The Issue This cause concerns a dispute as to whether the petitioner was properly denied application for examination as a general lines insurance agent by his exclusion from the examination because of alleged cheating thereon.
Findings Of Fact The Petitioner is an applicant for Licensure by examination as a general lines, property, casualty and miscellaneous lines insurance agent in Florida. The Petitioner sat for the general lines examination, which was held at Pensacola Catholic High School in Pensacola, Florida on January 7, 1989. Mary Chadwick and Marilyn Archer were employed by the examination administrator, the Educational Testing Services, as test proctors. Both were present at Pensacola Catholic High School on January 7, 1989, at the examination site and administered the general lines examination. Prior to the start of the examination, candidates for the examination were verbally advised by Mary Chadwick, the test proctor, not to consult any course materials or other written materials during the taking of the examination. Miss Chadwick then read a prepared statement, prior to the start of the examination, warning the candidates that any incidents of cheating, including giving or receiving help, copying or retaining test questions, would result in disqualification and dismissal from the examination. The test candidates were admonished not to use dictionaries, books, pamphlets, slide rules, calculators, calculator watches, compasses, rulers or papers of any kind during the test. Anyone found using these items would be disqualified from licensure and dismissed from the examination. The examinees were then admonished that if any such materials were in their possession that they should place them under their chair and that only the test booklet and a pencil should be on their desks. During the course of the examination, an examination candidate, Mr. Francis Kelly, observed that the Petitioner was referring to certain 3" X 5" note cards on top of his desk, concealed beneath his hand. The Petitioner was observed by Mr. Kelly to look at the note cards and then write in his examination booklet. Mr. Kelly observed this happening on repetitive occasions during a period of several minutes. Having formed the opinion that the Petitioner was cheating on the examination, Mr. Kelly left the examination room and reported the incident, and his observations, to the "hall proctor" outside the examination room. The hall proctor informed Marilyn Archer, the test supervisor, that a gentleman had told her that another candidate was cheating on the examination. The hall monitor and Ms. Archer then walked into the examination room and, together with Ms. Chadwick, they observed, through a window in the door, the Petitioner surreptitiously referring to the note cards. After observing the Petitioner for 2 or 3 minutes, Ms. Chadwick went into the room and confronted him. The Petitioner denied having any materials or cards in his possession. Ms. Archer then entered the room and asked the Petitioner for the note cards. The Petitioner denied having any cards, but ultimately relinquished them to Ms. Archer. He relinquished two note cards with information handwritten on them. The two note cards surrendered contained information pertaining to the 240 hour property and casualty insurance course, which was relevant to the insurance subject matter of the examination. They would definitely be of assistance to a candidate taking the general lines examination, which the Petitioner was then taking when he had the cards in his possession and was observed by Mr. Kelly and the other witnesses. The Petitioner was then dismissed from the examination and his test materials and the two note cards were collected. Ms. Chadwick and Ms. Archer then reported this incident involving the Petitioner to the Educational Testing Services by telephone and followed up with a written "irregularity report." Mr. Kelly, Ms. Chadwick, Ms. Archer all testified to the above-referenced effect. None of them had ever met the Petitioner before January 7, 1989. There has been no demonstration they have any bias or that any other reason exists for finding their testimony to be of dubious credibility. The Department thereafter denied the application of the Petitioner for admission to the examination and licensure, by its letter of denial dated January 13, 1989. The Petitioner requested a formal proceeding to contest that denial and in due course this proceeding ensued.
Recommendation Having considered the foregoing findings of fact and conclusions of law the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is therefore RECOMMENDED, that the Department deny the Petitioner, Paul John Roberto's, application for licensure as a general lines - property, casualty, and miscellaneous lines agent. DONE AND ENTERED this 19th day of September, 1989, in Tallahassee, Leon County, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of September, 1989. APPENDIX Case NO. 89-0788 PETITIONER'S PROPOSED FINDINGS: The Petitioner did not actually propose any findings of fact, but rather sought to discuss the testimony of the three witnesses presented against him by the Department. In essence, the Petitioner contends that witness Kelly could not have seen the evidence of cheating from his seating position and that the other witnesses based their testimony concerning his possession of the incriminating note cards during the taking of the examination, and his use of them for that purpose, on hearsay. If this could be deemed to constitute a finding of fact, it is rejected because it does not comport with the preponderant weight of the evidence, which establishes that the report of Mr. Kelly merely prompted the examination supervisors, who testified, to go and observe Mr. Roberto in the act of cheating themselves. Their testimony is certainly not hearsay, and in any event, Mr. Kelly also testified, thus the hearsay contention by the Petitioner is groundless. The Petitioner proposed no actual findings of fact so there are none to rule upon in addition to this. RESPONDENT'S PROPOSED FINDINGS: The Respondent's proposed findings of fact 1 through 15 are accepted. COPIES FURNISHED: Paul J. Roberto, Pro Se 22 Country Club Road Shalimar, Florida 32579 James A. Bossart, Esquire Office of Legal Services 412 Larson Building Tallahassee, Florida 32399-0300 Hon. Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300
The Issue At issue in this proceeding is whether the Respondent, Brevard Management, LLC, (Brevard Management) failed to abide by the coverage requirements of the Workers' Compensation Law, Chapter 440, Florida Statutes, by not obtaining workers' compensation insurance for its employees; and whether Petitioner properly assessed a penalty against Respondent pursuant to Section 440.107, Florida Statutes.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing, and the entire record in this proceeding, the following findings of fact are made: The Department is the state agency responsible for enforcing the requirement of the Workers' Compensation Law that employers secure the payment of workers' compensation coverage for their employees and corporate officers. § 440.107, Fla. Stat. On July 31, 2008, Eugene Wyatt, an insurance analyst working for the Department, visited the River Palm Motel in Melbourne to investigate the workers' compensation insurance status of several contractors performing renovations on the property. The River Palm Motel is owned by Brevard Management, whose principal owner is Albert Segev. During his visit, Mr. Wyatt spoke to Michael Cole, the hotel's manager, regarding the workers' compensation coverage of the hotel itself. Mr. Cole told Mr. Wyatt that the hotel used Automatic Data Processing, Inc. (ADP), a third-party payroll services provider, to provide workers' compensation insurance coverage. Brevard Management began operating the River Palm Motel on June 18, 2008. On June 19, 2008, Brevard Management entered into an agreement with ADP for the provision of payroll services, including the filing of payroll taxes, using Easy Pay, ADP's proprietary payroll management service. On August 25, 2008, Mr. Wyatt received an anonymous referral alleging that the River Palm Motel was not carrying workers' compensation insurance for its employees. Later that day, Mr. Wyatt returned to the River Palm Motel, this time to investigate the workers' compensation status of the motel itself. Upon his arrival at the motel, Mr. Wyatt spoke with Mr. Cole, who disclosed that Brevard Management owned the motel. Mr. Wyatt conducted a search of the Division of Corporation's website and learned that Mr. Segev was the principal owner of Brevard Management. Mr. Cole provided Mr. Wyatt with invoices for the last payroll period for the River Palm Motel. The invoices indicated that the company had more than ten employees, which led Mr. Wyatt to conclude that the company was required to secure workers' compensation insurance. At his deposition, Mr. Cole confirmed that River Palm Motel had between ten and twelve employees on August 25, 2008. Mr. Cole believed that Brevard Management had secured workers' compensation insurance coverage through ADP. However, the payroll invoices that Mr. Cole provided to Mr. Wyatt showed no deductions for any insurance. Mr. Wyatt consulted the Department's Coverage and Compliance Automated System (CCAS) database, which lists the workers' compensation insurance policy information for each business as provided by the insurance companies, as well as any workers' compensation exemptions for corporate officers. CCAS indicated that Brevard Management had no workers' compensation insurance policy in place and no current, valid exemptions. Mr. Cole provided Mr. Wyatt with a copy of the June 19, 2008, payroll agreement between Brevard Management and ADP, which gave no indication that workers' compensation insurance was included. The evidence at the hearing established that ADP does not automatically provide workers' compensation insurance coverage to entities that enroll for its payroll services. ADP provides such insurance coverage, but only as part of a separate transaction. After receiving authorization from the acting supervisor in the Department's Orlando office, Mr. Wyatt issued the SWO to Brevard Management on August 25, 2008, and personally served it on Mr. Segev on August 26, 2008. On August 25, 2008, Mr. Wyatt gave Mr. Cole a request to produce business records, for the purpose of making a penalty assessment calculation. In response, Mr. Cole provided an employee roster from ADP showing the payroll entries for every Brevard Management employee from the opening of the motel in June 2008 through August 25, 2008. After Mr. Wyatt's visit, Mr. Cole contacted ADP and spoke to Elizabeth Bowen, a workers' compensation sales agent with ADP Insurance Services. Ms. Bowen faxed forms to Mr. Cole to complete in order to obtain a workers' compensation insurance policy. Mr. Cole completed the paperwork and obtained a workers' compensation insurance policy through NorGUARD Insurance Company, effective August 25, 2008. Mr. Cole testified that he believed in good faith that he had obtained workers' compensation insurance at the time he signed up for payroll services with ADP sales representative Clinton Stanley in June 2008. It was only Mr. Wyatt's investigation that alerted Mr. Cole to the fact that Brevard Management did not have the required coverage. Mr. Stanley recalled that Mr. Cole had requested workers' compensation insurance, recalled telling Mr. Cole that his request had to be routed to ADP's separate insurance division, and recalled having forwarded the request to the insurance division. Mr. Stanley had no explanation for why the insurance division did not follow up with Mr. Cole in June 2008. Because he never heard from Mr. Cole again, he assumed that Brevard Management had obtained the requested workers' compensation coverage. It is accepted that Mr. Cole believed that he had purchased the workers' compensation coverage as part of the ADP payroll services; however, the evidence established that Mr. Cole should reasonably have known that this was not the case. Nothing in the June 2008 contractual documentation with ADP indicated that Brevard Management had obtained workers' compensation insurance coverage, and the subsequent ADP payroll registers showed no deductions for workers' compensation insurance. Using the proprietary Scopes Manual developed by the National Council on Compensation Insurance, Inc. (NCCI), Mr. Wyatt assigned Brevard Management's employees the occupation classification code 9052, "Hotel: All Other Employees & Sales Persons, Drivers." This was the same code assigned by Ms. Bowen when she completed the policy paperwork for Brevard Management. Ms. Bowen described this classification as "all inclusive" with respect to hotel employees. Mr. Wyatt calculated an amended penalty based on the payroll records provided by Mr. Cole, from the date Brevard Management became an active limited liability company, June 3, 2008, to the date the SWO was issued, August 25, 2008. Mr. Wyatt divided the total payroll by 100, then multiplied that figure by NCCI's approved manual rate for insurance coverage in 2008 for classification code 9052. That product was then multiplied by 1.5 to arrive at the penalty for the stated period. The total penalty for all employees was $2,112.03. The Amended Order was served on Brevard Management on August 26, 2008, along with the SWO. On August 26, 2008, Mr. Wyatt met with Mr. Cole and Mr. Segev, who produced a copy of the application for workers' compensation insurance placed through NorGUARD Insurance Company and tendered a cashier's check for the full amount of the penalty. The SWO was released on the same day.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is, therefore, RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers' Compensation, assessing a penalty of $2,112.03 against Brevard Management, LLC. DONE AND ENTERED this 17th day of April, 2009, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON 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 17th day of April, 2009. COPIES FURNISHED: Tracy Beal, Agency Clerk Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Ben Diamond, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307 Justin H. Faulkner, Esquire Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399 Albert Segev Brevard Management, LLC, d/b/a River Palm Hotel 420 South Harbor City Boulevard Melbourne, Florida 32901
The Issue Whether or not all or part of the 40 statements challenged in the petition of Great American Reserve Insurance Company violate Section 120.535 F.S. requiring the agency to immediately discontinue all reliance upon the statements or any substantially similar statement as a basis for agency action.
Findings Of Fact On June 13, 1994, Petitioner filed a petition for administrative determination of agency statement. The petition listed the following agency statements and alleged that each constituted a rule pursuant to Chapter 120.52(16), F.S. which had not been adopted by the rulemaking procedures provided by Section 120.54 F.S. [1993]. The challenged statements are as follows: Respondent issues a form which solicits information as follows: Please provide the following information for each approved and pending annuity contract: Form number. Name of form, if any. Date approved or if pending. What are the surrender charges and for how long? What is the initial interest rate and for how long? What is the guaranteed interest rate? Are there any bonuses? If so, for how long and under what circumstances are they paid? Is this annuity two-tier? If so, how is interest applied? What field compensation is paid for each variation? Are any of these forms field issue that allow the agent to write in the current rate of interest? If so, what controls are in place to guarantee accuracy? Respondent issues a form which solicits information as follows: Please list any other annuities offered by the company and their corresponding contract maintenance fees, administration charges, surrender charges, etc. Respondent issues a form which solicits information as follows: Please provide the agent compensation levels associated with each form and/or set of surrender charges. Respondent issues a form which solicits information as follows: Please describe the specific calculation basis of the various annuity purchase rates/settlement options. Please include sample calculations of all options at a selected age(s). Respondent issues a form which solicits information as follows: What percentage sales are expected to be replacements of an existing contract? Please identify the replacement percentages by source (internal, external, 1035 exchanges, etc.). Respondent issues a form which solicits information as follows: [Provide] a brief description of the market and marketing method. Respondent issues a form which solicits information as follows: Please provide the following: Agency training procedures as they relate to this form, Any brochures provided to agents which refer to this form, Any guidelines to assure that policy comparisons are accurate and fair, Standards to ensure that no marketing methods are used which would have the effect of inducing replacement sales through misleading representations, and All forms, other than those required by Rule 4-151.006 and 4-151.007(3)(b), used to a execute replacement sales. Respondent issues a form which solicits information as follows: Please describe the company's practice concerning credited interest rates for annuity products in renewal years. Does the credited interest rate on a given date vary by the duration of the policy within a policy form block of business? If so, please describe the relationship between the various rates. How is this practice disclosed in sales literature for its products? On an annuity policy, varying the death benefit by issue age and duration is unfair discrimination under Ch. 626.9541(1)(g). It is not appropriate to vary the death benefit by age at death for an annuity policy. Variation of surrender charges in an annuity policy by age results in unfair discrimination under Ch. 626.9541(1)(g). Basing the surrender charge in an annuity policy on the age of the annuitant is unfair discrimination under Ch. 626.9541(1)(a). Where surrender charges, which are guaranteed in an annuity contract, vary between forms and the policy parameters, which vary in support of these different surrender charges (interest, bonuses, etc.), are not guaranteed in the contract, if a company were to have products with different surrender charges this would constitute unfair discrimination under Ch. 626.9541. Unfair discrimination is prohibited under annuity contracts by Florida Statute 626.9541(1)(g). The Department continues to receive filings with many variations of interest rates and surrender charges for which the surrender charges are guaranteed and the interest rates are not. These many combinations, applied to the same type contracts, violate this statute. If a single insurance company offers more than one annuity policy in the same market in Florida, the values to the purchaser pursuant to guaranteed parameters under each policy must be actuarially equivalent to those of each other policy. A withdrawal provision in an annuity contract which waives surrender charges on all or part of a partial surrender but imposes surrender charges on all of a total surrender will produce unfair discrimination. Proposed interest rate differentials must result in compensatory guarantees across whatever number of free withdrawal options are made available in an annuity contract for a block of business. It is the position of the Florida Department of Insurance that where multiple annuity products are presented for approval in the State of Florida that the examination of the guaranteed parameters of the policies must all result in the same actuarially equivalent benefit to the beneficiary of the policy for a block of business. If you looked at a block of business sold under each policy, taking into account the distribution of that business and the persistency patterns of that business over the life of that block of business, there must be a comparable return to the policyholder. Less than half a point would be considered approaching reasonable. In an annuity policy, where the present value at death of the amount of death benefit paid is based on the manner in which it will be paid, this is discriminatory pursuant to Ch. 626.9541. It should be revised so that the death benefit options are actuarially equivalent. Each settlement option which may be exercised under an annuity policy must be the actuarial equivalent of each other settlement option offered under that policy. Settlement options offered in an annuity policy may not vary based on the age of the policyholder. An annuity policy may not contain a one direction market value adjustment. One direction MVA does not provide equitable treatment. such an adjustment should be allowed to move equally in both directions to prevent inequitable and discriminatory treatment under Ch. 626.9541. The Department of Insurance mandates compliance with the provision in the current draft of the standard non-forfeiture law for annuities that guaranteed minimum annuitization rates must be at least that guaranteed during the accumulation phase, for a policy not to violate Ch. 626.9541(1)(a) and Ch. 627.411(2). In an annuity contract, the guaranteed minimum annuitization rate may not be less than the guaranteed minimum accumulation rate, per the current draft of the standard non- forfeiture law for deferred annuities. The Department considers a minimal measure of benefits being reasonable in relation to premiums under Ch. 627.411(2), to be compliance with the standard non-forfeiture law. The guaranteed minimum annuitization rate in an annuity policy may not be less than the guaranteed minimum accumulation rate, per the current draft of the standard non-forfeiture law for deferred annuities. The Department continues to feel that attribution of mortality expense charge to variations in the annuitization phase is inappropriate. The current draft of the standard non-forfeiture law for deferred annuitities allows use of projection scale G to be applied to the 1993 table a to account for possible future mortality improvement. It would also appear inappropriate to deduct a mortality charge in the annuitization phase for a mortality risk from the accumulation phase, as the risk no longer exists. Annuity policy forms may not be approved unless all sales brochures and literature are submitted with the forms. All annuity contracts must contain a table of guaranteed values. A table of guaranteed values in an annuity policy must demonstrate any available partial withdrawals not subject to surrender charges, even if the free partial withdrawal provisions are set out in the policy. An annuity contract must include a table of guaranteed minimum annuitization rates. Current company practice may not be presented in the illustration or brochure as a product characteristic of an annuity policy. Only contractually guaranteed items may be presented as policy parameters. If a contract contains proposed provisions which would allow the company to reserve the right to make future changes in charges, guarantees or contractual provisions in the policy, this would violate Ch. 627.474. A sales illustration in an annuity policy must display surrender values, even if the surrender charges are disclosed in the illustration. An illustration in advertising of an annuity policy must demonstrate any available partial withdrawals not subject to surrender charges, even if the terms of a free partial withdrawal provisions are set out in the advertising. Computer generated sales illustrations for annuity policies must include the following: Name of the person that the illustration is prepared for. Name of the agent preparing the illustration. A current date. A proposed date of maturity. Disclosure of all expense charges including a clear statement of the surrender charges. An illustration in advertising of a one tier annuity policy must specify the maturity date. The agent is not permitted to write in the current interest rate in the sales brochure. Death benefits or settlement options in an annuity policy to be sold to males and females must be based on male mortality tables for men, female mortality tables for women or gender blended mortality tables. Statements 1-8 challenge forms used by the Department of Insurance soliciting the enumerated information. Statements 9-40 challenge statements of policy used by the Department in review of annuity insurance policy and advertising forms. Between the filing of the Petition herein and the date of formal hearing, the Respondent agency filed a notice of rule development workshop. (See Finding of Fact 36) The parties stipulated: That Petitioner has standing herein as a person substantially affected by the agency statements challenged in the petition herein. That each challenged agency statement is an agency statement defined as a rule under Section 120.52(16) F.S.; and That none of the challenged agency statements have been adopted by the rulemaking procedure provided by Section 120.54 F.S. [1993]. By reason of the parties' stipulations, the only matter to be determined is whether or not the agency is currently using the rulemaking procedure expeditiously and in good faith to adopt rules which address the statements challenged by the petition herein. In an effort to establish minimal standards on a wide variety of issues, the Department of Insurance and State Treasurer has recently tried to approach rulemaking in a holistic or coordinated manner among its various bureaus and areas of technical expertise instead of piecemeal, as historically. In 1989-1990, the agency adopted 225 forms as rules, reducing the number of forms in use from 800. Its last wholesale rules review and revision occurred in the fall of 1991, partly in response to the legislative creation of Section 120.535 F.S., was internally code-named "the rules reorganization project," and met the statutory March 1, 1992 deadline to formalize existing non-rule policies. Both projects were conducted under the oversite of agency attorney Ruth L. Gokel, of the agency's legislative and rules section. Since then, the agency has largely deferred to its technical experts to initiate rulemaking, and not to its lawyers. However, anytime a regulatory employee approaches the legislative and rules section, that section immediately initiates rulemaking procedures. While Ms. Gokel does not provide routine oversite to the agency's bureaus or divisions to determine whether they are routinely using non-rule policy, she has the authority to recommend to agency bureaus and divisions that they are in need of rules. Because she is familiar with the complex processes for promulgating rules, she coordinates much of the agency's rule drafting. Ms. Gokel created a departmental manual on rulemaking in June 1991. The manual was published after enactment of Section 120.535 F.S. Portions of that manual, upon which Petitioner strongly relies, provides: any interpretation of a statute or any requirement generally imposed on agents, companies or other regulated entities as a group which has not been adopted as a rule, is a non-rule policy. * * * The first time we interpret a statute and apply it to a particular fact situation, the interpretation is not as yet a statement of general applicability and thus is not a rule. The second time an issue arises . . . we need to begin to formulate a rule. The third or fourth time a statute is interpreted and applied in a given manner, a rule should be published. Petitioner views this manual as binding upon the agency to begin rulemaking in some form immediately upon any agency employee imposing any statutory interpretation for the first time and even if the statutory interpretation is still only part of an individual's mental process. Petitioner also views the manual as requiring the agency to publish a rule upon the third or forth similar interpretation. However, the competent substantial evidence as a whole shows that the manual's pronouncements were, at best, aspirational. The manual was designed as the agency's first best attempt to educate its non-lawyer experts concerning their responsibilities under a new law, to ensure agency compliance with the new law by "picking up any non-rule policy floating around", to head off potential violations of the new law, and to minimize the number of potential petitions challenging agency statements under the new law. The manual also was in line with the agency's new evolving coordinated approach to rulemaking. The manual is designed to alert laymen to rulemaking problems, and was revised in December 1993. It will continue to be revised periodically. Prior to the filing of the Petition herein, the Department adopted checklists to aid insurers in their submission of policy forms and to aid the Department staff in their reviews of such form filings. The checklists are adopted as forms in Part II of Rule Chapter 4-149. Prior to the filing of the Petition herein, the Department adopted rules governing the review of advertising material for annuities. Those rules may be found in Part II of Rule Chapter 4-150. The Department has conducted actuarial reviews of annuity filings only since May of 1992. Although there were no statutory changes on or about that date, the Department was motivated to institute much closer scrutiny of annuities and the sale of annuities in this state as a result of the rule challenges to the Department's "bank rules", Chapter 4-223 F.A.C. Actuarial review by the agency has evolved in order to ensure that the products are clearly presented, that they are not unfairly discriminatory, that the sales presentations and contracts are not misleading, and that the product has not been designed for use with inappropriate marketing practices. These are statutorily permissible goals. See, Chapter 627 F.S. Of necessity, the Department review must combine its regulatory concerns into one cohesive set of policy statements. The actuarial review of annuities was first conducted by actuary Mike Morgan from May 1992 to about February 1993, when that responsibility was assumed by another Department actuary, Tom Foley. In December, 1993, the responsibility shifted to yet another Department actuary, Linda Ziegler. During the course of the reviews performed by each of these agency employees, judgments were made as to particular aspects of the actuarial review. Those judgments regarding the particular forms being reviewed were expressed in letters to the companies involved. Some of these letters were requests for additional information. If the additional information were supplied and, in the opinion of the reviewing actuary, it did not result in a violation of Florida statutes or rules, then the filing was approved. If the reviewing actuary found a violation based on the additional information, the filing was disapproved. Other letters were disapproval letters after a complete review of all the requested information. Actuarial review is an arcane business involving informed consideration of many different aspects of a filing. The decision to approve or disapprove is made on the basis of the totality of the filing. It may be that one aspect of a particular filing might not be entirely within the required parameters in the judgment of the actuary, but that aspect, in that particular filing, might be offset by another aspect, which in turn would render the filing approvable. All pieces of the whole are interrelated and the whole is complex. When Ms. Ziegler became responsible for the filings, she consulted with Mr. Morgan and Mr. Foley. Over the course of the two years of review, the actuaries involved wrote several hundred letters addressing actuarial issues on a situation by situation basis as each situation arose. Between December 1993 and the filing of the Petition herein, Ms. Ziegler was the responsible reviewing actuary. During those approximately six months, Ms. Ziegler consistently and uniformly applied the statements challenged to every application for annuity policy form and advertising form approval filed. Thus, even those statements used relatively few times have been used every time the policy embodied in the statement could have been applied. Additionally, departmental letters to insurance company applicants for approval of annuity policy and advertising forms, some 630 separate applications of challenged statement numbers 2, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23 and 40, related to unfair discrimination pursuant to Section 627.9541(1)(g) F.S. Challenged statement number 29 has been the articulated agency policy for at least 21 months, since the issuance of Department of Insurance Informational Bulletin 92-032 issued October 21, 1992. In January of 1994, Mike Morgan drafted language intended for the agency's legislative package for the 1994 session to address parts of the problem of actuarial review statutorily. Although agency personnel believed the agency had, and has, authority to perform these reviews, Ms. Ziegler testified that it is always better if matters are addressed by specific statutes because they are then much less subject to challenge. The Legislature did not address the issue of annuities in 1994. However, Mr. Morgan's work remained available to Ms. Ziegler when she began drafting what eventually became the Department's proposed rules on the subject. In March 1994, Ms. Ziegler began work on a draft bulletin to send to the companies to inform them in a more comprehensive way of the Department's current interpretations of several parts of the actuarial review problem. At about that time, she met with Department attorney Dennis Silverman who advised that eventually she would need to pursue rulemaking. Ms. Zeigler was unavoidably absent from the workplace at some time during this period due to an accident. When she returned to her office, she prioritized what she considered "more immediate" work. In May 1994, Ms. Ziegler returned to the draft bulletin, made a few minor changes, and then abandoned the project in favor of proposed rules. The Petition in this cause was filed June 13, 1994. Ms. Ziegler was aware that the forty statements had been challenged by the Petition shortly after the Petition herein was filed. In the third week of June 1994, Ms. Ziegler sought out Ms. Gokel. At that time, Ms. Ziegler had draft rules she felt cohesively addressed the actuarial review necessities, including addressing certain misleading sales practices. She also had several of the checklists adopted in Part II of Chapter 4-149 F.A.C. on which she had drafted proposed changes. Her comprehensive package addressed the totality of the necessary review and, as a result, also addressed each of the forty statements challenged in the pending Petition. Ms. Ziegler represented to Ms. Gokel that she was comfortable with the whole package and was ready to go public with it. Ms. Gokel informed Ms. Ziegler that since February, 1994 Ms. Gokel had had an assignment to make changes to the same checklists and had already had two meetings, in February and in March, with two other members of the Department regarding the same matter. Yet another member of the Department, Kim Forrester, had been working on proposed changes to the advertising rules in Part II of Chapter 4-150 F.A.C. Ms. Forrester was working with another departmental attorney, so in line with the agency's comprehensive approach to rules, Ms. Gokel had the foregoing assignment transferred to her. Based upon Ms. Gokel's considerable education, training, and experience in rulemaking, her understanding of agency policy concerning the need for and use of rule development workshops, the great amount of insurance industry interest which can reasonably be anticipated for the draft rules, and her personal knowledge regarding the complexity and breadth of the actuarial matters addressed in the draft rules, Ms. Gokel determined that a rule development workshop was essential. Rule workshops have been more the norm than the exception with this agency since at least 1992. The agency published its Notice of Rule Development Workshop in the Florida Administrative Weekly on July 1, 1994. The notice stated that a preliminary draft of the rules would be available for distribution on July 22, 1994, and that the workshop would be held on August 23, 1994, from 2 to 4 p.m. Respondent's witnesses affirmatively demonstrated significant planning and tangible steps that have been taken in furtherance of the rulemaking process since the filing of the foregoing notice. Ms. Gokel has devised a feasible preparatory checklist or schedule for meeting the deadlines announced in the published notice. Between publication of the Notice of Rule Development Workshop and formal hearing, something has been accomplished almost every day. In accord with this schedule, Ms. Gokel has once again met with Ms. Ziegler to discuss the proposed changes; has worked on the needed changes to the checklists with the secretary in the Bureau of Life and Health Forms and Rates because those checklists are documents in the "Lotus Notes" software program not available to Ms. Gokel in the agency's legislative and rules section; has reviewed the statutory authority supplied by Ms. Ziegler and has added the history notes where they were missing in the draft prepared by Ms. Ziegler; has incorporated Ms. Ziegler's and Ms. Forrester's proposed changes into the draft of the advertising rules; has reworked Ms. Ziegler's and Ms. Forrester's drafts for compliance with the Secretary of State's filing requirements; and has produced preliminary rule drafts. These steps have been expeditious and are themselves tangible evidence of the agency's current good faith efforts in the rulemaking procedure. Other steps listed by Ms. Gokel as necessary remained to be accomplished after formal hearing. Those included a meeting between Ms. Gokel and Ms. Forrester about the advertising rules; preparation of the existing rules which adopt the checklists showing the new revision dates; a meeting with Ms. Ziegler to discuss another proposed new rule in the actuarial review rules; a comprehensive review of the history notes; consolidation of the existing drafts into a single document for distribution as noticed for July 22, 1994; and preparation of the sign-in sheets and agenda for the workshop noticed for August 23, 1994. Provisions for timely accomplishing these tasks has been made on Ms. Gokel's schedule. As of the date of formal hearing, Ms. Gokel had already discovered several other statutory sections which should have been included in the Notice of Rule Development Workshop. She expressed the intent to file an amended notice reciting the additional statutory authority, but not otherwise changing the date or time of the workshop. This discovery represents at least one advantage of a comprehensive approach to agency rule drafting as practiced by this agency. Once the workshop draft has been distributed on July 22, 1994, the agency anticipates holding the workshop on August 23, 1994 and leaving the record open for written comments if appropriate. The agency's current intent is to leave the record open for only two weeks, which the agency's past workshopping experience has proven sufficient. Although this period could be extended further, there is no evidence in this record to suppose it will be. After the record closes, the plan is for agency personnel to conduct an internal review of the comments that were received, if any; Ms. Gokel will prepare a revised draft of the rules, as warranted, and will circulate an internal route slip for approval of the agency "senior management" involved. Only the lattermost effort of the route slip is an internal procedure peculiar to this agency and is not a requirement of Chapter 120 F.S. Historically, this route slip procedure has been ministerial and has only taken a few days. There is no clear evidence to show it will be different or take longer this time. Finally, the agency will have to file for notice, pursuant to Section 120.54 F.S. Petitioner presented only speculation to the effect that the foregoing schedule would not be met. The agency's assessment that in the area of actuarial review, moving from "first-time-ever" review of annuities to a comprehensive rule package in two years is the rulemaking equivalent of the "speed of light," may be more colorful than informative and is not binding upon the finder of fact, but the foregoing agency schedule and the agency's actions thereon are found to be currently expeditious in the circumstances of the number and type of rules necessary for such complex subject matter. If any challenged statement were not being addressed by the rulemaking process, the agency would have been unable to demonstrate that the agency rulemaking process is currently proceeding expeditiously and in good faith. However, here, the agency affirmatively demonstrated through unrefuted testimony that its draft rules have addressed, with at least some degree of particularity, each of the forty statements challenged by the Petition. Statements (1) and (2) of the Petition for Administrative Determination of Agency Statement involve requests for information of a company as to the other annuity products which the company is offering, have approved or are pending approval. This subject is addressed in the proposed draft rules in Respondent's Exhibit 1, Forms DI4-555, DI4-556, and DI4-557. Statement (3) of the Petition involves a request for information concerning the agent compensation levels paid on the proposed product. This subject is addressed in the proposed draft rules in Respondent's Exhibit 1, Forms DI4-548, DI4-555, DI4-556, and DI4-557. Statement (4) of the Petition involves a request for information regarding a specific description of the basis of the guaranteed minimum annuitization rates in the contract. This subject is addressed in the proposed draft rules in Respondent's Exhibit 1, Forms DI4-555, DI4-556, and DI4-557. Statement (5) of the Petition involves a request for information regarding sales of the product which are expected to be replacements of existing coverage. This subject is addressed in the proposed draft rules in Respondent's Exhibit 1, Forms DI4-555, and DI4-556. Statement (6) of the Petition involves a request for information regarding the market to be targeted and the marketing method to be used with respect to the proposed form. This subject is addressed in the proposed draft rules in Respondent's Exhibit 1, Forms DI4-548, DI4-549, DI4-551, DI4-555, DI4- 556, and DI4-557. Statement (7) of the Petition involves a request for information regarding the agency training methods to be used with respect to the proposed form. This subject is addressed in the proposed draft rules in Respondent's Exhibit 1 Forms DI4-555, DI4-556, and DI4-557. Statement (8) of the Petition involves a request for information regarding the credited interest rates in renewal years and their disclosure to consumers as practiced by the company. This subject is addressed in the proposed draft rules in Respondent's Exhibit 1, Forms DI4-555, DI4-556, and DI4- 557. Statements (9) and (10) of the Petition address the Department's concern about unfair discrimination under Section 626.9541(1)(g), F.S., in the death benefit offered in an annuity product. This subject is addressed in the proposed draft rules in Petitioner's Exhibit I, proposed draft Rule 4- 149.064(2)(a)3. Statements (11) and (12) of the Petition address the Department's concern about unfair discrimination under Section 626.9541(1)(g), F.S., in the variation of surrender charges by age in an annuity product. This subject is addressed in the proposed draft rules in Petitioner's Exhibit I, proposed draft Rule 4-149.065(4). Statements (13), (14), (15), and (18) of the Petition address the Department's concern about unfair discrimination under Section 626.9541(1)(g), F.S., between essentially identical products which have variations in guaranteed surrender charges, and other guaranteed parameters, and do not provide comparable benefits for premiums paid for the annuity products. This subject is addressed in the proposed draft Rule 4-149.071, Petitioner's Exhibit I. Statement (16) of the Petition addresses the Department's concern about unfair discrimination under Section 626.9541(1)(g), F.S., between policyholders of the same annuity form in treatment under the withdrawal provisions. This subject is addressed in the proposed draft rules in Petitioner's Exhibit I, proposed draft Rule 4-149.065(4)(c). Statement (17) of the Petition addresses a special case scenario of the Department's concern as expressed in statements (13), (14), (15), (18). This subject is addressed in the proposed draft rules in Petitioner's Exhibit I, proposed draft Rule 4-149.071. Statement (19) of the Petition addresses the Department's concern about unfair discrimination under Section 626.9541(1)(g), F.S. regarding the payment of a death benefit. This subject is addressed in the proposed draft rules in Petitioner's Exhibit I, proposed draft Rule 4-149.066, and 4- 149.064(2)(a)3. Statement (20) of the Petition address the Department's concern about unfair discrimination under Section 626.9541(1)(g), F.S., in the value of the annuitization value available in an annuity product. This subject is addressed in the proposed draft rules in Petitioner's Exhibit I, proposed draft Rule 4- 149.066. Statement (21) of the Petition address the Department's concern about unfair discrimination under Section 626.9541(1)(g), F.S. in the choice of annuitization options available in an annuity product. This subject is addressed in the proposed draft rules in Petitioner's Exhibit I, proposed draft Rule 4-149.066. Statements (22) and (23) of the Petition address the Department's concern about misrepresentation and unfair discrimination under Section 626.9541(1)(a) and (g), F.S., in the inclusion of a Market Value Adjustment which affects the policy in only one direction. This subject is addressed in the proposed draft rules in Petitioner's Exhibit I, proposed draft Rule 4- 149.067(2). Statements (24), (25), and (27) of the Petition address the Department's concerns about misrepresentation under Section 626.9541(1)(a), F.S., and ambiguity and reasonableness of benefits to premiums under Section 627.411(1)(b), and (2), F.S. in the interest rate component of the guaranteed minimum annuitization rates in the annuity contract. This subject is addressed in the proposed draft rules in Petitioner's Exhibit I, proposed draft Rule 4- 149.064(2)(a)4. Statement (26) of the Petition addresses the Department's concern about reasonableness of benefits to premiums under Section 627.411(2), F.S. for an annuity contract. This subject is addressed in the proposed draft rules in Petitioner's Exhibit I, proposed draft Rule 4-149.064(2)(a). Statement (28) of the Petition addresses the Department's concern about reasonableness of benefits to premiums under Section 627.411(2), F.S., in the treatment of charges under an annuity contract. This subject is addressed in the proposed draft rules in Petitioner's Exhibit I, proposed draft Rule 4- 149.064(2)(c). Statement (29) of the Petition addresses the Department's concern about timely review and approval of sales literature as noticed by Bulletin 93- 032's expression of existing Rule 4-150.120 F.A.C.. This subject is addressed in the proposed draft rules in Respondent's Exhibit 1, Forms DI4-548, DI4-549, DI4-550, DI4-551, and DI4-555. Statements (30) and (31) of the Petition involve a requirement for the contract to contain an accurate table of guaranteed values, to prevent ambiguity under Section 627.411 (1)(b), F.S. This subject is addressed in the proposed draft rules in Respondent's Exhibit 1, Forms DI4-555, DI4-556, DI4-557. Statement (32) of the Petition involves a requirement for the contract to contain an accurate table of guaranteed minimum annuitization values, to prevent ambiguity under Section 627.411(1)(b), F.S. This subject is addressed in the proposed draft rules in Respondent's Exhibit 1, Forms DI4-555, DI4-556, DI4-557. Statement (33) of the Petition addresses the Department's concern about accurate, complete and non-misleading presentation of policy characteristics in sales literature, under existing Rule 4-150.105. This subject is addressed in the proposed draft rules in Petitioner's Exhibit J, proposed draft Rule 4-150.105(1)(a). Statement (34) of the Petition addresses the Department's concern that a contract explicitly describe policy provisions over the life of the contract, under Section 627.474, F.S. This subject is addressed in the proposed draft rules in Respondent's Exhibit 1, Forms DI4-548, DI4-555, DI4-556, and DI4-557. Statement (35) of the Petition addresses the Department's concern about accurate, complete and non-misleading presentation of policy characteristics in sales literature, under existing Rule 4-150.105. This subject is addressed in the proposed draft rules in Petitioner's Exhibit J, proposed draft Rule 40150.105(1)(b). Statement (36) of the Petition addresses the Department's concern about accurate, complete and non-misleading presentation of policy characteristics in sales literature, under existing Rule 4-150.105(1)(f) F.A.C.. Statement (37) of the Petition addresses the Department's concern about accurate, complete and non-misleading presentation of policy characteristics in sales literature, under existing Rule 4-150.105. This subject is addressed in the proposed draft rules in Petitioner's Exhibit J, proposed draft Rule 4-150.105. The requirement expressed by statement (37)(e), is presently found in currently promulgated Rule 4-150.106(1). Statement (38) of the Petition addresses the Department's concern about accurate, complete and non-misleading presentation of policy characteristics in sales literature, under existing Rule 4-150.105. This subject is addressed in the proposed draft Rule 4-150.105(1)(e). Statement (39) of the Petition addresses the Department's concern about accurate, complete and non-misleading presentation of policy characteristics in sales literature, under existing Rule 4-150.105. This subject is addressed in the proposed draft rules in Petitioner's Exhibit J, proposed draft Rule 4-150.105(1)(d). Statement (40) of the Petition addresses the Department's concern about reasonableness of benefits to premiums under Section 627.411(2), F.S., and unfair discrimination under Section 626.9541(1)(g), F.S. in the value of the death benefits and guaranteed annuitization rates for an annuity contract. This subject is addressed in the proposed draft rules in Petitioner's Exhibit I, proposed draft Rule 4-149.064(2)(a)4. The testimony that the forty challenged statements are addressed in the Department's draft rules [Pet.I, J; Resp. 1], as set forth above, is uncontroverted. The Petitioner did not present any evidence nor elicit any testimony refuting or otherwise discrediting this testimony on that issue.
Findings Of Fact At all times pertinent to the allegations herein, Respondent, Randy Clinton Latta, was licensed by the Insurance Commissioner of the State of Florida as a life and health, (debit), agent; a life and health agent; a general lines agent limited to industrial fire; and a health insurance agent. He was employed as a sales representative by the United Insurance Company of America, (United). The Petitioner, Department of Insurance, was the state agency responsible for the licensing and regulation of insurance agents in Florida. When Respondent was hired by United, he was issued a copy of the company's compensation plan brochure which outlined the way the agent was compensated for sales on the company's behalf and the agent's responsibilities for remitting premium collections to it. Respondent acknowledged receipt and acceptance of the terms of the plan on May 6, 1990. At page 22, the brochure provides: Any money you receive on behalf of United must be properly accounted for and promptly paid to United. All money must be deposited with the Company on or before the weekly settlement day. United may, at any time, audit your books and accounts. Books or records that contain entries made by you that show you collected money for United are conclusive evidence that you have collected the money. On March 19, 1992, United terminated Respondent from employment with the company because an audit of his and the company's records regarding his accounts reflected a deficiency. The records indicated that he had collected but not remitted to the company the sum of $1,655.48. Offset against that figure was the sum of $324.07 representing credits to his account and a deposit he made. The initial net shortage was $1,331.41. In addition to the initial shortage, supplemental field audits reflected two additional shortages of $27.43 and $29.79 which created a total shortage of $1,388.63. From that amount was subsequently deducted Respondent's bond of $258.34, leaving a final debt to the company of $1,100.50. Respondent admits to collecting some of the money claimed to be owed by him but not all. He asserts he has requested proof of his obligation from the company on several occasions but has not been given what he considers to be adequate evidence of his debt and wrongdoing. He claims to have also asked the office of the Insurance Commissioner for all supporting documentation and the premium receipt books relating to his accounts without success. He claims he resigned from employment with United on March 16, 1992, (the form shows involuntary termination as well as voluntary), because he was not satisfied with the conditions of employment. At that time, he was advised there was a deficiency in his accounts but it was not proven to his satisfaction. Respondent claims not to know if his books were in error or not. He contends that his letter to the company of May 11, 1992, in which he refers to "my bookkeeping error" was not an admission of error but merely acknowledges the company's allegation of error. Respondent presented no records of the funds he collected or what funds he remitted to the company. He claims there was no requirement he keep copies of the forms he submitted to the company, and, therefore, he has no documentary evidence to support his claims of compliance with the requirements of the remittance provision. In light of the above, there is no reasonable alternative to accept the company's figures as to the amount owed. Mr. Latta was subsequently charged with grand theft in regard to the shortages alleged. Though he claims he plead nolo contendere to the charge, the court document introduced into evidence at this hearing reflects he plead guilty and was placed on probation for 2 years on condition of paying restitution. He has been meeting the terms of his probation by making the required restitution payments to the court for transmittal to the company.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that Respondent, Randy Clinton Latta's licenses as a life and health (debit) agent; a life and health agent; a general lines agent - limited to industrial fire, and a health insurance agent in Florida be revoked. RECOMMENDED this 10th day of November, 1993, in Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of November, 1993. COPIES FURNISHED: William C. Childers, Esquire Division of Legal Services 612 Larson Building Tallahassee, Florida 32399-0300 Randy Clinton Latta 2114 Karolina Winter Park, Florida 32789 Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Bill O'Neil General Counsel Department of Insurance The Capitol, PL-11 Tallahassee, Florida 32399-0300
