The Issue At issue in this proceeding is whether respondent committed the offenses alleged in the administrative complaint and, if so, what disciplinary action should be taken.
Findings Of Fact Respondent, Earle Anthony Bennett, is now and was at all times material hereto licensed by petitioner as an insurance agent in the State of Florida. Pursuant to Chapter 626, Florida Statutes, petitioner has jurisdiction over the insurance licenses and appointments of respondent. On October 17, 1990, respondent entered into a home service agent's contract with The Independent Life and Accident Insurance Company (Independent Life). Pertinent to this case, such contract provided: Article 1. Description of General Duties The Agent agrees to canvass for insurance, to collect premiums as due on the policies assigned to the agency, to aid in the proper settlement of claims, to keep true records of the business on the books, to forward to the Company on Company forms a true account of each week of the agency, and to give full time to the business of the Company. Article 2. Collections The Agent agrees to pay over all monies collected to the District Sales Manager or to such other person as the Company may direct. No money shall be retained by the Agent out of collections for any purpose. The agent agrees that should legal proceedings be necessary to collect monies due from the Agent to the Company the Agent shall pay legal costs and a reasonable attorney's fee. * * * Article 37. Indebtedness Due Company The Company may use any commissions, vacation pay, or other compensation due the Agent to reimburse itself for any indebtedness due the Company by the Agent. In November 1991, respondent terminated his employment with Independent Life, and Independent Life notified petitioner of the cancellation of respondent's appointment as one of its insurance agents. Thereafter, on November 7, 1991, Independent Life conducted an audit of respondent's account which revealed a deficiency of $1,613.70 in insurance premiums collected by respondent and not remitted to the company. Subsequent audits in November reflected an additional deficiency of $213.62, in December an additional deficiency of $178.84, and in February 1992, an additional deficiency of $43.48. By letters of November 18, 1991, November 21, 1991, December 2, 1991, December 13, 1991, and March 18, 1992, Independent Life made demand upon respondent to satisfy the deficiencies disclosed by the audits. Such letters reflected, however, varying amounts the company claimed to be due as a consequence of newly discovered deficiencies in ongoing audits, discussed supra, as well as varying credits accorded respondent. Such correspondence lends credence to respondent's testimony that he was unsure as to the exact sum owing Independent Life, and that he had, subsequent to his termination of employment, remitted funds to the company. Respondent did concede, however, that when he terminated his employment with Independent Life, his account had a deficiency of approximately $1,400. Regarding any deficiency that may have been owing Independent Life, the proof demonstrates that respondent did, over time, satisfy all outstanding obligations.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be entered finding respondent guilty of the violations set forth in the conclusions of law, and suspending his licenses and eligibility for licensure for a period of nine months. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 22nd day of October 1993. WILLIAM J. KENDRICK 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 22nd day of October 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-3885 Petitioner's proposed findings of fact are addressed as follows: 1 & 2. To the extent supported by the proof, addressed in paragraph 1. 3. Addressed in paragraph 2. 4 & 5. Addressed in paragraph 3. 6. Addressed in paragraph 4. 7 & 8. Addressed in paragraph 5. 9 & 10. Addressed in paragraphs 6 & 7, otherwise rejected as not supported by competent proof. 11. Rejected as a conclusion of law. COPIES FURNISHED: William C. Childers, Esquire Department of Insurance 612 Larson Building Tallahassee, Florida 32399-0333 Earle Anthony Bennett 12100 North West 11th Avenue Miami, Florida 33168 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
Findings Of Fact By letter dated December 27, 1977, VIRGINIA E. BELL, of VIRGINIA BELL REALTY, INC., forwarded to Mr. and Mrs. George Kuruzovich a contract for sale and purchase of real estate which had been executed by Robert and Patricia Gaudet. The cover letter from this respondent to Mr. and Mrs. Kuruzovich, stated that the contract provided for ". . . a net cash to you of not less than $7,500. This contract provided in paragraph twenty-two, "It is agreed that the seller shall net not less than $7,500 cash from sale herein upon closing." By letter dated January 3, 1978, Mr. George Kuruzovich informed Virginia E. Bell that the sellers approved the terms of the contract, with the understanding that they would receive net cash not less than $7,500. The contract dated December 27, 1977, was not consummated. However, a new contract, dated February 18, 1978, was executed by the sellers, George and Loretta Kuruzovich, with purchaser Patricia A. Gaudet. This contract likewise provided in paragraph twenty-two, ". . . sell [sic] shall net no less than $7,500 cash from sale herein payable upon closing." The contract dated February 18, 1978, was executed by all parties. The matter proceeded to closing, with the sellers authorizing Virginia E. Bell, to act as their agent. On May 4, 1978, Virginia E. Bell signed a letter to American Title Insurance Company stating that: "I, Virginia Bell, hereby certify that the proceeds of sale regarding the above captioned property is $7,053.34 and not $7,500.00 as required under the special provisions of the Sales Contract and that Virginia Bell Realty will assume any liability as far as payment concerning the net proceeds to Mr. and Mrs. George Kuruzovich, and furthermore, I will not hold American Title Insurance Company responsible for same." On May 4, 1978, the closing on the February 18, 1978, contract was consummated. Mr. and Mrs. George Kuruzovich, the sellers, received $7,053.34 in cash for the sale of their home. By letter dated May 5, 1978, to Mr. and Mrs. Kuruzovich the Respondent, Virginia Bell, explained that the cash discrepancy was due to prorations of $155 for taxes, $219.60 for interest in addition to the mortgage balance, and $94.22 for an FHA insurance premium paid by Respondent. In mitigation, Virginia E. Bell contends that she informed the sellers that the net cash required by the contract did not include tax, interest and insurance prorations, but this self-serving oral representation must be disregarded as contrary to the expressed terms of the contract and against the weight of the evidence. This respondent admits that the transaction which is the subject of this proceeding was not handled properly, and she asserts that it will not happen again.
Recommendation Upon Consideration of the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Virginia E. Bell be fined the sum of $500.00. It is further RECOMMENDED that the administrative Complaint against Virginia Bell Realty, Inc., be dismissed. THIS RECOMMENDED ORDER entered on this 16th day of September, 1980. WILLIAM B. THOMAS Hearing Officer Division of Administrative Hearings Room 101 Collins Building Tallahassee, Florida 32301 (904)488-1779 Filed with the Clerk of the Division of Administrative Hearings this 16thday of September, 1980. COPIES FURNISHED: S. Ralph Fetner, Esquire 2009 Apalachee Parkway Tallahassee, Florida 32301 Virginia E. Bell 1927 U.S. Highway 17 Orange Park, Florida 32073 George E. Marcellus 64 Sleepy Hollow Road Middleburg, Florida 32068
Findings Of Fact Respondent Judy Louise Robinson is currently licensed by the Florida Department of Insurance as a general lines agent, a health agent, and a dental health agent and has been so licensed since November 21, 1984. At all times material, Respondent engaged in the business of insurance as Fleming Island Insurer. At all times material, Respondent maintained two business bank accounts in the name of Fleming Island Insurer: Account No. 1740043215 at Barnett Bank in Orange Park and Account No. 11630004614 at First Union Bank, Park Avenue Office. First Union Bank is currently First Performance Bank. All funds received by Respondent from or on behalf of consumers, representing premiums for insurance policies, were trust funds received in a fiduciary capacity and were to be accounted for and paid over to an insurer, insured, or other persons entitled thereto in the applicable regular course of business. Respondent solicited and procured an application for a workers' compensation insurance policy from Linda Smith on September 13, 1989, to be issued by CIGNA. Respondent quoted Ms. Smith an annual workers' compensation premium of two thousand six hundred four dollars and forty cents ($2,604.40). Linda Smith issued her check payable to Fleming Island Insurer in the amount quoted by Respondent on September 13, 1989, as premium payment for the CIGNA workers' compensation insurance coverage. On September 14, 1989, Respondent endorsed and deposited Linda Smith's $2,604.40 check into Fleming Island Insurer's business bank account No. 1740043215 at Barnett Bank, Orange Park, Florida. On September 17, 1989, Respondent forwarded her check in the amount of two thousand six hundred eighty nine dollars and forty cents ($2,689.40) to NCCI ATLANTIC for issuance of a workers' compensation policy with CIGNA for Linda Smith, Inc. The difference between the amount paid to Respondent by Linda Smith ($2,604.40) and the amount paid by Respondent to CIGNA via NCCI ATLANTIC ($2,689.40) amounts to $85.00 advanced by Respondent because she misquoted the premium amount to Linda Smith. On September 17, 1989, Respondent notified Linda Smith that another $85.00 was due. Linda Smith never paid this amount to Respondent. On September 19, 1989, CIGNA issued a workers' compensation policy for Linda Smith, Inc. Respondent's check was thereafter returned to CIGNA due to insufficient funds. On or about October 20, 1989, CIGNA notified Respondent that her agency check had been returned as unpayable and requested substitute payment within ten days to avoid interruption in Linda Smith, Inc.'s workers' compensation insurance coverage. Respondent asserted that she was injured in an automobile accident on October 1, 1989 and could not work through July of 1990 due to chronic dislocation of her right arm, but she also asserted that she never closed her insurance business and operated it out of her home. Respondent's home is the address at which CIGNA notified her on October 20, 1989 concerning Ms. Smith's policy. Respondent failed to timely submit substitute payment to CIGNA, and as a result, Linda Smith, Inc.'s policy was cancelled January 1, 1990. On January 4, 1990, Linda Smith forwarded her own check in the full amount of $2,689.40 directly to CIGNA and her policy was reinstated. Respondent did not begin to repay Linda Smith the $2,604.40 proceeds of Linda Smith's prior check paid to Respondent until May 1991. At formal hearing, Respondent maintained that she was never notified that Linda Smith paid for the policy a second time. Even if such a protestation were to be believed, it does not excuse Respondent's failure to account to either Linda Smith or CIGNA for the $2,604.40, which Respondent retained. Respondent also testified that Barnett Bank's failure to immediately make available to Respondent the funds from Linda Smith's check, which cleared, resulted in Barnett Bank reporting to CIGNA that there were insufficient funds to cover Respondent's check to CIGNA. From this testimony, it may be inferred that Respondent knew or should have known that she owed someone this money well before May 1991. On November 11, 1989, Lewis T. Morrison paid the Traveler's Insurance Company six thousand forty-three dollars ($6,043.00) as a renewal payment on a workers' compensation policy for Morrison's Concrete Finishers for the policy period December 30, 1988 through December 30, 1989. At the conclusion of the 1988-1989 policy period, Traveler's Insurance Company conducted an audit of Morrison's Concrete Finishers' account. This is a standard auditing and premium adjustment procedure for workers' compensation insurance policies. It is based on the insured's payroll and is common practice in the industry. This audit revealed that Morrison's Concrete Finishers was due a return premium of two thousand one hundred fifty-three dollars and eighty- seven cents ($2,153.87) from the insurer. On March 30, 1990, Traveler's Insurance Company issued its check for $2,153.87 payable to Fleming Island Insurer. This check represented the return premium due Morrison's Concrete Finishers from Traveler's Insurance Company. On April 6, 1990, Respondent endorsed and deposited Traveler's Insurance Company's return premium check into the Fleming Island Insurer's business bank account No. 11630004614 at First Union Bank. The standard industry procedure thereafter would have been for Respondent to pay two thousand two hundred forty-eight dollars ($2,248.00) via a Fleming Island Insurer check to Morrison's Concrete Finishers as a total returned premium payment comprised of $2,153.87 return gross premium from Traveler's Insurance Company and $94.13 representing her own unearned agent's commission. When Respondent did not issue him a check, Lewis T. Morrison sought out Respondent at her home where he requested payment of his full refund. In response, Respondent stated that she would attempt to pay him as soon as she could, that she was having medical and financial problems, and that the delay was a normal business practice. Respondent testified that on or about April 19, 1990, in an attempt to induce Mr. Morrison to renew Morrison's Concrete Finishers' workers' compensation policy through Fleming Island Insurer, she offered him a "credit" of the full $2,248.00 owed him. Pursuant to this offer of credit, Respondent intended to pay Traveler's Insurance Company or another insurance company for Morrison's Concrete Finisher's next year's premium in installments from Fleming Island Insurer's account. This "credit" represented the return premium Respondent had already received from Traveler's Insurance Company on behalf of Morrison's Concrete Finishers for 1988-1989 which she had already deposited into Fleming Island Insurer's business account. Whether or not Mr. Morrison formally declined Respondent's credit proposal is not clear, but it is clear that he did not affirmatively accept the credit proposal and that he declined to re-insure for 1989-1990 through Respondent agent or Traveler's Insurance Company. Respondent still failed to pay the return premium and commission which she legitimately owed to Morrison's Concrete Finishers. On June 28, 1990, the Traveler's Insurance Company issued a check directly to Mr. Morrison for the full amount of $2,248.00. Respondent did not begin repaying Traveler's Insurance Company concerning Mr. Morrison's premium until after intervention by the Petitioner agency. At formal hearing, Respondent offered several reasons for her failure to refund the money legitimately due Mr. Morrison. Her first reason was that the district insurance commissioner's office told her to try to "work it out" using the credit method outlined above and by the time she realized this method was unacceptable to Mr. Morrison, he had already been paid by Traveler's Insurance Company. However, Respondent presented no evidence to substantiate the bold, self-serving assertion that agency personnel encouraged her to proceed as she did. Respondent also testified that she did not know immediately that Traveler's Insurance Company had reimbursed Mr. Morrison directly. However, it is clear she knew of this payment well before she began to pay back Traveler's, and since Mr. Morrison did not reinsure through her or Traveler's she should have immediately known the "credit" arrangement was unacceptable to him. Respondent further testified that she did not want to repay Mr. Morrison until a claim on his policy was resolved. However, there is competent credible record evidence that the Traveler's Insurance Company 1988-1989 workers' compensation policy premium refund was governed solely by an audit based on payroll. Mr. Morrison's policy premium or refund consequently was not governed by "loss experience rating", and the refund of premium would not be affected by a claim, open or closed. Thus, the foregoing reasons given by Respondent for not refunding Mr. Morrison's money are contradictory or not credible on their face. They also are not credible because Respondent admitted to Mr. Morrison in the conversation at her home (see Finding of Fact 24) that she was having trouble paying him because of medical and financial difficulties. Further, they are not credible because Respondent testified credibly at formal hearing that she would have paid Mr. Morrison but for her bank account being wiped out by a fraudulent check given her by an unnamed third party. On August 10, 1992, Respondent was charged by Information with two counts of grand theft. See, Section 812.014(2)(c) F.S. The allegations in the Information charged Respondent with theft of insurance premiums from Linda Smith and Lewis T. Morrison, and arose out of the same facts as found herein. On December 17, 1992, Respondent entered a nolo contendere plea to only the first count of grand theft as to matters involving Linda Smith and the other count was "null prossed." Respondent secured a negotiated sentence on the first count. "Grand theft" is a felony punishable by imprisonment by one year or more. Adjudication was withheld pending satisfactory completion of probation, including community service and payment of restitution and court costs. Respondent has been complying with her probation, including restitution payments.
Recommendation Upon the foregoing findings of fact and conclusions of law, it is recommended that the Department of Insurance enter a final order finding Respondent guilty of violations of Sections 626.561(1), 626.611(7), (9), (10), and (13); 626.621(2) and (6) F.S. under Count I, violations of Sections 626.561(1), 626.611(7), (9), (10), and (13), and 626.621(2) and (6) under Count II, and violations of Sections 626.611(14) and 626.621(8) F.S. under Count III, finding Respondent not guilty of all other charges under each count, and revoking Respondent's several insurance licenses. RECOMMENDED this 23rd day of June, 1993, 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 23rd day of June, 1993. APPENDIX TO RECOMMENDED ORDER 92-2060 The following constitute specific rulings, pursuant to S120.59(2), F.S., upon the parties' respective proposed findings of fact (PFOF). Petitioner's PFOF: As modified to more correctly reflect the whole of the record evidence and avoid unnecessary, subordinate, or cumulative material, all of Petitioner's proposed findings of fact are accepted. Respondent's PFOF: Sentence 1 is accepted as a paraphrased allegation of the Second Amended Administrative Complaint. Sentence 2 is covered in Findings of Fact 4-18. Sentence 3 is accepted but subordinate and to dispositive. Sentence 4 is apparently Respondent's admission that she owed $2,604.40 to Linda Smith and paid her $500.00 of it. Accepted to that extent but not dispositive in that full payment was not made timely. Sentence 1 is accepted as a paraphrased allegation of the Second Amended Administrative Complaint but not dispositive. Sentence 2 is accepted but immaterial. Sentence 3 is rejected as argument and not dispositive. As stated, the proposal also is not supported by the record. Sentence 4 It is accepted that Mr. Morrison admitted he had a claim. However, the record does not support a finding that he requested Respondent to contact Traveler's Ins. Co. about it. Even if he had, that is subordinate and not dispositive of the ultimate material issues. Sentence 5 is rejected as not supported by the credible record evidence. Covered in Findings of Fact 23-28. Sentence 6 is rejected as not supported by the record and as argument. Sentence 7 Accepted. Sentence 8 Accepted. The "Descriptive Narrative" is accepted through page 4, but not dispositive. Beginning with the words "In summary" on page 5, the remainder of the proposal is not supported by the record in this cause which closed April 16. 1993. COPIES FURNISHED: Daniel T. Gross, Esquire Division of Legal Services Department of Insurance and Treasurer 412 Larson Building Tallahassee, FL 32399-0300 Judy Louise Robinson 4336 Shadowood Lane Orange Park, FL 32073-7726 Tom Gallagher State Treasurer and Insurance Commissioner Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, FL 32399-0300 Bill O'Neil General Counsel Department of Insurance and Treasurer The Capitol, PL-11 Tallahassee, FL 32399-0300
The Issue The issue in this case is whether Respondent, Ocala Exterior Solutions, Inc., failed to properly maintain workers' compensation insurance coverage for its employees, and, if so, what penalty should be assessed.
Findings Of Fact The Department is the state agency responsible for ensuring that all employers maintain workers' compensation insurance for themselves and their employees. It is the duty of the Department to make random inspections of job sites and to answer complaints concerning potential violations of workers' compensation rules. This case arose as a result of a random inspection. Respondent is a business created by Johnny Busciglio on or about October 16, 2012. At all times relevant hereto, Respondent was duly licensed to do business in the State of Florida. Its business address is 140 Southwest 74th Lane, Ocala, Florida 34476. On May 22, 2015, the Department’s investigator, William Pangrass, made a random site visit to a construction site located at a residence at 9189 Southwest 60th Terrace Road, Ocala, Florida. He saw two men installing soffit as part of the construction which was going on. Pangrass remembers the men identifying themselves as Derek McVey and Frank Deil. When Pangrass inquired as to their employer, the two men were initially not certain for whom they were working. One of the men made a telephone call and then told Pangrass they were employees of Sauer & Sons. Interestingly, Respondent said the two men on-site that day were McVey and a man named James Van Brunt. Pangrass contacted Sauer & Sons and were told that neither McVey nor Deil (or Van Brunt) were employees of that company. He was told by a representative of Sauer & Sons that the men were in fact employees of Respondent. Pangrass then verified that Respondent was a current, viable company and checked whether the company had workers’ compensation insurance coverage for its employees. He found that Respondent had a workers’ compensation insurance policy for a short time in 2014. Two of Respondent’s employees, however, did have exemptions from coverage. Those two were Johnny Busciglio and Anthony Wayne. Based on his findings, Pangrass issued a SWO which he posted at the work site he had visited. He posted the SWO on the permit board in front of the job site on May 26, 2015. On May 29, he served a Request for Production of Business Records on Respondent, seeking information concerning Respondent’s business for purposes of calculating a penalty for failure to have workers’ compensation insurance in place. Respondent emailed the requested business records to Pangrass. The Department requested additional records and clarification concerning some of the records which had been provided. Busciglio made a good faith effort to respond to each of the Department’s requests. After review of Respondent’s business records, the Department calculated a penalty and issued an amended OPA. That amended OPA was issued on September 8 and served on Busciglio (as agent for Respondent) on October 1, 2015. The amount of the penalty in the amended OPA was $9,896.32. Within a few days after receiving the amended Order, Busciglio obtained workers’ compensation insurance for his employees, paid a down payment of $1,000 to the Department, and Respondent was released to resume its work. The penalty in the amended OPA was based upon information obtained from Busciglio concerning Respondent. Using the bank records supplied by Busciglio, the Department determined that Respondent had the following employees: Eric McVey, Frank Dorneden, Jeff Burns, Jordan Anchondo, Anthony Wayne, Nikki Smith, Johnny Busciglio, and Jason Bridge. Their wages were used by the Department to calculate the penalty. The penalty was calculated by the Department as follows: The business was assigned class code 5645, construction on residential dwellings; The period of non-compliance was set at two years; The gross payroll amount for that two-year period was established at $30,905.14; The gross payroll amount was divided by 100, resulting in the sum of $309.05; The approved manual rate, i.e., the amount the employer would have paid if insurance was in place, was assigned for each employee; The gross payroll was multiplied by the manual rate; And the penalty amount was established, taking the figure in (f), above, and multiplying by two. Busciglio established by credible testimony, unrefuted by the Department, that Nikki Smith was a person from whom he bought tools; she was never an employee of Respondent. The same was true for the person listed as Jason Bridge (although his real name may have been Jason Woolridge). As for Eric McVey, he worked for Frank Dorneden, who paid McVey directly. There were no payroll records or checks from Respondent provided to the Department which were attributable to McVey. Dorneden had begun working for Respondent on December 22, 2014. On May 22, 2015, he was asked by Busciglio to visit the work site; he found McVey working there and Deil/Van Brunt was also on the site. Neither the Department nor Respondent offered any further explanation about Deil/Van Brunt, nor did the Department attribute any penalty to Van Brunt as a putative employee. His status in this matter is a mystery. When the penalties associated with McVey, Smith, and Bride are subtracted from the calculation, the amount of the penalty would be $9,454.22.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department of Financial Services requiring Respondent, Ocala Exterior Solutions, Inc., to pay the sum of $9,454.22. DONE AND ORDERED this 20th day of November, 2015, in Tallahassee, Leon County, Florida. S R. BRUCE MCKIBBEN 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 20th day of November, 2015.
The Issue Whether Petitioner realized unlawful excess profits, and if so, in what amount.
Findings Of Fact Sentry is currently licensed and holds a Certificate of Authority to do business in the State of Florida as a foreign property and casualty insurer, and was so licensed at all times material. Sentry Select Insurance Company was known as John Deere Insurance Company until it was purchased by Sentry Insurance Group in October of 1999. On or about June 24, 1998, Sentry submitted Form D14-15 to the Department as required by Section 627.215, Florida Statutes. Form D14-15 is also known as Reporting Form F. The form provides insurance company data which is used by the Department to calculate workers' compensation excess profits. The Department did calculate the excess profits in the case of Sentry and on January 6, 1999, filed a Notice of Excessive Profits finding that Sentry had realized excess profits in the amount of $191,094.00 for calendar/accident years 1994-1996. In response to the Notice of Excessive Profits, Sentry provided to the Department, on or about May 26, 1999, commercial property and casualty experience data on a Form DI4-358. This was not a certified submission, nor was any evidence submitted which indicated that it should have been certified. Sentry asserted that this data could be used to offset the excess profits determined by the Department. Patricia Ferguson authenticated and made competent the commercial property and casualty experience data submitted by Sentry in May of 1999. The raw data presented is a business record of the company and therefore is admitted as an exception to the hearsay rule. Ms. Ferguson asserted that if the commercial property and casualty experience data was combined with the workers' compensation experience, Sentry would not have realized excess profits in the years 1994, 1995, and 1996. However, the material provided, including a completed Form DI4-358, is insufficient to permit the Department to make that determination. The excess profits statute, Section 627.215, Florida Statutes, was originally enacted into law in 1979. This statute only addressed excess profits in the case of workers' compensation insurance and employer's liability insurance for business written in Florida. In 1988, the Florida Legislature added commercial property and commercial casualty insurance written in Florida to the excess profits law and provided for a combination of these types of insurance in the case of insurers who wrote these types of coverage. Because the calculation of excess profits requires information from three years' experience, the statute was drafted so that only workers' compensation and employer's liability insurance was considered until 1991. Thereafter the different lines were to be combined. During the three-year period leading to 1991, data was reported, but no excess profits were required to be calculated. Between 1991 and 1997, companies reported their profit or loss underwriting experience for the latest three calendar/accident years valued at the end of the following year. Reports to the Department were due prior to the first day of July. For example, if the calendar accident years were 1994, 1995, and 1996, the profit or loss underwriting experience would be valued on December 31, 1997, and reported to the Department on Form F prior to July 1, 1998. Form F must be certified by a corporate officer. Excess profit has been realized if an insurer's underwriting gain exceeds the anticipated underwriting profit from the insurer's rate filings plus a five percent earned premium which the insurer may retain. Stated another way, if an insurer's profit is greater than that anticipated in its rate filing plus five percent then that amount is deemed excess profit. The Form F submitted by Sentry on June 24, 1998, was certified by the Assistant Secretary of Sentry as being a full and true statement. The Department correctly determined the amount of excess profit to be $191,094.00. This is the amount which must be returned to Sentry's premium payers as a cash payment or credit toward future premiums. The Department correctly declined to consider the commercial property and casualty experience submitted by Sentry, on May 26, 1999, on Form DI4-358, because the Department believed it could not consider that data in light of a change in the law made in 1995 which was effective January 1, 1997.
Recommendation Based upon the Findings of Fact and Conclusions of Law, it is RECOMMENDED: That a final order be entered which finds that Sentry realized $191,094.00 in excess profits for workers' compensation business covering calendar/accident years 1994, 1995, and 1996. DONE AND ENTERED this 30th day of October, 2001, in Tallahassee, Leon County, Florida. HARRY L. HOOPER 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 30th day of October, 2001. COPIES FURNISHED: Elenita Gomez, Esquire Richard M. Ellis, Esquire Department of Insurance Division of Legal Services 200 East Gaines Street 612 Larson Building Tallahassee, Florida 32399-0333 Frank J. Santry, Esquire Granger, Santry & Heath, P.A. 2833 Remington Green Circle Post Office Box 14129 Tallahassee, Florida 32317 Honorable Tom Gallagher State Treasurer/Insurance Commissioner Department of Insurance The Capitol, Plaza Level 02 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Insurance The Capitol, Lower Level 26 Tallahassee, Florida 32399-0307
Findings Of Fact Based upon the oral and documentary evidence adduced at the Final Hearing and the entire record in this proceeding, the following findings of fact are made: Petitioner, the Florida Employers Safety Association Self-Insurance Fund (the "Fund"), is a workers' compensation group self-insurance fund, which, during all pertinent time periods was subject to Chapter 440, Florida Statutes, and Chapter 38F-5, Florida Administrative Code. Gulf Atlantic Management Group is the administrator for the Fund. The Fund began operations on April 1, 1990. At the time of the hearing in this case, the Fund was in its fifth year of operation. Prior to July 1, 1994, the state regulatory authority for workers' compensation self-insurance funds was DLES (State of Florida, Department of Labor and Employment Security). As of July 1, 1994, regulatory authority for workers' compensation self-insurance funds was transferred to DOI (State of Florida, Department of Insurance and Treasurer). For purposes of this Recommended Order, the "Department" shall refer to the regulatory authority responsible for workers' compensation group self-insurance funds in Florida during the pertinent time. As a result of the statutory changes, many DLES employees involved in the regulation of worker's compensation group self- insurance funds were transferred to DOI's, Bureau of Property and Casualty Self-Insurance which currently handles all regulatory matters relating to worker's compensation group self-insurance funds. Chapter 38F, Florida Administrative Code, was promulgated by the Department pursuant to its regulatory authority over worker's compensation group self-insurance funds as delineated in Chapter 440, Florida Statutes. The Rules require workers' compensation self-insurance funds to submit certain financial and actuarial documents to the Department on a regular basis. Form BSI-26 is a Department approval form that is to be submitted each year with an actuarial report; Form BSI-25 is another Department form that is filed with the year-end financial statements; and Form BSI-24 is a quarterly, non-financial statistical report on a fund's operations. Before the Department would approve a dividend distribution by a fund for a fiscal year beginning or ending in 1993, the Department required an audited certified financial statement, an annual report of financial condition and a loss reserve review by a qualified actuary to be submitted seven months after the end of a fund's fiscal year. The Fund's fiscal year runs from April 1 to March 31 of each year. Thus, its year-end reports and statements are due on or before November 1. At the time of the hearing in this case, Form BSI-25's had been submitted by the Fund to the Department for each fiscal year of the Fund's existence. Financial statements, independent auditor's reports and actuarial reports had also been submitted by the Fund to the Department for each Fund fiscal year. In addition, all quarterly BSI-24's had been filed. On or about October 29, 1993, the Fund's administrator sent the Department a request for an extension of time to file the required reports for the fiscal year that ended March 31, 1993. This request was denied by the Department in a letter dated November 3, 1993. Shortly thereafter, when the Department realized it had not received the required reports and information from the Fund within seven months from the end of the Fund's fiscal year, the Department sent a letter dated November 18, 1993 to the Fund requesting the required reports. On November 19, 1993, the administrator for the Fund forwarded to the Department the audited financial statements and actuarial report for the fiscal year ending March 31, 1993. In those statements and report, the Fund's loss reserves were discounted. In January 1994, the Department reviewed the required reports submitted by the Fund and determined that the loss reserves reflected on the BSI-25 form for the year ending March 31, 1993 were deficient because they discounted loss reserves contrary to the Department's policy. Gene Smith, the Department's actuary, wrote directly to Mr. Sanz, the administrator of the Fund, and requested the Fund to submit by January 28, 1994 a corrected BSI-25 which did not discount loss reserves. Petitioner responded to the Department's request with a letter from William Larry Shores, the Fund's Certified Public Accountant, to the Department dated January 21, 1994 which set forth Mr. Shores' opinion as to why the Department should allow Petitioner to discount its loss reserves. The Fund did not submit amended or modified financial documents in accordance with the Department's request. The Fund contends there is no rule or statutory basis for the Department to require the Fund to submit a corrected BSI-25 or a corrected financial statement. On or about March 8, 1994, the Fund submitted a written letter request to the Department, pursuant to Section 440.57(5), Florida Statutes, and Rule 38F-5.065(3), Florida Administrative Code, requesting authorization for a distribution in the amount of $781,065.02 from the surplus reflected on the Fund's financial statements and Actuarial Report for the Fiscal Year ending March 31, 1993. As indicated above, prior to the Fund's March 8, 1994 letter request for a disbursement, the Fund had completed and submitted to the Department all financial and actuarial data and reports required by the Florida Statutes and the Florida Administrative Code, but the Department had questioned whether those reports properly reported loss reserves. By letter dated April 1, 1994, the Department denied the Fund's March 8, 1994 request for a distribution. The request was denied pursuant to Section 38F-5.065(4), Florida Administrative Code, which was the applicable rule in effect as of March 31, 1993. This Initial Denial Letter stated that the Department had determined that approval of the requested dividend would impair the financial solvency of the Fund. Prior to denying the Fund's Initial Request, the Department reviewed the BSI-25 forms submitted by the Fund as of March 31, 1993, the Fund's March 31, 1993 financial statement, the Fund's actuarial report for the fiscal year ending March 31, 1993 along with the BSI-26 form, the Fund's June 30, 1993 BSI- 24, and two letters from William Larry Shores, C.P.A. submitted on behalf of the Fund. The first letter was the January 21, 1994 letter discussed in Findings of Fact 14 regarding the discounting of loss reserves. The second letter from Shores addressed excess coverage. For the fiscal year ending March 31, 1993, the financial statement submitted by the Fund to the Department reflected an aggregate surplus 1/ of $1,786,665.00. In this March 31, 1993 financial statement, the Fund's reserves were discounted at a discount rate of 5.5 percent. The 5.5 percent discount rate was determined by the Fund's independent actuary. According to these statements, if the requested dividend was approved and distributed, there would continue to be an excess of assets over liabilities of slightly in excess of $1,000,000.00. However, if loss reserves were not discounted, the Fund's total liabilities would exceed total assets for the fiscal year ending March 31, 1993 if the distribution was made. On or about August 11, 1994, the Fund submitted a second written letter request (the "Second Request") to the Department, pursuant to Section 440.57(5), Florida Statutes, and Rule 38F-5.065(3), Florida Administrative Code, requesting authority to make a distribution of excess surplus in the amount of $781,065.02. Prior to the Fund's Second Request for a disbursement, the Department had received and reviewed the Fund's March 31, 1994 BSI-25 Form, the Fund's March 31, 1994 financial statement, the Fund's March 31, 1994 actuarial report, the Fund's BSI-26 form, the Fund's BSI-25 forms, the Fund's BSI-24 form as of June 30, 1994, along with all of the Funds financial documents and reports submitted as of March 31, 1993. For the fiscal year ending March 31, 1994, the financial statements submitted by the Fund to the Department reflected an aggregate surplus in the amount of $4,163,401.00. In those 1994 year-end financial statements, the Fund's reserves were discounted at a rate of 7 percent. The 7 percent discount rate was determined by the Fund's independent actuary. The Fund's financial statements and reports submitted for the fiscal year ending March 31, 1994, indicated that if the requested dividend was approved and distributed, there would be an excess of assets over liabilities of more than $3,000,000.00. As noted above, an examination of the financial and actuarial documents submitted by the Fund to the Department confirms that, if the dividend request was approved and disbursed, total assets would not be greater than total liabilities for the fiscal year ending March 31, 1993 unless the loss reserves are discounted. It is not entirely clear whether the Fund's total assets would have exceeded total liabilities following the requested distribution for the fiscal year ending March 31, 1994 if the loss reserves were not discounted. One of Petitioner's expert witnesses testified that, without the discounting of loss reserves, the Fund's assets would have exceeded liabilities by only $142,000 for the Fund year ending March 31, 1994. This surplus would not accommodate the Fund's request for a dividend disbursement of $781,065.42. Petitioner's other expert witness testified that "if you back out the discounting of the loss reserves at March of '94, total assets are approximately equal to total liabilities." By letter dated September 7, 1994, the Department denied the Fund's Second Request for a distribution specifically stating that the discounting of loss reserves was not permissible. The Second Denial Letter advised the Fund of its right to a hearing on the matter pursuant to Chapter 120, Florida Statutes. No formal request for hearing was submitted with request to this Second Denial Letter. The Actuarial Reports and financial statements filed by the Fund for the fiscal years ending March 31, 1993 and 1994 contained certified qualifying language regarding the discounting of loss reserves. For example, the Fund's independent actuary provided as follows in the report for the fiscal year ending March 31, 1994: "the discount rate of 7.0 percent [5.5 percent 2/ for 1993] has been selected by [the actuary] for illustrative purposes only. The appropriate use of this discount rate for [the Fund] is not guaranteed by [the actuary]. Establishing loss reserves on a discounted basis requires that future investment income earned on the loss reserves will need to be added to the reserves to strengthen them rather than be recognized as net income. The ultimate accuracy of discounted reserves depends on the accuracy of the ultimate undiscounted loss estimates, the estimated pay out schedule, and the interest rate assumption used to discount the loss pay out schedule. If the discounted loss estimate is used, the management of [the Fund] should carefully review each of these assumptions to assure that they are in agree- ment with them." The discounting of loss reserves is based upon the concept that if you can reasonably predict a payoff pattern and rate of return then you can discount whatever the debit is back to the present to ascertain the present value of the future income stream that will be used to fully fund the future losses whenever they come due. In other words, the discount rate is a function of what is expected to be earned over the pay out period of the claims. The rate of discount for loss reserves is usually calculated based upon the investment yields that the company or the entity is able to obtain in its investment portfolio, taking into consideration certain other factors, such as maturity of that investment portfolio. The discount rates used by the Fund in the reports and statements submitted to the Department for the fiscal years ending March 31, 1993 and 1994 were based upon a combination of industry average and the Fund's history. During the time it was responsible for overseeing worker's compensation self-insurance funds, the DLES Bureau of Worker's Compensation Self-Insurance consistently took the position that the discounting of loss reserves on the financial statements and reports submitted to the Department was not acceptable because there was no explicit authority in either the Florida Statutes or the Administrative Code for discounting reserves. DLES informed all self-insurance funds that any matter submitted to it for review and/or approval would be evaluated without reference to or consideration of discounting. The position that reserve discounting is inappropriate has been maintained by the DOI Bureau of Property and Casualty Self-Insurance. Thus, it has been the consistent position of the regulatory authorities that funds must report total reserves without discounting. Likewise, the evaluation of whether to approve a request to make a dividend disbursement has consistently been based on a determination of whether total assets exceed total liabilities. Under the Department's view, neither total reserves nor total liabilities can be determined when loss reserves are discounted. Some Florida worker's compensation self-insurance funds have discounted loss reserves in reporting their reserves to the Department. The Department has never approved this practice and has not used discounted reserves in analyzing matters within its regulatory control. The issue of whether loss reserves should be discounted is a question of growing controversy and legitimate debate. Petitioner's experts suggest that discounting of loss reserves should be accepted because such discounting is acceptable under Generally Accepted Accounting Principles and various other accounting sources. Generally Accepted Accounting Principles ("GAAP") are principles which are promulgated by authoritative bodies or generally utilized in the accounting industry for companies that report financial information. Prior to December 20, 1993, Chapter 38F-5, Florida Administrative Code, provided that financial statements for workers' compensation self- insurance funds should be prepared in accordance with GAAP. In other words, the Department Rules in effect at the time of the filing of the Fund's March 31, 1993 and March 31, 1994 fiscal year-end financial statements required the financial statements to be prepared in accordance with GAAP. Effective December 20, 1993, Chapter 38F-5, Florida Administrative Code was amended. The amended rule applies to reporting by workers' compensation group self-insurance funds for fiscal years beginning after December, 1993. Thus, the amended Rule 38F-5.059 applies to Petitioner's Fund year beginning April 1, 1994. This Amended Rule effectively implements stable accounting procedures in place of GAAP by incorporating certain guidelines under the National Association of Insurance Commissioners Rules and Regulations, with certain modifications. As amended, Rule 38F-5 clarifies that a discounting of loss reserves is not allowed, but anticipated income from the reserve accounts can be included. 3/ Among the various sources mentioned in support of Petitioner's contention that discounting of loss reserves is acceptable under GAAP are the following: (1) Statement of Financial Accounting Standards Number 60; (2) American Institute of Certified Public Accountants Statement of Position 92-4, Auditing Entities Loss Reserves; (3) Financial Accounting Standards Board Concept Statement Number 5; and (4) an American Institute of Certified Public Accountants guide entitled Audits of Property and Liability Insurance Companies. Other non-authoritative sources were also mentioned. For the most part, these pronouncements simply provide procedure and guidance for how these discounts are to be reported when discounting is being utilized. They do not provide authority for the contention that discounting of loss reserves is always permissible nor do they establish standards for when the discounting of loss reserves should be allowed for regulatory purposes. The more persuasive evidence established that, under GAAP, a discounting of loss reserves is allowed only if it is prescribed by a statute or written rule. In support of its' position, the Department cites guidelines promulgated by the United States Securities and Exchange Commission ("SEC") regarding the propriety of discounting of reserves. These guidelines are only directly applicable to publicly held companies which are SEC registrants. However, the SEC publication known as Staff Accounting Bulletin 62 (SAB 62) is the only written authoritative literature currently in existence regarding the propriety of discounting reserves. SAB 62 provides that discounting of loss reserves is only appropriate if the state in which the entity is domiciled allows discounting of loss reserves. While the Fund is correct in asserting that SAB 62 is not directly applicable to it since it is not a publicly held company, that publication does have some persuasive value in determining whether GAAP should be viewed as allowing a workers' compensation self-insurance fund to discount loss reserves. The Fund contends that discounting of workers' compensation self- insurance fund loss reserves is permissible under Section 625.091, Florida Statutes. As set forth in the Conclusions of Law below, the Fund's reliance upon this statute is misplaced. The statute only directly applies to insurers and not to self-insurance funds. Section 440.5705, Florida Statutes, should not be read as a directive that all provisions of Section 625.091, Florida Statutes, are applicable to self-insurance funds. In summary, for all Fund years ending prior to May 31, 1994, neither the Florida Statutes nor Rule 38F-5, Florida Administrative Code, required statutory accounting for the financial statements submitted to the Department by a workers' compensation self-insurance fund. Consequently, there was no specific statutory authority prohibiting the discounting of loss reserves nor was there any authority permitting such discounting. The evidence indicates that workers' compensation self-insurance funds in some states other than Florida are allowed to discount loss reserves. The standards governing such discounting and the purposes for which it is used are not clear. Other than the discounting of loss reserves, there is no evidence that the March 31, 1993 and March 31, 1994 financial statements for the Fund were not in accordance with the requirements of the Department, including Rule 38F-5, Florida Administrative Code, and/or that the statements were not completed in accordance with GAAP. Petitioner's contention that its marketing efforts for participation in the Fund are hindered by the denial of a distribution is irrelevant to a determination of whether the requested distribution should be approved by the Department.
Recommendation Based upon the foregoing Findings and Facts and Conclusions of Law, it is RECOMMENDED that the Department of Insurance and Treasurer enter a Final Order denying Petitioner's request for authorization to make a dividend disbursement. DONE AND RECOMMENDED this 28th day of June, 1995, in Tallahassee, Leon County, Florida. J. STEPHEN MENTON 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 28th day of June, 1995.
Findings Of Fact National Benefit is a foreign corporation incorporated under the laws of the District of Columbia, organized for profit, and doing business in several states, including the State of Florida. National Benefit is authorized to write insurance in the State of Florida. Insurance Marketing Corporation (INC) operates as the marketing arm for Associated Direct Marketing Services (ADMS), which in turn is an affiliate of National Benefit and functions as the marketing company for National Benefit. INC prepares all of National Benefit's direct response marketing, including the advertisement at issue in this case. National Benefit is fully responsible for advertisements prepared by INC. National Benefit has advertised and is currently advertising insurance products, through the television medium, which are received by residents of the State of Florida. One such product is known as "Security Life TM." The television advertising at issue in this case is referred to as IMC- 103 and is a television commercial featuring Dick Van Dyke as the compensated spokesperson. Van Dyke states: "that National Benefit Life has found a way for you to get the protection you need . . . at a price you really can afford. Just $3.95 a month . . . ." At this point in the advertisement, superimposed on the screen are the words: "$3.95 a month (per unit)" At no time during this advertisement is there either an explanation of the use of units in which a common premium is specified or a description of varying benefit amounts according to age. During the advertisement, Van Dyke states that a forty-five (45) year old male consumer can obtain forty thousand dollars ($40,000.00) of coverage for just sixty-five cents ($.65) a day. However, the implication is that such coverage can be obtained for a monthly premium of three dollars and ninety-five cents ($3.95) because this figure is prominently displayed twice on the screen and Van Dyke mentions this figure twice within a 120-second period. In reality, the consumer must purchase five (5) units of insurance at a monthly premium of nineteen dollars and seventy-five cents ($19.75) to be eligible for the forty thousand dollars ($40,000) benefit advertised. At the advertised premium of three dollars and ninety-five cents ($3.95)(one unit) per month, a forty-five (45) year old male consumer would receive benefits of only six hundred ($600.00) in Term Life benefits if he dies a natural death at age seventy (70) while having paid in seven hundred eleven dollars ($711.00). A forty-five year old consumer purchasing five (5) units would obtain a forty thousand dollar ($40,000.00) benefit only if the consumer's death was caused by a covered accidental bodily injury and only after the first two years of coverage. The amount of coverage decreases as the policyholder's age increases. Death benefits are limited to premiums paid during the first two (2) years of coverage if death is caused by other than accidental bodily injury. The advertisement contains a 14-word superimposed summary of limitations on benefits which appear on the screen for approximately two (2) seconds. At the same time that the summary of limitations appears on the screen, Van Dyke is discussing something unrelated to the summary of limitations. There is no other explanation of these terms. A person of average education or intelligence cannot be expected to read or comprehend the afore-mentioned summary within the two (2) second period in which the summary appears on the screen. In fact, the undersigned was able to read only the first five words when the advertisment was shown. Van Dyke also states during the afore-mentioned advertisement, "Big Dollar Benefits." Using Van Dyke's example given in the advertisement, i.e., forty thousand dollars ($40,000.00) of coverage, a forty-five (45) year old male would have to purchase five (5) units of insurance, keep the policy in force, die before age forty-ninety (49), and die as a result of accidental bodily injury, directly and independently from all other causes, within ninety (90) days of the accident. None of these factors are mentioned in the advertisement. Likewise, a forty-five (45) year old male could purchase five (5) units of insurance, keep the policy in force until his natural death at age sixty (60), and have paid National Benefit a total premium of three thousand five hundred fifty-five dollars ($3,555.00), yet the policy would pay, because of decreasing benefits, a total benefit of only three thousand dollars ($3,000.00). The advertisement indicates "guaranteed acceptance" by superimposition and spoken text without explaining the limitations on benefits in a manner contiguous to and as prominent as the term. Taken as a whole, IMC-103 is deceptive and misleading advertising and has the capacity or tendency to mislead or deceive either by fact or implication. After the Notice and Order to Show Cause was received by National Benefit in November, 1987; it continued to run the subject advertisement on local television stations until February, 1988. The advertisement, when cancelled, was cancelled for poor response. National Benefit re-entered the spot market in Florida with this advertisement subsequent to its cancellations. National Benefit continues to show a commercial almost identical to INC-103 available for viewing in Florida by Cable T.V. National Benefit had actual notice of and access to the rules of the Department of Insurance regarding advertising, Chapter 4-35, Florida Administrative Code. National Benefit has a "compliance manual," but does not always follow the requirements set out in that manual. Repeated references to age and health emphasize the aspects of the policy which pay for death by natural causes over death by accident. The advertisement neglects objective information and obfuscates elements of cost. Taken as a whole, there is both direct and circumstantial evidence of a knowing intent to make a distorted presentation and to present less than a full, fair and accurate explanation of the policy through this televised advertisement. The advertisement involves a compensated person and includes identification of various toll-free telephone numbers which Florida residents are encouraged to use in order to receive additional information concerning the advertised insurance product. As a result of receiving a telephone inquiry from Florida residents, National Benefit also solicits its insurance products via U.S. Mail by sending consumers information packets called fulfillment kits containing various written material concerning its advertised product. At the time a consumer views the television advertisement, the consumer does not have the fulfillment kit available. The television advertisement is a separate advertisement and may in itself be deceptive and misleading. The television ad contains an "800" number that viewers can call to receive a fulfillment kit. The fulfillment kit contains an application for insurance. Once consumers receive a fuflment kit, if they wish to purchase insurance, they fill out the application and send it to the company. Because the next item received following the viewing of the T.V. commercial contains an application form, it is possible to purchase the insurance solely on the basis of Van Dyke's representations as to premiums and benefits. The statements of Van Dyke went beyond the parameters authorized in Rule 4-35.008, Florida Administrative Code, and constituted solicitation. Explanation of policy provisions including quotation of premiums and benefits are acts performed by a licensed agent and constitute solicitation. Van Dyke described coverages, benefits and premiums, and in doing so is acting as an insurance agent for National Benefit. Van Dyke is not licensed as an insurance agent in the State of Florida. No action has been brought by the Department against Van Dyke and Van Dyke is not a party to this action. Joe Plante, Vice-President of Direct Response Advertising Compliance for IMC, keeps up with the current rules and regulations of state insurance departments as they occur. In order to carry out this responsibility, Mr. Plante has a set of ACLI manuals relating to group insurance which are updated on a daily basis. He receives updates to the National Law Services Manual, and he attends regular NAIC meetings and ad hoc NAIC meetings, including the Delaware Valley Ad Hoc Committee. NAIC is an acronym for National Association of Insurance Commissioners. It meets three times per year for a day or two days for the purpose of discussing compliance issues. Mr. Plante also determines where advertising can be viewed and aired. In carrying out this responsibility he often requires that advertising materials be modified to comply with state regulations and he has taken advertising to the Florida Department of Insurance to be reviewed prior to use since 1981, even though such a review is not required by the Department. When a company submits an advertisement for review by the Department, if the analysts do not find any apparent violations, their usual procedure is to stamp the advertisement "Filed" and return a copy to the company. The same procedure may or may not be followed after apparent violations noted by the analysts have been corrected by the company. After a company has made all changes in its advertising requested by the Department, the Department's file is closed. Closing the file means that the advertising appears to be in compliance with applicable statutes and rules. A file may be reopened at any time. On November 25, 1986, Plante met with Department personnel regarding a television advertising script identified as IMC-115 and a fulfillment kit which the company planned to mail to viewers responding to the advertisement. Mr. Plante did not supply the Department with a videotape of the ad. The Department personnel took the advertising material to review and agreed to meet with Mr. Plante later that same day to offer their comments. The supervisor of the analyst who reviewed INC-115 told the analyst, in front of Mr. Plante, that he should review the T.V. script and solicitation letter only. The fulfillment kit and videotapes were not reviewed at that time. At the second meeting on November 25, 1986, Department personnel suggested various changes be made to the television advertising material which had been submitted. Mr. Plante returned to his office in Pennsylvania and directed that the changes suggested by the Department be incorporated in the television advertisements, with one exception. The Department's request that the compensated endorser's statement that "no agent will come to your home" be eliminated was not complied with because this would have entailed refilming the advertisements. On January 30, 1987, Mr. Plante submitted a videotape of a television advertisement identified as IMC-103 to the Department with a cover letter indicating that the requested changes had been made. IMC-103 is very similar to IMC-115, but not identical. No script was provided for IMC-103. On February 20, 1987, Department personnel sent a letter to Mr. Plante which states in part: "Once we have resolved this matter, the material appears to be in compliance with Florida advertising rules and regulations." Department personnel had not reviewed the videotape of IMC-103 prior to sending the letter. The television advertising identified as IMC-103 contains the words "Big dollar benefits," which were not contained in the script presented to the Department for review on November 25, 1986, and identified as INC-ll5. The Department closed its file on March 23, 1987. The compliance manual developed in September, 1986, by Mr. Plante for IMC states that Florida prohibits use of the term "No agent will call" and "No medical exam." However, the term "no agent will come to your home" was included in both IMC-115 and IMC-103. The manual contained these admonitions at the time IMC-115 was submitted to the Department for review. IMC began broadcasting IMC-103 in March, 1987, without further changes and spent in excess of $350,000.00 in broadcasting IMC-103 over the next year. In September, 1987, the Department began a review of medicare supplement and life and health insurance advertising. Department personnel were directed to obtain copies of the scripts and videotapes of insurance television advertisements, to review them, and to send the analysts' reviews to the legal office. In conjunction with this departmental review, Plante supplied the materials related to IMC-103. This action is a result of the September, 1987, investigation. Between March, 1987, when the Department closed its file on IMC-103 and November, 1987, when this action was brought, the Department clearly changed its policy regarding what statements by compensated endorsers constitute solicitation and what statements constitute an invitation to inquire. The Department has initiated rulemaking to reflect the Department's current policy in its rules. There is no definition of what constitutes deceptive or misleading advertising in the department's rules. In this case, both parties offered expert testimony of what the appropriate definition is. National benefit's expert, Phillip E. Downs, acknowledged that there are different definitions of deceptive advertising. The definition he supports is that advertising is considered to be deceptive if it includes untruthful claims that create belief levels in individuals that result in some purchase behavior that would result in some harm or damage to the consumer. Essentially, Downs' definition contains three elements: 1) requires that the advertisement contains statements which are untrue, and 2) which are believed by the consumer, 3) resulting in damage to the consumer. This definition is rejected as it does not conform to the statutory framework which recognizes that an advertisement can be either untrue, deceptive or misleading. Additionally, there is no statutory prerequisite involving the need to show damage to the consumer. Instead, the definition used and applied by the Department's expert, Richard W. Mizerski, is accepted and credited and it has been applied herein. That definition requires that the viewer be lead to believe things that are not true and it involved four factors: the probability of deception, the characteristics of the targeted audience, the materiality of the information, and the way the information is presented. An advertisement is deceptive if individuals have the capacity of taking away an understanding this is not based on reality or if they come away with a perception that is not realistic, given what the real situation is. It includes deception by omission. There is no necessity that actual injury occurs, but there must be a possibility of injury.
Recommendation Based upon the foregoing Findings of Fact and Conclusion of Laws, it is RECOMMENDED that the Department of Insurance, through the Insurance Commissioner, enter a Final Order and therein: Find National Benefit Life Insurance Company guilty of violating Sections 626.9521 and 626.9541 and Rules 4-35.004, 4-35.005, and 4-35.006(1)(a) and (f) and (2)(a). Dismiss the charges that National Benefit Life Insurance Company violated Sections 626.051 and 626.112. Impose an administrative penalty of $10,000.00 against National Benefit Life Insurance Company for the above mentioned violations. Find that the compensated spokesperson in IMC-103 does solicit insurance. Order National Benefit Life Insurance Company to cease and desist from using IMC-103 in Florida. DONE AND ENTERED this 12th day of August, 1988 in Tallahassee, Leon County, Florida. DIANE K. KIESLING 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 Administrative Hearings this 12th day of August, 1988. APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 87-5436 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, Department of Insurance and Treasurer Each of the following proposed findings of fact are adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 1(1); 2(2); 3(5); 4-19(4-19); 20(21); 21-39(47-65); 40-43(67-71); 46-51(22-27); 52(8); 53(9); 54(15); 55(20); 57(15); 58-62(28-32); 65 and 66(39); 67(38); 68(41); 69(42); 71(40); and 72-76(33-37) Proposed findings of fact 44, 56, 63, 64, and 70 are subordinate to the facts actually found in this Recommended Order. Proposed finding of fact 45 is irrelevant. Specific Rulings on Proposed Findings of Fact Submitted by Respondent, National Benefit Life Insurance Company Each of the following proposed findings of fact are adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 1(1 and 2); 2(3); 12(31 and 35); 17-19(44-46); 29(63); 30(66); 34(69); and 38(70). Proposed findings of fact 3, 4, and 6-8 are unnecessary. 3. Proposed findings of fact 5, 9-11, 14-16, 22, 26-28, 31, 32, 35, 37, 39-46, 48, 49, 53, 55, 58-60, and 62-65 are subordinate to the facts actually found in this Recommended Order. 4. Proposed findings of fact 13, 33, 51, and 52 are rejected as being unsupported by the competent, substantial evidence. 5. Proposed findings of fact 20, 21, 23-25, 36, 47, 50, 54, 56, 57, and 61 are irrelevant. COPIES FURNISHED: Gabriel Mazzeo, Attorney at Law Susan F. Stafford, Attorney at Law Richard W. Thornberg, Attorney at Law Office of Legal Services 413-B Larson Building Tallahassee, Florida 32399-0300 Douglas A. Mang, Attorney at Law Charles T. Collette, Attorney at Law Edward W. Dougherty, Jr., Attorney at Law P. O. Box 11127 Tallahassee, Florida 32302 Stephen R. Herbert, Attorney at Law 900 Third Avenue New York, New York 10022 Honorable William Gunter State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300
Findings Of Fact Having listened to the testimony and considered the evidence presented in this cause, it is found as follows: Dr. Melvin J. Hellinger is licensed to practice dentistry in the State of Florida by the State Board of Dentistry. Dr. Melvin J. Hellinger is currently practicing dentistry in Miami, Florida. Dr. Melvin J. Hellinger was indicted on three counts of income tax evasion in the United States District Court, District of Massachusetts. The indictment charged that Dr. Melvin J. Hellinger did willfully and knowingly attempt to evade and defeat a large part of the income taxes due and owing by him and his wife to the United States of America for the calendar years 1969, 1970 and 1971, by filing and causing to be filed with the District Director of Internal Revenue for the Internal Revenue District of Boston, in the District of Massachusetts, a false and fraudulent joint income tax return for the calendar years 1969, 1970 and 1971, each calendar year constituting a separate count. On March 10, 1975, Dr. Melvin J. Hellinger pled guilty to and was convicted of the offense of willfully and knowingly attempting to evade and defeat a large part of the income taxes due and owing by him and his wife to the United States of America by filing and causing to be filed with the Internal Revenue, a false and fraudulent joint income tax return, in violation of Section 7201, I.R.C., Title 26, U.S.C., Sec. 7201, as charged in Counts 2 and 3 of the aforementioned indictment. Count 2 charged that Dr. Hellinger did evade income taxes by filing an income tax return wherein it was stated that his and his wife's taxable income for calendar year 1970 was $47,883.08 and that the amount of tax due and owing thereon was $16,401.58, whereas, as he then and there well knew, their joint taxable income for said calendar year was $101,503.07, upon which said taxable income there was owing an income tax of $47,264.70. Count 3 charged that Dr. Hellinger did evade income taxes by filing an income tax return wherein it was stated that his and his wife's taxable income for calendar year 1971 was $50,877.52 and that the amount of tax due and owing thereon was $17,498.76, whereas, as he then and there well knew, their joint taxable income for said calendar year was $67,786.12, upon which said taxable income there was owing an income tax of $26,502.36. The United States District Court for the District of Massachusetts sentenced Dr. Melvin J. Hellinger to imprisonment for a period of three months, execution of prison sentence to be suspended and Dr. Hellinger placed on probation for a period of two years. As a special condition of his probation, he is to spend two days a month doing work at a charitable hospital or some similar institution under the supervision of the probation office. It was further ordered that Dr. Hellinger pay a fine in the amount of $10,000, payable on or before March 17, 1975. Dr. Melvin J. Hellinger is presently performing voluntary work one day a week at Jackson Memorial Hospital in Miami, Florida. Dr. Melvin J. Hellinger is a competent oral surgeon. Dr. Melvin J. Hellinger currently holds a valid license to practice dentistry in the state of Massachusetts, which license was renewed after his conviction for income-tax evasion. By his own statement, Dr. Hellinger can return to Massachusetts to practice dentistry. Dr. Melvin J. Hellinger was removed from the staff at Miami-Dade General Hospital because of the subject conviction for income tax evasion and omissions he made from his application to Miami-Dade General Hospital, which omissions reflected upon his character. Dr. Melvin J. Hellinger's membership in the American Dental Association and the American Society of Oral Surgeons has been revoked as a result of accusations by Blue Cross-Blue Shield concerning duplicate claims filed by Dr. Hellinger, which accusations have now been settled between Dr. Hellinger and Blue Cross-Blue Shield. Dr. Melvin J. Hellinger became a diplomate of the American Board of Oral Surgery in 1965, when in his late 20's. He has published in dental journals and taught at Tuft's University in oral pathology and Boston University in oral surgery. Dr. Melvin J. Hellinger came to Florida in December of 1974 from Wakefield, Massachusetts. In Wakefield, Massachusetts, Dr. Melvin J. Hellinger was very active in civic and religious affairs, contributing a substantial amount of time to community service. During the time within which Dr. Hellinger committed the subject felonies, his wife discovered that she had a cancer malignancy, which is presently being treated by a specialist in Miami. Also at that time, Dr. Hellinger's father-in-law, of whom he thought highly, suffered several strokes. Further, during that time, Dr. Hellinger suffered large stock-losses, putting a severe financial burden on him. Dr. Hellinger and his wife have four children, ages seven to twelve. Since moving to Florida, Dr. Hellinger has been active in his temple and coaches children's league football. Dr. Hellinger has no other criminal record. Dr. Melvin J. Hellinger pled guilty to and was adjudged guilty of a felony under the laws of the United States involving income tax evasion as set forth in Counts and 2 of the Accusation filed herein by the Florida State Board of Dentistry.
Findings Of Fact Respondent holds a property and casualty insurance license, life and health insurance license, and life insurance license for the State of Florida. She has held her property and casualty license for about 20 years. In 1976, she was employed as an agent for the Orlando office of Commonwealth insurance agency, which she purchased in 1977 or 1978. She continues to own the Commonwealth agency, which is the agency involved in this case. Respondent has never previously been disciplined. In 1979 or 1980, Respondent was appointed to the board of directors of the Local Independent Agents Association, Central Florida chapter. She has continuously served on the board of directors of the organization ever since. She served as president of the association until September, 1991, when her term expired. During her tenure as president, the local association won the Walter H. Bennett award as the best local association in the country. Since May, 1986, Commonwealth had carried the insurance for the owner of the subject premises, which is a 12,000 square foot commercial block building located at 923 West Church Street in Orlando. In July, 1987, the insurer refused to renew the policy on the grounds of the age of the building. Ruth Blint of Commonwealth assured the owner that she would place the insurance with another insurer. Mrs. Blint is a longtime employee of the agency and is in charge of commercial accounts of this type. Mrs. Blint was a dependable, competent employee on whom Respondent reasonably relied. Mrs. Blint contacted Dana Roehrig and Associates Inc. (Dana Roehrig), which is an insurance wholesaler. Commonwealth had done considerable business with Dana Roehrig in the past. Dealing with a number of property and casualty agents, Dana Roehrig secures insurers for the business solicited by the agents. Dana Roehrig itself is not an insurance agent. In this case, Dana Roehrig served as the issuing agent and agreed to issue the policy on behalf of American Empire Surplus Lines. The annual premium would be $5027, excluding taxes and fees. This premium was for the above- described premises, as well as another building located next door. The policy was issued effective July 21, 1987. It shows that the producing agency is Commonwealth and the producer is Dana Roehrig. The policy was countersigned on August 12, 1987, by a representative of the insurer. On July 21, 1987, the insured gave Mrs. Blint a check in the amount of $1000 payable to Commonwealth. This represented a downpayment on the premium for the American Empire policy. The check was deposited in Commonwealth's checking account and evidently forwarded to Dana Roehrig. On July 31, 1987, Dana Roehrig issued its monthly statement to Commonwealth. The statement, which involves only the subject policy, reflects a balance due of $3700.86. The gross premium is $5027. The commission amount of $502.70 is shown beside the gross commission. Below the gross premium is a $25 policy fee, $151.56 in state tax, and a deduction entered July 31, 1987, for $1000, which represents the premium downpayment. When the commission is deducted from the other entries, the balance is, as indicated, $3700.86. The bottom of the statement reads: "Payment is due in our office by August 14, 1987." No further payments were made by the insured or Commonwealth in August. The August 31, 1987, statement is identical to the July statement except that the bottom reads: "Payment is due in our office by September 14, 1987." On September 2, 1987, the insured gave Commonwealth a check for $2885.16. This payment appears to have been in connection with the insured's decision to delete the coverage on the adjoining building, which is not otherwise related to this case. An endorsement to the policy reflects that, in consideration of a returned premium of $1126 and sales tax of $33.78, all coverages are deleted for the adjoining building. The September 30 statement shows the $3700.86 balance brought forward from the preceding statement and deductions for the returned premium and sales tax totalling $1159.78. After reducing the credit to adjust for the unearned commission of $112.60 (which was part of the original commission of $502.70 for which Commonwealth had already received credit), the net deduction arising from the deleted coverage was $1047.18. Thus, the remaining balance for the subject property was $2653.68. In addition to showing the net sum due of $944.59 on an unrelated policy, the September 30 statement contained the usual notation that payment was due by the 12th of the following month. However, the statement contained a new line showing the aging of the receivable and showing, incorrectly, that $3700.86 was due for more than 90 days. As noted above, the remaining balance was $2653.68, which was first invoiced 90 days previously. Because it has not been paid the remaining balance on the subject policy, Dana Roehrig issued a notice of cancellation sometime during the period of October 16-19, 1987. The notice, which was sent to the insured and Commonwealth, advised that the policy "is hereby cancelled" effective 12:01 a.m. October 29, 1987. It was the policy of Dana Roehrig to send such notices about ten days in advance with two or three days added for mailing. One purpose of the notice is to allow the insured and agency to make the payment before the deadline and avoid cancellation of the policy. However, the policy of Dana Roehrig is not to reinstate policies if payments are received after the effective date of cancellation. Upon receiving the notice of cancellation, the insured immediately contacted Mrs. Blint. She assured him not to be concerned and that all would be taken care of. She told him that the property was still insured. The insured reasonably relied upon this information. The next time that the insured became involved was when the building's ceiling collapsed in June, 1988. He called Mrs. Blint to report the loss. After an adjuster investigated the claim, the insured heard nothing for months. He tried to reach Respondent, but she did not return his calls. Only after hiring an attorney did the insured learn that the cancellation in October, 1987, had taken effect and the property was uninsured. Notwithstanding the cancellation of the policy, the October 31 statement was identical to the September 30 statement except that payment was due by November 12, rather than October 12, and the aging information had been deleted. By check dated November 12, 1987, Commonwealth remitted to Dana Roehrig $3598.27, which was the total amount due on the October 30 statement. Dana Roehrig deposited the check and it cleared. The November 30 statement reflected zero balances due on the subject policy, as well as on the unrelated policy. However, the last entry shows the name of the subject insured and a credit to Commonwealth of $2717 plus sales tax of $81.51 minus a commission readjustment of $271.70 for a net credit of $2526.81. The record does not explain why the net credit does not equal $2653.68, which was the net amount due. It would appear that Dana Roehrig retained the difference of $125.87 plus the downpayment of $1000 for a total of $1125.87. It is possible that this amount is intended to represent the earned premium. Endorsement #1 on the policy states that the minimum earned premium, in the event of cancellation, was $1257. By check dated December 23, 1987, Dana Roehrig issued Commonwealth a check in the amount of $2526.81. The December 31 statement reflected the payment and showed a zero balance due. The record is otherwise silent as to what transpired following the issuance of the notice of cancellation. Neither Mrs. Blint nor Dana Roehrig representatives from Orlando testified. The only direct evidence pertaining to the period between December 31, 1987, and the claim the following summer is a memorandum from a Dana Roehrig representative to Mrs. Blint dated March 24, 1988. The memorandum references the insured and states in its entirety: Per our conversation of today, attached please find the copy of the cancellation notice & also a copy of the cancellation endorsement on the above captioned, which was cancelled effective 10/29/87. If you should have any questions, please call. Regardless of the ambiguity created by the monthly statements, which were not well coordinated with the cancellation procedure, Mrs. Blint was aware in late March, 1988, that there was a problem with the policy. She should have advised the insured, who presumably could have procured other insurance. Regardless whether the June, 1988, claim would have been covered, the ensuing litigation would not have involved coverage questions arising out of the cancellation of the policy if Mrs. Blint had communicated the problem to the insured when she received the March memorandum. Following the discovery that the policy had in fact been cancelled, the insured demanded that Respondent return the previously paid premiums. Based on advice of counsel, Respondent refused to do so until a representative of Petitioner demanded that she return the premiums. At that time, she obtained a cashiers check payable to the insured, dated June 1, 1990, and in the amount of $2526.81. Although this equals the check that Dana Roehrig returned to Commonwealth in December, 1987, the insured actually paid Commonwealth $1000 down and $2885.16 for a total of $3885.16. This discrepancy appears not to have been noticed as neither Petitioner nor the insured has evidently made further demands upon Respondent for return of premiums paid. The insured ultimately commenced a legal action against Commonwealth, Dana Roehrig, and American Empire. At the time of the hearing, the litigation remains pending.
Recommendation Based on the foregoing, it is hereby recommended that the Department of Insurance and Treasurer enter a final order finding Respondent guilty of violating Sections 626.561(1) and, thus, 626.621(2), Florida Statutes, and, pursuant to Sections 626.681(1) and 626.691, Florida Statutes, imposing an administrative fine of $1002.70, and placing her insurance licenses on probation for a period of one year from the date of the final order. If Respondent fails to pay the entire fine within 30 days of the date of the final order, the final order should provide, pursuant to Section 626.681(3), Florida Statutes, that the probation is automatically replaced by a one-year suspension. RECOMMENDED this 5th day of February, 1992, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 5th day of February, 1992. COPIES FURNISHED: Hon. Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, FL 32399-0300 Bill O'Neil, General Counsel Department of Insurance The Capitol, Plaza Level Tallahassee, FL 32399-0300 James A. Bossart Division of Legal Affairs Department of Insurance 412 Larson Building Tallahassee, FL 32399-0300 Thomas F. Woods Gatlin, Woods, et al. 1709-D Mahan Drive Tallahassee, FL 32308
The Issue Whether Respondent committed the violations alleged in the First Amended Administrative Complaint; and If so, what disciplinary action should be taken against him.
Findings Of Fact Based upon the evidence adduced at hearing, and the record as a whole, the following findings of fact are made: Respondent's Licensure Status Respondent is now, and has been at all times material to the instant case, a Florida-licensed life and health insurance agent. Counts I through VI At all times material to the instant case, Peter DeBello, Inc., d/b/a Emery Richardson Insurance (Corporation), a Florida corporation owned by Respondent's father, operated a general lines insurance agency (Emery Richardson Insurance) located in the state of Florida. The Corporation was formed to manage the assets of Emery Richardson, Inc., which assets Respondent's father had obtained through litigation. Respondent's father delegated to Respondent the authority to manage the affairs of the Corporation. The same day (in 1992) that the Corporation took possession of Emery Richardson, Inc.'s assets, it so notified the Department of Insurance (Department) by telephone. Shortly thereafter, Leo Joy, a Florida-licensed property and casualty insurance agent since 1961, was designated on a Department- provided form as the primary agent for Emery Richardson Insurance at its 240 Commercial Boulevard location in Lauderdale By The Sea, Florida, and the completed form was provided to the Department.3 At no time prior to the commencement of the instant administrative proceeding did Respondent himself personally notify the Department of the identity of Emery Richardson Insurance's primary agent. It was Mr. Joy who (in 1992) filled out the primary agent designation form and submitted it to the Department. Mr. Joy, however, did so on behalf of Respondent, who had verbally designated Mr. Joy as Emery Richardson Insurance's primary agent. Neither Respondent, Mr. Joy, nor any one else, has subsequently used the Department's primary agent designation form to advise the Department of Mr. Joy's continuing status as Emery Richardson Insurance's primary agent. In his capacity as president of the Corporation, Respondent, on behalf of the Corporation, in April of 1994, entered into an agreement (Agreement) with Ulico Casualty Company of Washington, D.C. (Ulico), which provided as follows: WHEREAS, the Applicant (Corporation), a licensed insurance agent and/or insurance broker, has heretofore obtained from the COMPANY (Ulico) or is desirous of obtaining from the COMPANY the placement of insurance for the Applicant's customers or principals, and WHEREAS, the COMPANY, using its facilities, has placed insurance for the Applicant or with whom Applicant has requested the placement of such insurance, NOW, THEREFORE, in consideration of the mutual promises herein contained, and for other good and valuable consideration, the receipt whereof is hereby acknowledged. It is mutually AGREED as follows: With reference to the placement of new insurance, Applicant shall submit to the COMPANY a separate application containing the name of each prospective insured, describing the risk to be considered for underwriting and binding. Applicant specifically understands and agrees that Applicant shall have no authority to authorize or write any insurance or bind any risk on behalf of the COMPANY without the prior written approval by a duly authorized representative of the COMPANY. With respect to any insurance heretofore placed with the COMPANY by the Applicant, and with respect to any insurance hereinafter placed by the Applicant, all premiums shall be payable to the COMPANY and such Applicant assumes and agrees to pay the COMPANY premiums on all the policies of insurance heretofore or hereinafter placed by Applicant with the COMPANY in accordance with the current statements rendered to the Applicant by the COMPANY, such payment to be made no later than 30 days after the month of issue of the insurance policy, or due date of any installment if issued on an installment basis, less any credits due to the Applicant for return premium, provided an appropriate credit memorandum therefor has previously been issued by the COMPANY to Applicant. In the absence of such credit memorandum, Applicant shall have no right of counterclaim or setoff with respect to any claimed credits due, but shall be required to establish entitlement to the same in a separate action. Applicant shall have the right, so long as Applicant is not indebted to the COMPANY, to deduct agreed upon commissions on each policy of insurance prior to remitting the remaining premium to the COMPANY. In the event that premiums on behalf of any insured party shall have been financed and refund of financed premiums are required from the COMPANY to the financing institution, Applicant shall forthwith refund and pay to the COMPANY all unearned commissions heretofore received with respect to such financed premiums. In the event that Applicant shall fail to make any payment to the COMPANY which is required to be made pursuant to this Agreement, within the time specified, the COMPANY shall have the right, at any time subsequent to the due date of payment, to cancel any policy on which the premium payments have not been remitted to the COMPANY, without prior notice to the Applicant, by sending notice of cancellation directly to the insured, except that Applicant shall continue to remain liable to the COMPANY for the payment of all premiums earned as of the date of cancellation which are collected by Applicant. Applicant represents that they are duly licensed as an insurance broker or agent for Casualty and Property Insurance as indicated in the States set forth below, and agrees that in the event that any license shall cease, terminate or be cancelled, that the Applicant will promptly notify the COMPANY accordingly. Applicant agrees, where required, to file at Applicant's expense, all necessary affidavits and collect all State or local premium taxes and to pay the same promptly to the respective taxing authorities on all insurance placed with the COMPANY, in accordance with the laws applicable in the State of licensing. No changes or modification of this Agreement shall be valid unless such change or modification is subscribed, in writing, by the COMPANY and Applicant. Ulico is one of approximately 47 insurance companies that Emery Richardson Insurance represents. In the past five years, Emery Richardson Insurance has received from clients in excess of seven or eight million dollars in premium payments, which it has deposited in its various checking accounts and then paid over to these insurance companies. Ulico is the only one of these 47 insurance companies to have experienced "problems" in receiving from Emery Richardson Insurance monies due. These "problems" are detailed below. On June 13, 1994, the Corporation opened a checking account (account no. 458-902279-9, hereinafter referred to as the "Account") with Savings of America at the bank's Hollywood, Florida, branch. The Peter Debello described on the signature card for the Account was Respondent's father. Respondent's father, however, through execution of a power of attorney, had authorized Respondent to act on his behalf in connection with the Account. On August 20, 1996, Respondent drafted and signed four checks drawn on the Account, which were made payable to Ulico: check no. 804, in the amount of $1,729.15, for "Teamsters #769, Policy #BOU 907"; check no. 805, in the amount of $1,071.65, for "Sheet Metal Appr. #32, Policy #CLU 668"; check no. 806, in the amount of $700.00, for "Sheet Metal #32, Policy #CLU 682"; and check no. 807, in the amount of $96.05, for "Painters L.U. 160, Policy #CLU 451." (These policies will hereinafter be referred to as the "Subject Policies.") On January 24, 1997, Respondent drafted and signed a check (check no. 882) drawn on the Account, in the amount of $7,500.00, which was also made payable to Ulico. Check nos. 804, 805, 806, 807,4 and 882 were sent to Ulico as payment for monies the Corporation owed Ulico (pursuant to the Agreement) for insurance coverage obtained from Ulico by the Corporation for its clients (as reflected in invoices Ulico sent the Corporation, which hereinafter will be referred to as the "Subject Invoices").5 At the time that he drafted and signed these checks and submitted them to Ulico, Respondent assumed that there were sufficient funds in the Account to cover the amounts of the checks. In drafting and signing these checks and submitting them to Ulico, Respondent did not make any statements or representations that he knew to be false or misleading. All five checks were returned by Savings of America unpaid, with the explanation, "insufficient funds," stamped on each check.6 (These checks will hereinafter be referred to as the "Dishonored Checks.") Ulico's premium collection manager, Gayle Shuler, spoke with Respondent, as well as with Mr. Joy, "many times" concerning the monies the Corporation owed Ulico. At no time did either Respondent or Mr. Joy indicate that they disputed the Subject Invoices7 (although Respondent and Mr. Joy did contest other invoices that they received from Ulico). Although aware that the Dishonored Checks had been returned due to insufficient funds8 and knowing that Ulico desired payment, Respondent failed to act promptly to remedy the situation. It was not until early 1998, after the commencement of the instant administrative proceeding, that Respondent, on behalf of the Corporation, took steps to address the matter. At that time, using Fidelity Express money orders purchased between February 26, 1998, and March 1, 1998, (which Respondent dated August 26, 1996), Respondent paid Ulico a portion ($1,867.70) of the total amount of the Dishonored Checks. The money orders were sent to Ulico by certified mail, along with a cover letter from Respondent. Respondent "backdated" the money orders to reflect "when [the monies owed Ulico] should have been" paid. He did so without any intent to mislead or deceive. There is no clear and convincing evidence that anyone other than Ulico was injured by Respondent's failure to timely pay over to Ulico the monies Emery Richardson Insurance had received from its clients for the Subject Policies (which monies belonged to Ulico). Respondent's failure to timely make such payments, it appears, was the product of isolated instances of carelessness, neglect and inattention on Respondent's part,9 which, when considered in light of the totality of circumstances, including his problem-free dealings with the other insurance companies Emery Richardson Insurance represents, were not so serious as to demonstrate a lack of fitness, trustworthiness or competency to engage in transactions authorized by his license. Count VII In August of 1986, Respondent visited Gary Faske, Esquire, at Mr. Faske's office in Dade County, Florida. The purpose of the visit was to have Mr. Faske complete the paperwork necessary to add Mr. Faske to his new employer's group major medical insurance policy with Union Bankers Insurance Company. After the paperwork was completed, Respondent left Mr. Faske's office with the completed paperwork, as well as a check from Mr. Faske's employer to cover the cost of adding Mr. Faske to the group policy.10 It is unclear what Respondent did with the paperwork and check after he left Mr. Faske's office. In October of that same year (1986), Mr. Faske took ill and had to be hospitalized on an emergency basis. He assumed that he was covered by his employer's group major medical insurance policy, but he subsequently learned that he was wrong and had to pay between $50,000.00 to $60,000.00 in medical bills. The evidence does not clearly and convincingly establish that Respondent (as opposed to Union Bankers Insurance Company or some other party) was responsible for Mr. Faske not having such coverage. Mr. Faske thereafter filed suit against Respondent and Union Bankers Insurance Company in Dade County Circuit Court. He settled his claim against the insurance company, but was unable to reach an agreement with Respondent. Respondent's case therefore went to trial, following which, on August 12, 1997, a Final Judgment11 was entered against Respondent in the amount of $40,271.00.12 Count VIII By filing an Address Correction Request, dated January 29, 1992, Respondent notified the Department that his new mailing address was 40 Hendricks Isle, Fort Lauderdale, Florida. The Department subsequently sent a letter, dated April 14, 1995, to Respondent at this 40 Hendricks Isle address. Respondent, however, "had just moved from that address," and the letter was returned to the Department stamped, "forward expired." In May of 1995, Respondent advised the Department in writing of his new mailing address. It is unclear whether such written notification was given more than, or within, 30 days from the date Respondent had moved to his new address.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department issue a final order: (1) finding Respondent guilty of the violations noted in the Conclusions of Law of this Recommended Order; (2) penalizing Respondent for having committed these violations by suspending his license for 18 months; and (3) dismissing the remaining allegations of misconduct advanced in the First Amended Administrative Complaint. DONE AND ENTERED this 12th day of February, 1999, in Tallahassee, Leon County, Florida. 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 12th day of February, 1999.
