice of Intent to Non-renew, the Department cited two grounds. First, the Department alleged that Capital was illegally financing the purchase of automobile club memberships in conjunction with an insurance transaction, a violation of Section 627.8405, Florida Statutes. Second, the Department alleged that Capital was utilizing a form in conjunction with the premium financing transaction without the requisite Departmental approval, a violation of Section 627.838, Florida Statutes. The parties have stipulated that the only issue to be determined is whether there was a violation of Section 627.8405. Capital finances insurance premiums and has agreed to collect installment payments for automobile club memberships which the insurance agent sells to the customer when the customer is buying automobile insurance. The customer makes a down payment on the automobile club membership. Capital does not advance the remainder of the membership cost to the insurance agent. The customer executes a billing service disclosure form. The billing service disclosure form contains the following language: In conjunction with your insurance, you have purchased through your insurance agent the supplemental service disclosed above. The amount which you are charged for this supplemental service, after deduction of any down payment which you have paid, will be divided equally into monthly installments payable to Capital National Financial Corporation due at the same time, and in addition to, your monthly installment payable to Capital National for the financing of the purchase of your insurance. Capital National is acting as a collection agent for your insurance agent and is not charging any interest or other fee for collecting and processing the amount due for your purchase of this supplemental service. The monthly installment you will pay for the supplemental service will be added to the payment amount for your insurance and this aggregate amount will be reflected on your payment coupon. However, your insurance can not be cancelled by reason of your failure to pay the amount of the monthly installment attributable to the purchase of the supplemental service. The billing service disclosure form used by Capital is executed by the customer on the same day the premium finance agreement is executed. The billing disclosure form is a separate document from the premium finance agreement.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered finding that Capital National Financial Corporation did not violate Section 627.8405, Florida Statutes. DONE AND ENTERED this 8th day of January, 1996, in Tallahassee, Leon County, Florida. SUSAN B. KIRKLAND 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 8th day of January, 1996. APPENDIX TO RECOMMENDED ORDER, CASE NO. 95-1944 To comply with the requirements of Section 120.59(2), Florida Statutes, the following rulings are made on the parties' proposed findings of fact: Petitioner's Proposed Findings of Fact. Paragraphs 1-4: Accepted in substance. Paragraphs 5-19: Rejected as unnecessary. Paragraph 20: Rejected as not supported by the record. Capital disputes that they are "financing" the automobile club fees. Paragraphs 21-23: Accepted in substance. Paragraphs 24-29: Rejected as unnecessary. Respondent's Proposed Findings of Fact. Paragraphs 1-4: Accepted in substance. Paragraphs 5-6: Rejected as unnecessary. Paragraphs 7-11: Accepted in substance. Paragraphs 12-13: Rejected as unnecessary. COPIES FURNISHED: Alan J. Leifer, Esquire Department of Insurance/Legal Services East Gaines Street Tallahassee, Florida 32399-0333 Alberto R. Cardenas, Esquire Matias R. Dorta, Esquire Tew & Garcia-Pedrosa South Biscayne Boulevard Miami, Florida 33131-4336 Bill Nelson State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Dan Sumner Acting General Counsel Department of Insurance The Capitol, PL-11 Tallahassee, Florida 32399
The Issue Whether or not Petitioners are entitled to add an above-the-age-limits child, who became handicapped after their initial enrollment in the state insurance program, as an eligible dependent.
Findings Of Fact Petitioners are Robin A.C. Fearn, SSN 269-36-8341, an employee at the Marion County Correctional Institution since May 23, 1986, and his wife, Mary Fearn, SSN 273-36-8629, an employee of the University of Florida since September 5, 1978. Effective June 1, 1986, Petitioners were enrolled in the Spouse Program under the State of Florida's Employees' Group Health Self Insurance Plan. Participants in the Spouse Program are entitled to family coverage for themselves and any eligible dependents. Petitioners are the parents of a son, Lee A. Fearn, SSN 264-39-0713 who was born on February 27, 1961. At the time of Petitioners' initial enrollment in the health plan on June 1, 1986, Lee was 25 years of age and had exceeded the maximum dependent age limit of 23 years of age provided under the plan. Lee has not, at any time, been covered as a dependent under the State of Florida Employees' Group Health Insurance Plan. Shortly after his 29th birthday, Lee Fearn was rendered disabled from injuries received in an automobile accident in March 1990. Since that accident, Lee has been dependent on Petitioners for support. The Federal Social Security Administration has accepted him as dependent on his parents, and Respondent does not dispute that Lee is "incapable of self-sustaining employment by reason of such mental or physical handicap and chiefly dependent upon the employee" as that term is used in Rules 60P-1.003(4)(c) and (d) F.A.C. [formerly Rule 22K- 1.103(4)(c) and (d) F.A.C.] Petitioners attempted to secure health insurance coverage for Lee during the open enrollment periods in 1991 and 1992 by listing Lee as an eligible dependent in the space provided for adding dependents on the bottom half of their annual open enrollment form. As a part of its insurance program, the Respondent permits State employees to enroll in the State of Florida Employees' Group Health Self Insurance Plan (Plan) within 31 days of employment or during an annual open enrollment period as described in its Rules 60P-2.002 and 60P-2.003 F.A.C. The annual open enrollment form is titled, "Annual Benefit Selection Form." All state employees are asked to complete and return this form during each annual open enrollment period. It provides, in pertinent parts, as follows: "You must make a decision on each benefit. . . . Add only those dependents not currently covered by your health insurance. Eligible dependents are those outlined in Rule 22K-1 F.A.C." (Emphasis supplied) Employees wishing to make changes in their current health insurance are permitted to do so during the open enrollment period by indicating those changes on the Annual Benefit Selection Form. No health examination or declarations, even of a preexisting condition, are required during this annual open enrollment period. Employees are given five options regarding their health insurance on the Annual Benefits Election Form: Make no changes; Cancel Enroll Change from HMO Plan to State Self-Insured Plan or vice versa; and Change from individual coverage to family coverage or vice versa. Petitioners separately completed their Annual Benefits Selection Forms during the 1992 open enrollment period by indicating they did not wish to make any changes in their health insurance coverage, that is, family PPC coverage. At the bottom of the Annual Benefits Selection Form, Petitioners added Lee as a dependent and authorized payroll deductions and stated "I understand my enrollment or coverage changes will be effective January 1, 1993 . . ." (Emphasis supplied) Petitioners claim they submitted a similar form in 1991 and never received notice from Respondent of the acceptance or denial of their 1991 open enrollment request to add Lee as their dependent. Petitioners did receive back a denial in the form of two memos via the University of Florida personnel department, which employs Mrs. Fearn, for their 1992 open enrollment request. Verla Lawson, Department of Management Services, [formerly Department of General Services] Division of State Employees Insurance, State Enrollment Administrator, testified as to how the open enrollment plan and applicable rules have been administered. She has been employed with the agency since 1986, but her involvement with the pertinent issues appears to have begun only with her assuming her present position in 1991. Ms. Lawson testified that to accomplish Petitioners' goal of adding Lee to their coverage as a dependent they "should have" checked the box for "I wish to change" at the top of the form, filled out the dependent information at the bottom of the form and then made out another form for PPC coverage. From this portion of Ms. Lawson's testimony, it is inferred that the annual open enrollment form a/k/a the Annual Benefits Selection Form also constitutes the "Health Care Option Selection Form" referenced in Rule 60P-2.002 F.A.C. Ms. Lawson also testified that even if Petitioners had made out both forms required, the agency would have denied coverage of Lee. According to Ms. Lawson, employee participation in the Plan is considered continuous unless an employee elects to discontinue participation or to change to an HMO. She stated that although employees are asked to return open enrollment Annual Benefit Selection Forms each year for administrative purposes, they are not required to re-enroll in the Plan during each open enrollment period. If an employee indicates no changes on an Annual Benefit Selection Form, that form is not transmitted by an employee's local personnel office to the Department of Management Services in Tallahassee. Ms. Lawson conjectured that is what happened to Petitioners' 1991 attempts to add Lee to their coverage. However, Ms. Lawson consistently referred to the Annual Benefit Selection Form as "the enrollment form" for the Plan, and Mr. Fearn testified credibly that he was advised by his supervisor that his coverage would be terminated if he did not turn in his form timely. The language on the form reflects the same compulsory instruction. (See FOF 7). It is accepted, pursuant to Mr. Fearn's testimony and within the parameters of Section 120.58(1)(a) F.S.. that Mrs. Fearn was told that submission of the annual open enrollment form was necessary to prevent termination of her coverage. Also, according to Ms. Lawson, the agency interprets its rules to permit employees to add additional eligible dependents within 31 days of the acquisition of that dependent or during the open enrollment period, and the Plan has been administered to permit above-the-age-limit handicapped children to be added only during the employee's or retiree's initial enrollment in the Plan. The agency interprets Rules 60P-2.001 and 60P-2.002 F.A.C. and Section 110.123(2)(b) F.S. to mean that only employees, retirees or spouses of deceased employees may apply for "enrollment" in the Plan, that eligible dependents merely "participate" in the Plan under an existing family coverage when added as dependents, and that consequently, dependents do not independently "enroll" in the Plan. The agency therefore decided that Petitioners' 1992 attempts to add Lee Fearn to his parents' existing family coverage as a dependent did not constitute an "enrollment" which by its own terms created the opportunity to enroll an above-the-age-limits handicapped child. Because under this interpretation Lee Fearn was not an eligible dependent, the agency felt he could not have been added to Petitioners' coverage. Ms. Lawson was not familiar with any case with facts similar to this one. According to Ms. Lawson, if Petitioners had been first employed in 1992 and enrolled in the Plan within 31 days of that first employment, their handicapped over-age son could have been covered, and if they had been employed in 1986 but waited until 1992 to enroll for the first time in the Plan, their handicapped over-age son could have been enrolled at that time. Ms. Lawson specifically stated she could not say how the agency would proceed if the Petitioners herein dropped their coverage for one year and then tried to enroll both parent employees and the over-age handicapped child during a new employee 31 day grace period or an annual open enrollment. Ms. Lawson was not clear on what the agency might do if one or both of Lee's parents accepted employment elsewhere and later returned to government service and applied for the Plan, except that state retirement rules possibly would govern the length of a permissible break in service. Ms. Lawson was not asked, and therefore the record is barren of any explanation of how, the agency would interpret its rules if one parent were employed without covering Lee and the other were later employed and wished to cover him as an over-age dependent handicapped child within the second parent's first 31 days of initial employment. However, the agency maintained that there is no provision in the Plan allowing an employee who is already enrolled in the Plan to add a handicapped over-age child and that its rules have never been interpreted to permit the adding of such a dependent at annual open enrollment. Rule 60P-1.003(4)(c) F.A.C., as interpreted by the agency, applies to a handicapped dependent child already in the Plan who then turns nineteen. Rule 60P-1.003(4)(d) F.A.C., as interpreted by the agency, applies only to a handicapped dependent child not in the Plan at the time of the parent- employee(s) initial enrollment. The word "enroll" as used in Rule 60P-1.003(13) F.A.C. is interpreted by the agency to mean "change or transfer plans" under the program, if an employee is already enrolled in any state insurance program at all (PPC Plan or HMO). The agency interprets the same word to mean "enroll" if the employee has never before been enrolled in any state insurance program. Under the provisions of Section 110.123(5), F.S. the Secretary of the Department of Management Services is given the responsibility for administering the state group insurance program. Inherent in that responsibility, but subject to prior legislative approval, is the authority to determine benefits and the contributions required therefor. Such determinations, whether for a contracted plan or a self-insurance plan, do not constitute "rules" within the meaning of Section 120.52(16) or "orders" within the meaning of Sections 120.52(11) F.S. The purpose of this exception to the Administrative Procedure Act is to afford the Department flexibility to make benefit changes or clarifications consistent with legislative approval. Respondent modified its January 1, 1993 edition of the Benefit Document to reinforce its interpretation that above-age-limits handicapped children could only be added during an initial enrollment, but this information was not provided to employee consumers until after the instant case was already in progress. There was no actuarial or expert insurance evidence to show that the legislature by its statutes or the agency by its rules had made a conscious and reasonable decision to treat the over-age handicapped children of longtime employees differently than the over-age handicapped children of brand-new employees or employees who have had a significant interruption in government service or that there is any reason or purpose for such a distinction.
Recommendation Upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be entered enrolling Lee Allen Fearn SSN 264-39-0713 as an eligible dependent of Robin A.C. Fearn and Mary E. Fearn in the State Health Plan effective January 1, 1993 and that all eligible claims for his medical expenses after January 1, 1993 be paid. RECOMMENDED this 1st day of April, 1994, at Tallahassee, Florida. ELLA JANE P. DAVIS 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 1st day of April, 1994. APPENDIX TO RECOMMENDED ORDER 93-5859 The following constitute specific rulings, pursuant to S120.59(2), F.S., upon the parties' respective proposed findings of fact (PFOF). Petitioners' PFOF: Petitioners' proposed recommended order does not comply with the rules of the Division of Administrative Hearings as to designating proposed findings of fact and conclusions of law separately or numbering same. It appears to present only conclusions of law or a final recommendation. It is rejected as proposed findings of fact. As proposed conclusions of law and legal argument it has been covered but not necessarily adopted in the recommended order's conclusions of law. Respondent's PFOF: 1-2 Accepted. 3 Accepted in part and rejected in part as legal argument or mere recitation of one person's testimony. Covered in FOF 17. 4-5 Accepted. 6-10 Rejected as legal argument or mere recitation of testimony, covered in FOF 17-25. COPIES FURNISHED: Robin A.C. & Mary E. Fearn 3241 NW 41st Avenue Gainesville, FL 32605 Augustus D. Aikens, Jr., Esquire DMS/Division of State Employees Insurance 2002 Old St. Augustine Road B-12 Tallahassee, FL 32301-4876 William H. Lindner, Secretary Department of Management Services Knight Building Suite 307 Koger Executive Center 2737 Centerview Drive Tallahassee, FL 32399-0950 Sylvan Strickland General Counsel Department of Management Services Knight Building Suite 309 Koger Executive Center 2737 Centerview Drive Tallahassee, FL 32399-0950
The Issue Whether the Petitioner's application of January 11, 1991, for examination as a general lines agent should be granted.
Findings Of Fact Petitioner Paul L. Kornya was licensed in 1974 as a general lines insurance agent in the State of Florida. Prior to 1984, Respondent Department of Insurance had taken no formal disciplinary action against the Petitioner. In 1983, while licensed as an insurance agent and employed in the capacity of office manager for the Milton Carpenter Insurance Agency, Petitioner established a demand deposit account in the name of "Atlantic Association Insurance" and listed himself as the sole signatory and beneficiary on the account. Petitioner thereafter wrote four unauthorized checks on the Milton Carpenter Agency Account totaling $47,132.14 made payable to Atlantic Association Insurance and deposited them into his demand deposit account. In order to conceal his activity, the Petitioner altered the payee of the checks. In a prior administrative case (Case No. 84-L-4085F), Petitioner admitted misappropriating and converting the funds. In 1983, while licensed as an insurance agent and employed in the capacity of office manager for the Milton Carpenter Insurance Agency, Petitioner wrote two unauthorized checks on the Milton Carpenter Agency Account totaling $3,455 made payable to Blinder, Robinson and Co., Inc., Investment Bankers. In order to conceal his activity, the Petitioner listed an agency account code designated for miscellaneous companies on said checks. In a prior administrative case (Case No. 84-L- 4085F), Petitioner admitted misappropriating and converting the funds which were used for Petitioner's personal stock purchases. In 1984, a judgement in the amount of $52,013.35 was entered against Petitioner in the case styled Milton Carpenter Insurance, Inc., a Florida Corporation, and Cincinnati Insurance Company vs. Paul L. Kornya, Case No. 84-3235 CA(L)A, Fifteenth Judicial Circuit Court, Palm Beach County, Florida. On October 31, 1985, the Department entered a Final Order revoking Petitioner's license qualifications and eligibility for licensure for a period of two years, based upon the misappropriation and conversion of said funds. By application signed December 16, 1987 and filed December 28, 1987, Petitioner submitted an application for examination as a general lines insurance agent. By Insurance Commissioner Bill Gunter's letter to the Petitioner of February 29, 1988, the Department requested that the Petitioner submit certain certificates of employment to verify his prior experience. The letter stated that, "[t]o qualify for this examination through experience you must have completed within the past 4 years, at least 1 year of substantially full-time responsible duties as the bona fide employee of an agent or insurer. Your duties during this time must have been in all lines of property, casualty, surety, health and marine insurance. ... One certificate should be completed by you and the other by your employer." The Petitioner claims to have submitted said employment certificates shortly following the Department's request. However, the Department's files do not contain the documents or any other response to the letter, and there is no evidence beyond Petitioner's testimony to support the claim. By letter of March 17, 1988, Department representative Franklin Thompson again requested the experience information cited in the February 29 letter or in the alternative, that Petitioner submit proof that a course of education had been completed. The letter further stated that "we will need a statement from Milton Carpenter Insurance Inc. Agency of Belle Glade, Florida stating that any and all indebtedness you may have had relative to their firm has been satisfied". Both the February 29 and March 17 letters provided that failure to file the information within 30 days from the date of each letter is grounds for denial of the application. Three months passed following the March 17 letter to the Petitioner. According to the records of the Department, no response to either letter was received. On June 17, 1988, the Petitioner's December 1987 application was closed by the Department based upon the failure of Petitioner to submit the previously requested information. By letter of June 23, 1988, the Petitioner advised the Department that the indebtedness was not to the Milton Carpenter Insurance Agency, but was to Cincinnati Insurance Company, which had insured the Carpenter agency against such losses. The letter further stated that approximately $5,000 had been repaid to the Cincinnati Insurance Company. By letter of August 3, 1988, Department representative Thompson wrote, "[t]he information you have furnished has been thoroughly reviewed. It appears that your indebtedness with Milton Carpenter Insurance has been assigned to Cincinnati Insurance Company. Please request that Cincinnati Insurance Company furnish us with a statement indicating that all of your indebtedness to their company has been satisfied". The letter stated that failure to respond within 30 days from the date of the letter was grounds for denial of the application. The evidence does not explain the reason for Mr. Thompson's letter of August 3, 1988. Given the June 17 closure of the pending application based upon the Petitioner's failure to supply additional information, the information furnished apparently consisted of the Petitioner's untimely filed letter of June 23. As of August 3, no pending application existed. In any event, the Petitioner did not respond to the August 3 request. By second application signed October 31, 1989, and filed November 3, 1989, Petitioner submitted an application for examination as a general lines insurance agent. By undated letter, Department representative Thompson again requested Petitioner to submit either certificates of employment to verify his prior experience or proof of completion of certain educational requirements, and further requested a reply to the letter of August 3, 1988 seeking statement from Cincinnati Insurance Company indicating that "all of your indebtedness to their company has been satisfied". Again the letter provides that failure to furnish the requested information within 30 days would result in the file being closed. 1/ The Petitioner, subsequent to the undated letter and prior to February 2, 1990, submitted said certificates of employment. Early in 1990, the Petitioner's application file was assigned to Department representative, Patricia Lehman. On February 2, 1990, Ms. Lehman informed that Petitioner that his certificates of employment were not acceptable, and that he would be required to complete a 240 hour educational requirement. Further, Ms. Lehman's letter provided that, "[i]n addition, you will need to furnish us with a certified letter from Cincinnati Insurance Company that you have made full restitution or a certified copy of the written agreement between you and the party(s) involved that you are making restitution satisfactory to all parties concerned. The information you sent to us is not certified and reflects no signatures". Beginning February 26, 1990, Mr. Kornya took and completed the 240 hour insurance course as identified in the Department's previous communications. The $595 course met for six weeks, five days each week, from 8:00 a.m. to 5:00 p.m. On September 17, 1990, the pending application was closed by the Respondent based upon the failure of Petitioner to submit the previously requested information. There is no evidence that Petitioner submitted evidence of completing the educational requirement. On or about January 8, 1991, Petitioner entered into an restitution agreement with Cincinnati Insurance Company setting forth a payment schedule which requires that Petitioner make a payment of $300 each month to the Cincinnati Insurance Company in order to eventually satisfy the entire $52,013.35 judgement against him. By application signed January 11, 1991, and filed January 16, 1991, Petitioner submitted an application for examination as a general lines agent. By memorandum of February 18, 1991, to her superior, Bob Stewart, Ms. Lehman recommended that the Petitioner's application be denied. Specifically, her memo provides as follows: Mr. Kornya's license qualification and eligibility for licensure were revoked by the Department in 1985 for the mishandling of funds in a fiduciary capacity. It does not appear Mr. Kornya attempted to make restitution until the signed Agreement in 1991. He has demonstrated lack of fitness and trustworthiness to engage in the business of insurance. Therefore pursuant to Sections 626.611(1) (7) , [sic] 626.641(2) and 626.731(1), I recommend his application be denied. Although Ms. Lehman's memo states that "[i]t does not appear Mr. Kornya attempted to make restitution until the signed Agreement in 1991", prior to the January 8, 1991 execution of the restitution agreement, the Petitioner had paid $12,237.94 to Cincinnati Insurance Company realized from the sale of vehicles and real estate. The executed copy of the restitution agreement reflects that such funds were paid, although the agreement fails to indicate when the payment was made. The payment was applied towards interest which had accumulated on the judgement, not towards the $52,013.35 principle judgement amount. At the time of the hearing, the restitution payments were current (although Petitioner did not make the $300 payment due in April, but paid $600 in May.) As of the date of hearing, approximately $49,913 remained to be paid to Cincinnati Insurance Company to satisfy the judgement. Although at the time of the hearing, a letter allegedly from Cincinnati Insurance Company indicated that they had not received documentation of Petitioner's compliance with paragraph five of the restitution agreement (a requirement that Petitioner purchase a life insurance policy naming the insurer as irrevocable beneficiary), said policy was purchased on January 9, 1991. By letter of March 1, 1991, the Department denied the application, based on an application of the statutory sections cited in Ms. Lehman's memo. On June 21, 1991, the Department issued an amended letter of denial. 2/ In the amended letter of denial, the Department cites the prior misappropriation of funds, the unsatisfied judgement, and the 1985 revocation of licensure and eligibility for licensure, which "circumstances surrounding that revocation still exist". The letter cites Sections 626.611(1), (4), (7), (9), (10) and (13), section 626.641(2), and section 626.731(1) Florida Statutes, as the statutory basis for the denial. The evidence fails to establish that any representative of the Department of Insurance, at any time, informed or assured the Petitioner that, upon his completion of the course of education and upon the execution of the restitution agreement between Cincinnati Insurance Company and the Petitioner, his application for examination for licensure as a general lines insurance agent would be approved. The Petitioner has been acquainted with his current employer, Samuel Jokich, for approximately six years. Mr. Jokich employs the Petitioner as a "Colorado Prime" freezer beef salesman. According to Mr. Jokich, the Petitioner is "extremely trustworthy" and of good character. The Petitioner had not disclosed to Mr. Jokich, and Mr. Jokich was not otherwise aware, that the Petitioner had taken approximately $52,000 from the Milton Carpenter Insurance Agency. Mr. Jeffrey Hooker, an independent insurance agent in Belle Glade and childhood friend of the Petitioner's, is aware of the Petitioner's misappropriation and conversion of approximately $52,000 from the Milton Carpenter Insurance Agency. However, Mr. Hooker stated that he would trust the Petitioner and "try to help him any way I could". Mr. Hooker desires to become partners with the Petitioner in a proposed insurance agency in Ft. Myers. Mr. Kenneth Snyder, a field representative for CNA Insurance Company, has known the Petitioner for approximately eight years. He believes the Petitioner to be of "good character" with "solid morals". Although Mr. Snyder was aware that the Petitioner had taken some funds from the Milton Carpenter Insurance Agency, he was unaware of the amount of said funds. Mr. Snyder stated that he would be willing to enter into a business relationship were the Petitioner to become licensed as a general lines agent.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department of Insurance enter a Final Order denying the application of Paul L. Kornya to sit for examination for licensure as a general lines insurance agent. DONE and RECOMMENDED this 23rd day of January, 1992, in Tallahassee, Florida. WILLIAM F. QUATTLEBAUM Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of January, 1992.
The Issue Whether Respondent committed the violations alleged in the Amended Administrative Complaint issued against him, as modified at hearing, and, if so, what penalty should be imposed.
Findings Of Fact Based on the evidence adduced at hearing, and the record as a whole, the following findings of fact are made to supplement and clarify the extensive factual stipulations set forth in the parties' Statement of Facts Admitted3: Respondent has been employed by Direct General Insurance Agency, Inc. (Direct General) for the past five years. He is the manager of a Direct General office located at 7558 West Commercial Boulevard, Lauderhill, Florida. This has been Respondent's principal business address since September 2005. Prior to September 2005, Respondent was the manager of a Direct General office located at 8300 West Oakland Park Boulevard, Sunrise, Florida. Respondent did not notify Petitioner of this September 2005 change of his principal business address within 60 days of the change. He assumed, erroneously it turns out, that Direct General's "licensing department" would inform Petitioner of the change. At all times material to the instant case, Respondent, as a licensed agent acting on behalf of Direct General, sold automobile insurance, along with three ancillary or "add-on" products. The three "add-on" products Respondent sold were an accident medical protection plan, a travel protection plan, and a term life insurance policy (hereinafter referred to collectively as the "Add-Ons"). From September 2003 to May 2006, Respondent sold these Add-Ons to approximately 1300 customers, including Ms. Roberts- Hall, Mr. Bentivegna, and Mr. Moore. For his efforts on behalf of Direct General, Respondent was paid an hourly wage, plus a commission for each of the Add- Ons he sold. He did not receive a commission for any automobile insurance policy sales he made. Direct General had sales goals with respect to Add-Ons that it expected its agents to meet. How well an agent did in meeting these goals was an "important factor" in the job performance evaluation the agent received annually from his supervisor (as Respondent was aware). An agent's failure to meet a particular goal, however, did not inevitably lead to the "fir[ing]" of the agent. Nonetheless, it was obviously in the agent's best interest to sell as many Add-Ons as possible. Respondent's supervisor was Sara Silot, a Direct General District Manager. In addition to an annual job performance evaluation, Ms. Silot provided Respondent, as well as her other subordinates, with regular feedback during the course of the year regarding their Add-On sales numbers. Each of the customers (Ms. Roberts-Hall, Mr. Bentivegna, and Mr. Moore, hereinafter referred to collectively as the "Complaining Customers") referenced in Counts I through VII and XV through XVIII of the Amended Administrative Complaint (hereinafter referred to collectively as the "remaining sliding counts") purchased the policies referenced in these counts in person at Respondent's office, where they were given paperwork to review and to then initial, sign, and/or date in numerous places in order to consummate the transaction. This paperwork consisted of, depending on the transaction, as few as 14, and as many as 20, pages of various documents (hereinafter referred to collectively as the "Transactional Paperwork"). The Transactional Paperwork clearly and conspicuously informed the reader, consistent with what Petitioner orally explained at the time of purchase to each of the Complaining Customers, that the Add-Ons being purchased were optional policies that were separate and distinct from the automobile insurance policy also being purchased and that these Add-Ons carried charges in addition to the automobile insurance policy premium. In providing his oral explanation to the Complaining Customers, Respondent circled (with a writing utensil) language in the Transactional Paperwork that conveyed this information about the Add-Ons. His purpose in doing so was to bring this language to the attention of the Complaining Customers. In view of the contents of the Transactional Paperwork, including the portions highlighted by Respondent, and what Respondent told the Complaining Customers concerning the Add-Ons, it was reasonable for Respondent to believe that the Complaining Customers were informed about the Add-On products they were being sold and were (by executing the paperwork) consenting to purchase them. The Transactional Paperwork included, among other things, a one-page Accident Medical Protection Plan form; a one- page Accident Medical Protection Plan Application form; a one- page American Bankers Insurance Company Optional Travel Protection Plan form; a one-page Statement of Policy Cost and Benefit Information-One Year Term Life Insurance Policy form; a one-page Explanation of Policies, Coverages and Cost Breakdown form; a multi-page Premium Finance Agreement; and a one-page Insurance Premium Financing Disclosure form. Among the information contained on the top half of the Accident Medical Protection Plan form was the cost of the plan. The bottom half of the form read as follows: THIS IS A LIMITED POLICY. READ IT CAREFULLY. I the undersigned understand and acknowledge that: This Policy does not provide Liability Coverage for Bodily Injury and Property Damage, nor does it meet any Financial Responsibility Law. I am electing to purchase an optional coverage that is not required by the State of Florida. My agent has provided me with an outline of coverage and a copy of this acknowledgment. If I decide to select another option or cancel this policy, I must notify the company or my agent in writing. I agree that if my down payment or full payment check is returned for any reason, coverage will be null and void from the date of inception. Insured's Signature Date I HEREBY REJECT THIS VALUABLE COVERAGE: Insured's Signature Date The Accident Medical Protection Plan Application form indicated what the annual premium was for each of the three categories of coverage offered: individual, husband and wife, and family. The top half of the American Bankers Insurance Company Optional Travel Protection Plan form summarized the benefits available under the plan. The bottom half of the form read as follows: Please Read Your Policy Carefully for a Full Explanation of Benefits Purchasing the Optional Travel Protection Plan is not a condition of purchasing your automobile liability policy. I hereby acknowledge I am purchasing an Optional Travel Protection Plan, and that I have received a copy of this acknowledgement. ___ ____ Insured's Signature Date I HEREBY REJECT THIS VALUABLE COVERAGE: Insured's Signature ____ Date The Statement of Policy Cost and Benefit Information- One Year Term Life Insurance Policy form noted the amount of the "Annual Premium for this policy" and that the "Annual Premium included a $10.00 policy fee that [was] fully earned." On the Explanation of Policies, Coverages and Cost Breakdown form, the Add-Ons were listed under the heading of "optional Policies" and the cost of each Add-On was separately stated. The first page of the Premium Finance Agreement also contained an itemization of the cost of each Add-On, as did the Insurance Premium Financing Disclosure form. On this latter form, the Add-Ons were included in a section entitled "Optional insurance coverage." The form also advised, in its prefatory paragraph, that: Florida law requires the owner of a motor vehicle to maintain Personal Injury Protection and Property Damage liability insurance. Under certain circumstances as provided in Chapter 324, Florida Statutes, additional liability insurance may be required for Bodily Injury liability. Also, additional insurance is usually required by a lienholder of a financed vehicle. Florida law does not require other insurance. The direct or indirect premium financing of auto club membership and other non-insurance products is prohibited by state law. Each of the Complaining Customers was capable of reading the above-described documents and understanding that purchasing the Add-Ons was optional, not mandatory, and involved an additional cost.4 Respondent gave each of them as much time as they wanted to read these documents, and he did not refuse to answer any of their questions. Ms. Roberts-Hall rejected the travel protection plan, and signed and dated the American Bankers Insurance Company Optional Travel Protection Plan form so indicating, in 2004, 2005, and 2006. Mr. Bentivegna rejected the term life insurance policy, as documented by his signature next to the word "Rejected," which was written in by hand at the bottom of the Statement of Policy Cost and Benefit Information-One Year Term Life Insurance Policy form. As noted above, unlike Mr. Bentivegna, Ms. Roberts- Hall and Mr. Moore each signed up for a term life insurance policy. On Mr. Moore's Application for Life Insurance, his three children, Melissa Moore, Kenneth Moore, Jr., and Timothy Brown-Moore, were named as "Beneficiar[ies]." While Kenneth Moore, Jr., and Timothy Brown-Moore were listed as "Members of Applicant's Household" on Mr. Moore's application for automobile insurance, Melissa Moore (who, at the time, was away at college) was not. Elsewhere on Mr. Moore's Application for Life Insurance, in the "Insurability Data" section, the question, "Have you during the past two (2) years had, or been told you have, or been treated for . . . a) Heart trouble or high blood pressure?" was answered, incorrectly, in the negative. Mr. Moore placed his initials next to this answer. Several days after her May 2004 purchases, Ms. Roberts-Hall telephoned Respondent and told him that she was having second thoughts about her accident medical protection plan purchase. Respondent suggested that she come to his office and speak with him in person, which she did. During this follow-up visit, Respondent went over with her the benefits of the plan, after which she told him that she was going to keep the coverage. Ms. Roberts-Hall took no action to cancel either of the Add-Ons (the accident medical protection plan and term life insurance policy) she had purchased in May 2004. In fact, she renewed these coverages in May 2005 and again in May 2006 (along with her automobile insurance policy). Prior to these renewals, in February 2005, when contacted by one of Petitioner's investigators who was conducting an investigation of possible "sliding" by Respondent, Ms. Roberts-Hall had expressed her displeasure that Respondent had "given her these additional products." Mr. Bentivegna and Mr. Moore were also contacted by Petitioner's investigative staff to discuss the Add-On purchases they had made from Respondent. Mr. Moore was contacted approximately ten months after his May 2004 purchases. The three Add-Ons he had purchased were still in effect at the time, but he took no action to cancel any of these policies. He did not renew them, however; nor did he do any other business with Respondent following his May 2004 purchases. Petitioner's policy is have its investigators "make it very clear from the beginning," when interviewing aggrieved consumers, that no promises are being made that these consumers will be "getting their money back" if they cooperate in the investigation. It does not appear that there was any deviation from this policy in Petitioner's investigation of Respondent. The investigation of Respondent led to the charges against him that are the subject of the instant case.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that Petitioner issue a Final Order finding Respondent guilty of committing the violation of Section 626.551, Florida Statutes, alleged in Count X of the Amended Administrative Complaint, fining him $250.00 for such violation, and dismissing the remaining counts of the Amended Administrative Complaint. DONE AND ENTERED this 29th day of March, 2007, in Tallahassee, Leon County, Florida. S STUART M. LERNER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 29th day of March, 2007.
