The Issue Whether Respondent owes $1,568,399.00 or $2,323,765.60 as a penalty for failing to secure workers' compensation insurance for its employees, as required by Florida law.
Findings Of Fact Based on the evidence adduced at hearing, and the record as a whole, the following findings of fact are made to supplement and clarify the sweeping factual stipulations set forth in the parties' June 1, 2005, Joint Stipulation3: Legislative History of the "Penalty Calculation" Provisions of Section 440.107(7), Florida Statutes Since October 1, 2003, the effective date of Chapter 2003-412, Laws of Florida, Section 440.107(7)(d)1., Florida Statutes, has provided as follows: In addition to any penalty, stop-work order, or injunction, the department shall assess against any employer who has failed to secure the payment of compensation as required by this chapter a penalty equal to 1.5 times the amount the employer would have paid in premium when applying approved manual rates to the employer's payroll during periods for which it failed to secure the payment of workers' compensation required by this chapter within the preceding 3-year period or $1,000, whichever is greater. Prior to its being amended by Chapter 2003-412, Laws of Florida, Section 440.107(7), Florida Statutes, read, in pertinent part, as follows: In addition to any penalty, stop-work order, or injunction, the department shall assess against any employer, who has failed to secure the payment of compensation as required by this chapter, a penalty in the following amount: An amount equal to at least the amount that the employer would have paid or up to twice the amount the employer would have paid during periods it illegally failed to secure payment of compensation in the preceding 3-year period based on the employer's payroll during the preceding 3- year period; or One thousand dollars, whichever is greater. The Senate Staff Analysis and Economic Analysis for the senate bill that ultimately became Chapter 2003-412, Laws of Florida, contained the following explanation of the "change" the bill would make to the foregoing "penalty calculation" provisions of Section 440.107(7), Florida Statutes4: The department is required to assess an employer that fails to secure the payment of compensation an amount equal to 1.5 times, rather than 2 times, the amount the employer would have paid in the preceding three years or $1,000, which is greater. There was no mention in the staff analysis of any other "change" to these provisions. The NCCI Basic Manual The National Council on Compensation Insurance, Inc. (NCCI) is a licensed rating organization that makes rate filings in Florida on behalf of workers' compensation insurers (who are bound by these filings if the filings are approved by Florida's Office of Insurance Regulation, unless a "deviation" is permitted pursuant to Section 627.11, Florida Statutes). The NCCI publishes and submits to the Office of Insurance Regulation for approval a Basic Manual that contains standard workers' compensation premium rates for specified payroll code classifications, as well as a methodology for calculating the amount of workers' compensation insurance premiums employers may be charged. This methodology is referred to in the Basic Manual as the "Florida Workers Compensation Premium Algorithm" (Algorithm). According to the Algorithm, the first step in the premium calculating process is to determine the employer's "manual premium," which is accomplished by applying the rates set forth in the manual (or manual rates) to the employer's payroll as follows (for each payroll code classification): "(PAYROLL/100) x RATE)." Adjustments to the "manual premium" are then made, as appropriate, before a final premium is calculated. Among the factors taken into consideration in determining the extent of any such adjustments to the "manual premium" in a particular case are the employer's loss experience, deductible amounts, premium size (with employers who pay "larger premium[s]" entitled to a "Premium Discount"), and, in the case of a "policy that contains one or more contracting classifications," the wages the employer pays its employees in these classifications (with employers "paying their employees a better wage" entitled to a "Contracting Classification Premium Adjustment Program" credit). Petitioner's Construction of the "Penalty Calculation" Provisions of Section 440.107(7), Florida Statutes In discharging its responsibility under Section 440.107(7), Florida Statutes, to assess a penalty "against any employer who has failed to secure the payment of compensation as required," Petitioner has consistently construed the language in the statute, "the amount the employer would have paid," as meaning the aggregate of the "manual premiums" for each applicable payroll code classification, calculated as described in the NCCI Basic Manual. It has done so under both the pre- and post-Chapter 2003-412, Laws of Florida, versions of Section 440.107(7). This construction is incorporated in Petitioner's "Penalty Calculation Worksheet," which Florida Administrative Code Rule 69L-6.027 provides Petitioner "shall use" when "calculating penalties to be assessed against employers pursuant to Section 440.107, F.S." (Florida Administrative Code Rule 69L-6.027 first took effect on December 29, 2004.) Penalty Calculation in the Instant Case In the instant case, "1.5 times the amount the [Respondent] would have paid in premium when applying approved manual rates to [Respondent's] payroll during periods for which it failed to secure the payment of workers' compensation" equals $2,323,765.60.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner order Respondent to pay a $2,323,765.60 penalty for failing to secure workers' compensation insurance for its employees. DONE AND ENTERED this 5th day of August, 2005, in Tallahassee, Leon County, Florida. S STUART M. LERNER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 5th day of August, 2005.
The Issue The issue in this case is whether Respondents have violated provisions of Section 627.837, Florida Statutes, through payment of alleged monetary inducements to insurance agents for the purpose of securing contracts which finance insurance premiums.
Findings Of Fact Petitioner is the Department of Insurance and Treasurer (Department). Respondents are Puritan Budget Plan, Inc., and Gibraltar Budget Plan, Inc., (Respondents). Findings contained in paragraphs 3- 23, were stipulated to by the parties. Stipulated Facts Common shares in Respondents' corporations were sold to insurance agent/shareholders for between $500.00 and $2,500.00 per share, depending on date purchased. Presently, and for the purposes of this litigation, marketing and/or administrative fees paid by Respondents to agent/shareholders range from $1.00 to $13.00 per contract produced, depending on the number of payments made, and the amount of the down payment. Each per contract marketing and/or administrative fee paid by Respondents to agent/shareholders is completely unrelated to the number of contracts produced by that agent/shareholder, and is based upon the characteristics of each contract, pursuant to the terms of the shareholder purchase agreement. Perry & Co., pursuant to a written agreement, manages the day to day activities of Respondents, including solicitation of new shareholder/agents. Alex Campos is currently President of Perry & Co. Perry & Co., Dick Perry or Alex Campos have no equity ownership, either direct or indirect, in Respondents corporations. No shareholder of Perry & Co. is also a shareholder in either Respondent, and no shareholder of the Respondents is a shareholder in Perry & Co. No officer or director of Perry & Co. is an officer or director of either Respondent, and no officer or director of either Respondent is an officer or director of Perry & Co. The individual management agreements between Perry & Co. and Respondents are terminable with proper notice by either party. Respondent Puritan Budget Plan, Inc., was originally licensed by the Department as a premium finance company in 1984, pursuant to the provisions of Chapter 627, Part XV, Florida Statutes. Puritans' principle office is located at 2635 Century Parkway, Suite 1000, Atlanta, Georgia 30345. Respondent Gibraltar Budget Plan, Inc., was originally licensed by the Department as a premium finance company in 1984, pursuant to the provisions of Chapter 627, Part XV, Florida Statutes. Gibraltar's principle office is located at 2635 Century Parkway, Suite 1000, Atlanta, Georgia 30345. Customers of Respondents are typically financing automobile insurance premiums. There is little if any variation among licensed premium finance companies in the State of Florida as to the interest rate charged to customers. In 1988, the Department inquired of Respondents' activities in relation to agent/shareholder compensation arrangements. After several meetings with representatives from Respondents, the Department closed the matter without taking any action. Also in 1988, the Department proposed the adoption of Rule 4-18.009, which in part would have explicitly made payment of processing fees or stock dividends a violation of Section 627.837, Florida Statutes, but later withdrew the proposed rule. Again in 1994, the Department proposed a rule which would have explicitly made payment of processing fees or stock dividends a violation of Section 627.837, Florida Statutes. After a hearing and adverse ruling by the hearing officer, the Department withdrew proposed Rule 4-196.030(8). Financial consideration paid to insurance agents in exchange for the production of premium finance contracts may result in the unnecessary financing of contracts, and the Department believes Section 627.837, Florida Statutes, was intended to make such conduct illegal. Financial consideration paid to insurance agents in exchange for the production of premium finance contracts may result in insurance agents adding or sliding unnecessary products to make the total cost of insurance more expensive and induce the financing of additional contracts, and the Department believes Section 627.837, Florida Statutes, was intended to make such conduct illegal. An "inducement" is presently defined as "an incentive which motivates an insurance purchaser to finance the premium payment or which motivates any person to lead or influence an insured into financing the insurance coverage being purchased; or any compensation or consideration presented to a person based upon specific business performance whether under written agreement or otherwise." Rule 4-196.030(4), Florida Administrative Code (July 27, 1995). This rule is currently effective but presently on appeal. There is no evidence that Respondents unnecessarily financed any premium finance contracts or engaged in any "sliding" of unnecessary products to induce the unnecessary financing of contracts. Section 627.837, Florida Statutes, does not prohibit the payment of corporate dividends based on stock ownership to shareholders who are also insurance agents. According to the Final Bill Analysis for H.B. 2471, in 1995 the Legislature amended Section 627.837, Florida Statutes, relating to rebates and inducements. This section was amended to clarify that this statute does not prohibit an insurance agent or agents from owning a premium finance company. The statute, as amended, is silent on the issue of how owner-agents may be compensated. Other Facts Approximately 80 percent of Respondents' insureds will turn to the shareholder/agent to handle premium mailing and collection. When a shareholder/agent provides these valuable services and labor to Respondents through the servicing of the premium finance contract with an insured, payment for those services and/or recoupment of the expenses involved with their provision is made, at least in part, in the form of the marketing and administrative fees paid by Respondents to the shareholder/agent. The marketing and administrative fee payment by Respondents to shareholder/agents is made from the net profit of the corporation and represents payment of ownership interest (dividends) to shareholder/agents in addition to payment for shareholder/agent services or expenses. Respondents generally finance "non-standard" private passenger automobile insurance. Such insurance generally covers younger drivers and drivers with infraction points against their license. The average non-standard premium is $500 per year. Thirty percent of non-standard insureds will cancel their insurance prior to the renewal date. Cancellation of policies and financing arrangements by non-standard insurers require the agent to return unearned commissions, about $30 generally. In contrast, payment of an insurance premium in cash guarantees an agent his/her entire commission, an average of $90 per non-standard policy. Consequently, the financial interest of most agents is best served by cash sale of auto insurance as opposed to financing the insurance. The average amount generated by 95 percent of all premium finance contracts executed in Florida would yield an agent/shareholder approximately six dollars per contract.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that a Final Order be entered dismissing the Administrative Complaints. DONE and ENTERED in Tallahassee, Florida, this 28th day of November, 1995. DON W. 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 28th day of November, 1995. APPENDIX In accordance with provisions of Section 120.59, Florida Statutes, the following rulings are made on the proposed findings of fact submitted on behalf of the parties. Petitioner's Proposed Findings 1.-11. Accepted to extent included within stipulated facts, otherwise rejected for lack of citation to the record. 12. First sentence is rejected as not substantially dispositive of the issues presented. Remainder rejected for lack of record citation if not included within stipulated facts. 13.-15. Rejected to extent not included within stipulation, no citation to record. Incorporated by reference. Rejected, no record citation, legal conclusion. 18.-19. Rejected, not materially dispositive. 20. Rejected, no record citation. 21.-23. Rejected, not materially dispositive. Rejected, record citation and relevancy. Rejected, weight of the evidence. Incorporated by reference. Respondent's Proposed Findings 1. Rejected, unnecessary to result. 2.-3. Accepted, not verbatim. 4. Rejected, unnecessary. 5.-7. Accepted, not verbatim. 8.-9. Rejected, unnecessary. 10. Accepted per stipulation. 11.-12. Rejected, unnecessary. 13. Accepted per stipulation. 14.-16. Accepted, not verbatim. Rejected, hearsay. Rejected, relevance. Rejected, unnecessary. 20.-22. Accepted per stipulation. 23. Rejected, unnecessary. 24.-57. Incorporated by reference. 58.-60. Rejected, unnecessary. 61.-62. Rejected, subordinate and not materially dispositive. 63.-67. Rejected as unnecessary to extent not included in stipulated facts. Accepted per stipulation. Rejected, unnecessary. Accepted per stipulation. 72.-76. Rejected, unnecessary. 77. Accepted per stipulation. 78.-79. Incorporated by reference. 80.-87. Accepted per stipulation. 88. Incorporated by reference. 89.-90. Accepted per stipulation. 91.-95. Rejected, subordinate. 96. Accepted. 97.-101. Rejected, unnecessary. 102. Incorporated by reference. COPIES FURNISHED: Alan Liefer, Esquire Division of Legal Services 612 Larson Building Tallahassee, FL 32399-0333 Steven M. Malono, Esquire Cobb, Cole & Bell 131 N. Gadsden St. Tallahassee, FL 32301 Bill Nelson State Treasurer and Insurance Commissioner Department of Insurance The Capitol, Plaza Level Tallahassee, FL 32399-0300 Dan Sumner Acting General Counsel Department of Insurance The Capitol, PL-11 Tallahassee, FL 32399-0300
The Issue The issues are whether, pursuant to section 409.910(17)(b), Florida Statutes (sometimes referred to as "17b"), Respondent's recovery of medical assistance expenditures from $500,000 in proceeds from the settlement of a products liability action must be reduced from its allocation under section 409.910(11)(f) (sometimes referred to as "11f")1 to avoid conflict with 42 U.S.C. § 1396p(a)(1) (Anti-Lien Statute)2; and, if so, the amount of Respondent's recovery.
Findings Of Fact As a result of a motor vehicle accident that took place on May 27, 2012, Petitioner sustained grave personal injuries, including damage to his spinal cord that has left him a paraplegic incapable of self-ambulation of more than a few steps, except by means of a wheelchair or rolling walker. Petitioner was a passenger in a 2003 extended-cab Ford F-150 pickup truck that was driven at a high rate of speed by his brother, who lost control of the vehicle in a curve, over-corrected, and caused the vehicle to rollover three times, ejecting Petitioner with such force that he traveled a distance of 150 feet in the air. The force of the rollovers crushed the vehicle's roof, which caused Petitioner's door latch to fail, allowing Petitioner's door to open and Petitioner to be expelled from the relative safety of the passenger compartment. In settlement negotiations, Petitioner's trial counsel claimed that Ford F-150s of the relevant vintage suffered from deficient door latches, but the forces to which the latch were subjected were overwhelming and well beyond reasonable design limits: the truck's door could not have resisted these forces unless it had been welded to the frame. The one-vehicle accident was substantially, if not entirely, caused by Petitioner's brother, who was intoxicated and is now serving a five-year sentence in prison for his role in the crash. Petitioner shared some responsibility because he likely was not wearing a seatbelt when the truck rolled over. Petitioner's brother and another passenger who were not ejected from the vehicle sustained minor injuries. Petitioner commenced a products liability action against Ford Motor Company and the manufacturer of the door latch. Ford Motor Company defended the case vigorously. Expert witnesses were unable to find any federal safety standards that had been violated in connection with the vehicle, the door latch, or the performance of the vehicle and door latch during the rollovers. The manufacturer of the door latch raised a substantial defense of a lack of personal jurisdiction. At the time of the incident, Petitioner was a 25-year-old plumber and construction worker. He was the sole means of support for his three young children. He has undergone an arduous course of rehabilitation to gain wheelchair-dependent self-autonomy. At the time of the settlement, which appears to have resolved the products liability action, the putative true value of Petitioner's case was $6 million, consisting of $154,219 of past medical expenses, $2.1 million of future medical expenses, $800,000 of lost wages and loss of future earning capacity, and about $2.95 million of noneconomic damages, including pain and suffering and loss of consortium. Petitioner has proved each of these damages components, so the putative true value is the true value (sometimes referred to as the "actual true value"). Petitioner settled the case for $500,000, representing a settlement discount of 91.7% from the true value of $6 million (Settlement Discount). Petitioner has paid or incurred $147,000 in attorneys' fees and about $123,000 in recoverable costs in prosecuting the products liability action. Respondent has expended $154,219 of medical assistance. Under the 11f formula, which is described in the Conclusions of Law, Respondent would recover approximately $126,000 from the $500,000 settlement. This provisional 11f allocation provides the point of reference for determining whether Petitioner has proved in this 17b proceeding a reduced recovery amount for Respondent. Having proved the Settlement Discount of 91.7% from the actual, not putative, true value to the settled value, Petitioner has proved that each damages component of the true value, including past medical expenses, must be proportionately reduced by 91.7% to identify the portion of the settlement proceeds representing past medical expenses, which, as discussed in the Conclusions of Law, is the only portion of the proceeds subject to the Medicaid lien. Reducing the past medical expenses of $154,219 by 91.7% yields about $12,800, which is Respondent's tentative 17b recovery. As mentioned in the Conclusions of Law, Respondent's recovery must bear its pro rata share of the attorneys' fees and costs paid or incurred to produce the settlement. The total fees and costs of $270,000 represent 54% of the settlement. The record provides no reason to find that these fees and costs are unreasonable in amount or were not reasonably expended to produce the $500,000 settlement. Reducing Respondent's recovery of $12,800 by 54% yields $5888, which is Respondent's 17b recovery.
The Issue Whether Respondent violated the following statutory provisions: Sections 626.561(1), 626.611(5), 626.611(7), 626.611(8), 626.611(9), 626.611(10), 626.611(13), 626.621(2), 626.621(4), 626.621(6), 626.9521, and 626.9541(1)(o)1., Florida Statutes, and if so what discipline should be imposed.
Findings Of Fact Respondent, Gus Jones, Jr., is currently and was at all times relevant to this proceeding a licensed insurance agent in this state doing business under the name of A. Maples Insurance Agency. In August, 1990, Jesus Escalera, who had a roofing business, came to Respondent to obtain workers' compensation insurance. Mr. Escalera's insurance was placed through the National Counsel on Compensation Insurance (NCCI) which is a pool for assigned risk insurance. Mr. Escalera's policy was with Aetna with coverage effective through October 26, 1991. On August 16, 1991, Mr. Escalera came to Respondent to renew his workers' compensation insurance. Mr. Escalera gave Respondent $409.00, which represented a down payment of one-half the premium for one year's coverage. The remainder of the premium was to be financed with Financial Industries, Inc. Aetna had withdrawn from the original risk insurance pool, therefore it was necessary to submit a new application to NCCI for placement of insurance for Mr. Escalera. Respondent sent the application to NCCI in October, 1991. Mr. Escalera's insurance was placed with United States Fidelity and Guaranty Company (USF&G) on November 13, 1991. Respondent kept a supply of blank drafts from Financial Industries, Inc. at his office. Respondent sent a Financial Industries, Inc.'s draft to NCCI for Mr. Escalera's insurance with USF&G. Financial Industries stopped payment on the draft because they had decided to discontinue financing workers' compensation insurance. Respondent attempted to finance Mr. Escalera's insurance through Premium Assignment Company (Premium). Respondent sent a premium draft to NCCI, but Premium stopped payment on the draft for Respondent's failure to send a transmittal to Premium. Mr. Escalera had called Respondent three or four times asking for his payment book so that he could make the installment payments for the insurance. Respondent advised Mr. Escalera that the payment book was in the mail. USF&G performed an audit on Mr. Escalera's payroll and determined that Mr. Escalera owed $13,724.00 for earned premiums. In January, 1992, Respondent contacted Mr. Escalera and advised him that USF&G intended to cancel the insurance effective February 16, 1992. On February 3, 1992, Mr. Escalera went to see Respondent. Respondent explained that he could not get financing for Mr. Escalera and requested Mr. Escalera to pay the balance of the premium of $817.00. Mr. Escalera paid $409.00 to Respondent and received a receipt for that amount. Respondent sent USF&G a check for $817.00. The policy was reinstated with coverage effective December 13, 1991. USF&G gave notice dated March 13, 1992 that Mr. Escalera's policy would be terminated April 13, 1992 for non-payment. By letter dated April 16, 1992, USF&G returned Respondent his check due to the second cancellation. By letters dated June 2, 1992, USF&G advised Respondent that Mr. Escalera owed a earned premium of $13,724.00. The policy was terminated effective April 13, 1993, because Mr. Escalera had failed to pay the earned premium. In April or May, 1992, Respondent placed the retuned check from USF&G in his trust account. Respondent did not advise Mr. Escalera that the premium had been returned. According to Mr. Escalera, he did not know at the time of the hearing who had the money. On February 6, 1993, Respondent called David Peters, a representative of USF&G and asked Mr. Peters what to do with the $817. Respondent let the money remain in the trust account and awaited further instruction from Mr. Peters. After Respondent received the administrative complaint, he called USF&G and spoke with Marilyn Bailey who was now handling the account on behalf of USF&G. Based on his conversation with Ms. Bailey, Respondent sent USF&G a cashier's check for $817 dated May 18, 1993.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Insurance and Treasurer issue a Final Order finding Respondent guilty of a violation of Sections 626.561(1) and 626.621(2) and that Respondent be assessed an administrative fine of $500 and be placed on probation for a period of one year subject to such terms and restrictions as the Department may apply. DONE AND ENTERED this 19th day of October, 1993, in Tallahassee, Leon County, Florida. SUSAN B. KIRKLAND Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of October, 1993.
The Issue The issue in this case is whether Respondent failed to provide workers' compensation insurance coverage for employees, and, if so, what penalty should be assessed.
Findings Of Fact Petitioner is the state agency responsible for, inter alia, monitoring businesses within the state to ensure that such businesses are providing the requisite workers' compensation insurance coverage for all employees. The Division's headquarters are located in Tallahassee, Florida, but its investigators are spread throughout the state in order to more effectively monitor businesses. Respondent is a construction company that has been operating in excess of 30 years. It is a small company and usually only has a few employees at any given time. The company is located in Charlotte Harbor, Florida. Workers' compensation coverage is required if a business entity has one or more employees and is engaged in the construction industry in Florida. Workers' compensation coverage may be secured via three non-mutually exclusive methods: 1) The purchase of a workers' compensation insurance policy; 2) Arranging for the payment of wages and workers' compensation coverage through an employee leasing company; or 3) Applying for and receiving a certificate of exemption from workers' compensation coverage, if certain statutorily-mandated criteria are met. On January 8, 2009, Ira Bender, investigator for the Division, was doing on-site inspections in Port Charlotte, Florida. Bender stopped at the site on Edgewater Drive where new construction was underway at a YMCA. Bender observed a man (later identified as Thomas Woodall) sweeping the floor. Bender questioned Woodall and was told that Woodall worked for Respondent. When asked about his workers' compensation insurance coverage, Woodall advised that his insurance was maintained through Frank Crum Leasing Company ("Crum"). Bender called Crum and found that although Woodall had been carried as an employee of Respondent in the past, he had been released from coverage. The reason for his release was that his employment had been terminated for lack of business. Bender called Respondent to inquire about workers' compensation coverage. He was told that Respondent did not realize Woodall had been dropped from the Crum insurance coverage and that he would be reinstated immediately. In fact, coverage was restarted on that same day. Based on his finding that an employee had been working without coverage, Bender called his supervisor and provided his findings. The supervisor authorized issuance of a SWO based on the findings. The SWO was served on Respondent via hand- delivery at 11:45 a.m., on January 8, 2009. The SWO was also posted at the work site. The Division then requested business records from Respondent in order to determine whether there were any violations. If there were violations, then the Division would ascertain the amount of penalty to assess. Respondent cooperated and submitted the business records, as requested. After review of the business records, the Division issued its first Amended Order of Penalty Assessment ("Order") on January 14, 2009. The process employed by the Division was to locate all uncovered employees, i.e., those working without workers' compensation insurance for any period of time. The employees were then assigned a class code from the National Council on Compensation Insurance (NCCI) publication. Each trade or type of employment is assigned a code which sets the rate to be applied to an individual depending on the type of work he/she is performing. The Division assigned codes to the employees, determined how much the employee had been paid during the period of non-coverage, assigned the rate to the gross pay, and calculated the insurance premium needed to cover the worker for the time in question. A penalty of 1.5 times the premium was then assigned. The Order assessed a total penalty of $21,165.98 against Respondent. Respondent objected to the amount and refused to sign it due to errors contained in the Penalty Worksheet attached to the Order. Signing the Order would have allowed Respondent to return to work, but he refused to sign because he knew it was not correct. Pursuant to discussions between the parties and "additional records received," the Division issued a second Order on January 16, 2009, assessing a penalty of $6,501.27. Respondent believed that the Division was still in error and provided yet additional information--some verbal--to the Division. A third Order was issued on January 21, 2009, reducing the penalty to $3,309.56. However, Respondent still believed the penalty worksheet contained errors. Again, Respondent refused to sign and provided additional information to the Division. The Division issued a fourth Order on January 28, 2009, assessing a penalty of $2,822.24. That Order had an error concerning the spelling of an employee's name, but the penalty amount was correct. Respondent would not sign the fourth Order, because he did not believe he had intentionally violated any statute or rule concerning workers' compensation coverage for his employees. A corrected (fifth amended) Order was ultimately issued on May 19, 2009.1 The fifth Order asserts the amount of penalty now in dispute, which is the same amount appearing in the fourth amended Order. Respondent signed the fifth Order and entered into a payment plan for payment of the penalty, paying a down payment of $1,000 and monthly payments of $30 until paid in full. Respondent takes great offense to the fact that the penalty assessments were not faxed to him more quickly. He maintains that he had every intention to resolve this matter as quickly as possible, but the Division delayed and dragged out the process. The penalty worksheet attached to the fifth Order listed nine "Employee Names" that are subject to the penalty assessment. Each will be discussed below. The first "employee" is listed as "Cash" and is assigned Class Code 5403. This "employee" represents checks found in Respondent's records with the payee listed as "cash- casual labor" totaling $2,178.00 in gross payroll. Code 5403 was assigned because that is the code used by Crum for Respondent's general business. The manual rate for Code 5403 is $24.74. A penalty of $808.26 was assessed for that employee. The second employee is Jacob Prewitt. Prewitt was assigned Class Code 5221, due to the word "driveway" appearing on a check issued to him. Driveway work falls under a lower approved manual rate ($10.37) than general construction. The gross payroll amount was $1,960, and the penalty assigned to Prewitt was $304.88. The third employee is Woodall, assigned a Class Code of 5606, with a manual rate of $3.84. That code is used for supervisors and is, again, not as dangerous an occupation as general construction. The gross payroll for this entry was $1,008, and the penalty assessed for Woodall was $58.07. Cash is the fourth employee and has been covered in the discussion in paragraph 16, above. Barry Lawrence is the fifth employee; he is assigned Class Code 5437 as a cabinet maker/installer with a manual rate of $13.01. Lawrence had a Verification Letter issued by the Division indicating he was exempt from workers' compensation coverage. However, that exemption was limited to cabinet- making. By installing the cabinets, Lawrence performed work outside his exemption status. The gross payroll for his work was $6,200, and the penalty assessed for Lawrence was $1,209.33. Respondent was completely unaware that the exemption letter did not cover installation and had, in fact, always allowed cabinet- makers to install the cabinets as well. Brunderman Builders is listed as the sixth employee. It is assigned Class Code 5403 with a manual rate of $14.39. The gross payroll for this entry was $550, resulting in a penalty assessment of $118.73. The seventh employee is Jorge Gonzolas, assigned Class Code 5403, the general contracting code. Gonzolas was the employee of a contractor who was subcontracting with Respondent. The contractor died unexpectedly, and Gonzolas was left without payment for the work he had performed. Respondent generously decided to pay Gonzolas for his work, thereby, effectively making Gonzolas a de facto employee. The amount paid Gonzolas was $599.00; the penalty assessed for Gonzolas was $129.30. Woodall is again listed as employee number eight, this time with Class Code 5610, reflecting casual labor he did on one date that his insurance was not in place. The payroll amount for this work was $37.50. The penalty assessed for Woodall was $4.02. The ninth employee was Julio Garcia, assigned Class Code 8742 for outside sales, with a manual rate of $.64. The payroll amount for Garcia was $1,300. His penalty assessment amount was $12.48. Garcia was another one of the deceased subcontractor's employees that Respondent volunteered to pay for work Garcia had performed. The total payroll at issue for Respondent was $14,477.50. The total premium for that amount of payroll would have been $1,881.48, and the penalty assessed was $2,822.84. This is a fairly insignificant portion of Respondent's $5.5 million annual payroll. Respondent did not intentionally attempt to avoid the payment of workers' compensation insurance for its employees. There is no pattern of avoidance or indication that non-payment was Respondent's goal. Rather, there are plausible and reasonable explanations about the unpaid premiums. For Woodall, Respondent believed he was still covered through the Crum policy. For Gonzolas and Garcia, Respondent was simply attempting to be a nice guy. For Prewitt, the employee's exemption had unknowingly lapsed. For Lawrence, Respondent relied upon a Verification Letter from the state, but misinterpreted its scope. The Division, on the other hand, only pursued Respondent based on an actual finding of non-coverage. But for Woodall's presence at a work site doing manual labor (sweeping the floor), the Division would not have looked at Respondent's records. There is no indication the Division acted other than in strict accordance to its governing rules.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by Petitioner, Department of Financial Services, Division of Workers' Compensation, upholding the assessment of a penalty of $2,822.24 against Respondent, Brunderman Building Company, Inc. DONE AND ENTERED this 9th day of October, 2009, in Tallahassee, Leon County, Florida. 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 9th day of October, 2009.
Findings Of Fact On September 8, 1987, the Department of Insurance received a letter dated September 1, 1987, from Joseph F. Kinman, Jr., which stated: Another insurance agent (Daniel Bruce Caughey) from Pensacola, Florida and his incorporated agency (Caughey Insurance Agency, Inc.) are refusing to forward premium payments on to Jordan Roberts & Company, Inc. despite a final judgment for such amounts here in Hillsborough County Circuit Court. Enclosed is a copy of the Final Judgment entered August 13, 1987, as well as a copy of the Complaint. We represent Jordan Roberts & Company, as well as Poe & Associates, Inc. here in Tampa, Florida. In approximately August of 1982, Daniel Bruce Caughey and Caughey Insurance Agency, Inc. entered into a brokerage agreement with Jordan Roberts & Company, Inc. wherein Mr. Caughey and the Agency were to collect premiums on behalf of Jordan Roberts & Company, Inc. and in turn, Mr. Caughey and the Agency were to receive commissions. Mr. Caughey signed an Individual Guarantee Agreement on October 21, 1983, guaranteeing that Brokerage Agreement with Caughey Insurance Agency, Inc. Mr. Caughey and the Agency failed to forward the insurance premiums collected on behalf of Jordan Roberts & Company, Inc. despite repeated demands and inquiries. Finally, a lawsuit was filed against Mr. Caughey and the Agency in the Circuit Court of the Thirteenth Judicial Circuit of the State of Florida, in and for Hillsborough County in December of 1986. Final judgment for Jordan Roberts & Company, Inc. against Mr. Caughey and the Agency was entered on August 13, 1987, for an amount of $6,595.94. Mr. Caughey and his Agency have unlawfully withheld monies belonging to an insurer, Jordan Roberts & Company, Inc. and, accordingly, appear to be in violation of Florida Statutes 626 et seq. Jordan Roberts & Company, Inc. has a judgment for unpaid insurance premiums against Mr. Caughey and the Agency, however, Mr. Caughey and the Agency refuse or fail to pay over to Jordan Roberts & Company, Inc. premium funds rightfully belonging to Jordan Roberts & Company, Inc. Accordingly, we would respectfully request that your office conduct an investigation of Mr. Caughey and the Caughey Insurance Agency, Inc. Enclosed with this letter were copies of the complaint and final judgment in the circuit court case, Case No. 86-21454. As found in the main administrative case, Case No. 89-2651: In Count 1, JORO's complaint [in Case No. 86-21454] alleges the existence of a brokerage agreement between JORO and Caughey Insurance Agency, Inc., entered into "[o]n or about April 27, 1982"; execution and delivery of respondent's guarantee "[o]n or about October 21, 1983"; and the agency's indebtedness "for premiums on policies underwritten by [JORO] for the sum of $20,975.36." Petitioner's Exhibit No. 3. In Count II, the complaint also alleges execution and delivery of a promissory note "[o]n or about October 21, 1983," without, however, explicitly indicating its relationship (if any) with the guarantee executed the same date. Petitioner's Exhibit No. 3. The final judgment does not specify which count(s) JORO recovered on. Petitioner's Exhibit No. 4. Attached to the complaint are copies of the promissory note, executed by "CAUGHEY INSURANCE AGENCY, INC., By: D B Caughey Vice President"; the guarantee, executed in the same way; and the brokerage agreement, executed on behalf of Caughey Insurance Agency by "William C. Caughey, President." Although the Individual Guarantee Agreement names respondent as guarantor in the opening paragraph, the corporation is shown as guarantor on the signature line. The complaint does not allege and the judgment does not recite that respondent personally failed to remit premiums but says he is responsible as an officer of the agency. Without any further investigation, as far as the record shows, the Department of Insurance filed a complaint amended on April 24, 1989, to allege, inter alia, that "[o]n or about August 19, 1982 Caughey Insurance Agency, Inc. entered into a brokerage agreement with Jordan Roberts and Company, Inc. . . . requir[ing] Caughey Insurance Agency, Inc. to remit premiums, unearned commissions and additional premiums to Jordan Roberts and Company, Inc."; and that respondent "personally guaranteed the [agency's] obligation under this agreement in" writing, but "failed to remit five thousand five dollars and forty-four cents due under th[e] agreement" for which sum Jordan Roberts and Company, Inc. obtained judgment. After a formal administrative hearing, a recommended order was entered on April 2, 1990, recommending dismissal of the administrative complaint, because "ambiguities in the court papers do not clearly and convincingly rule out the possibility that the court's judgment rests on the dishonored promissory note . . . [rather than] a breach of respondent's [here petitioner's] fiduciary responsibilities." In its final order, the Department dismissed the administrative complaint; Daniel Bruce Caughey was the prevailing party in that case. The parties have stipulated that "Daniel B. Caughey qualifies as a small business party as defined in Section 57.111(3)(d), Florida Statutes." The parties also stipulated that the "total value of the reasonable attorney's fees and costs at issue is $2,830."
The Issue The issue is whether Respondent is liable for a penalty of $4,741.76 for the alleged failure to maintain workers’ compensation insurance for its employees in violation of Chapter 440, Florida Statutes (2008).1
Findings Of Fact Petitioner is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers’ compensation for the benefit of their employees in accordance with the requirements of Section 440.107. Respondent is a Florida corporation engaged in the construction business. The corporate officers of Respondent in 2007 were: Julie Magill, Glen Magill, Jamie Guerrero, and Richard Magill. The corporate officers after amendment on June 12, 2008, were: Julie Magill, Albert Farradaz, and Farid O’Campo. Corporate officers are eligible to obtain exemption from the requirements of workers’ compensation through the process described in Section 440.05. Construction exemptions are valid for a period of two years. The expiration date of each exemption is printed on an exemption card issued to each card holder. Julie Magill, Glen Magill, and Jaime Guererro obtained construction exemptions as officers of Respondent, pursuant to Section 440.05. Julie Magill acknowledged receiving a card for each exemption with the expiration date printed on each exemption card. The exemption for Julie Magill expired on June 2, 2008. The exemption for Glen Magill expired on May 29, 2008, and the exemption for Jaime Guererro expired on May 29, 2008. Petitioner notifies exemption holders at least 60 days prior to the expiration date. Petitioner sent the Notice of Expiration to Julie Magill at Respondent's current mailing address. On October 5, 2009, an investigator for Petitioner interviewed Mr. Cliff Chavaria, an installer and repairer of air-conditioner units. Mr. Chavaria was an employee of Respondent. Respondent did not maintain workers’ compensation insurance coverage for Mr. Chavaria in violation of Chapter 440. It is undisputed that Mr. Chavaria did not have any type of coverage for workers’ compensation insurance. Mr. Jaime Guererro and Mr. Glen Magill also had no exemptions and no workers’ compensation insurance coverage. Respondent offered tax records for 2007 as Exhibit 8 at the hearing to show gross payroll for Julie and Richard Magill. The offered exhibit was an attempt to re-create tax information from an internet website. Respondent was given 10 days following the date of the hearing to produce an authenticated version of this document. No documentation was received.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation, issue a final order imposing a penalty assessment in the amount of $4,741.76. DONE AND ENTERED this 15th day of April, 2010, in Tallahassee, Leon County, Florida. S DANIEL MANRY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of April, 2010.
The Issue At issue in this case is whether Respondents, the Office of Insurance Regulation ("OIR" or "the Office") or the Financial Services Commission ("the Commission") have developed agency statements of general applicability meeting the definition of a rule in section 120.52(10), Florida Statutes (2011), governing its review, evaluation, recalculation, and disposition of excessive profits filings submitted pursuant to section 627.215, Florida Statutes (2011). If so, it must be determined whether those statements have been adopted as rules pursuant to the rulemaking process in section 120.54(1).
Findings Of Fact Premier is a foreign insurer authorized to write workers' compensation insurance in the State of Florida. As a workers' compensation insurer, Premier is subject to the jurisdiction of the Office. Premier began writing workers' compensation insurance coverage in Florida on January 1, 2005. The Office is a subdivision of the Financial Services Commission responsible for the administration of the Insurance Code, including section 627.215. Section 627.215(1)(a) requires that insurer groups writing workers' compensation insurance file with the Office on a form prescribed by the Commission, the calendar-year earned premium; accident-year incurred losses and loss adjustment expenses; the administrative and selling expenses incurred in Florida or allocated to Florida for the calendar year; and policyholder dividends applicable to the calendar year. Insurer groups writing other types of insurance are also governed by the provisions of this section. The purpose of section 627.215 is to determine whether insurers have realized an excessive profit and if so, to provide a mechanism for determining the profit and ordering its return to consumers. Insurer groups are also required to file a schedule of Florida loss and loss adjustment experience for each of the three years prior to the most recent accident year. Section 627.215(2) provides that "[t]he incurred losses and loss adjustment expenses shall be valued as of December 31 of the first year following the latest accident year to be reported, developed to an ultimate basis, and at two 12-month intervals thereafter, each developed to an ultimate basis, so that a total of three evaluations will be provided for each accident year." Section 627.215 contains definitions that are critical to understanding the method for determining excess profits. Those definitions are as follows: "Underwriting gain or loss" is computed as follows "the sum of the accident-year incurred losses and loss adjustment expenses as of December 31 of the year, developed to an ultimate basis, plus the administrative and selling expenses incurred in the calendar year, plus policyholder dividends applicable to the calendar year, shall be subtracted from the calendar-year earned premium." § 627.215(4). "Anticipated underwriting profit" means "the sum of the dollar amounts obtained by multiplying, for each rate filing of the insurer group in effect during such period, the earned premium applicable to such rate filing during such period by the percentage factor included in such rate filing for profit and contingencies, such percentage factor having been determined with due recognition to investment income from funds generated by Florida business, except that the anticipated underwriting profit . . . shall be calculated using a profit and contingencies factor that is not less than zero." § 627.215(8). Section 627.215 requires that the underwriting gain or loss be compared to the anticipated underwriting profit, which, as previously stated, is tied to the applicable rate filing for the insurer. Rate filings represent a forecast of expected results, while the excess profits filing is based on actual expenses for the same timeframe. The actual calculation for determining whether an insurer has reaped excess profits is included in section 627.215(7)(a): Beginning with the July 1, 1991, report for workers' compensation insurance, employer's liability insurance, and commercial casualty insurance, an excessive profit has been realized if the net aggregate underwriting gain for all these lines combined is greater than the net aggregate anticipated underwriting profit for these lines plus 5 percent of earned premiums for the 3 most recent calendar years for which data is filed under this section. . . Should the Office determine, using this calculation, that an excess profit has been realized, the Office is required to order a return of those excess profits after affording the insurer group an opportunity for hearing pursuant to chapter 120. OIR B1-15 (Form F) is a form that the Office has adopted in Florida Administrative Code Rule 69O-189.007, which was promulgated pursuant to the authority in section 627.215. The information submitted by an insurer group on Form F is used by the Office to calculate the amount of excessive profits, if any, that a company has realized for the three calendar-accident years reported. The terms "loss adjustment expenses," and "administrative and selling expenses," are not defined by statute. Nor are they defined in rule 69O-189.007 or the instructions for Form F. On or about June 30, 2009, Premier filed its original Form F Filing with the Office pursuant to section 627.215 and rule 69O-189.007. Rule 69O-189.007 requires that a Form F be filed each year on or before July 1. The first page of Form F includes section four, under which calendar year administrative and selling expenses are listed. Section four includes five subparts: A) commissions and brokerage expenses; B) other acquisition, field supervision and collection expense; C) general expenses incurred; D) taxes, licenses and fees incurred; and E) other expenses not included above. Premier subsequently filed three amendments to its Form F filing on December 11, 2009; on June 21, 2010; and on January 13, 2012. In each of its amended filings, Premier included the federal income tax expense attributable to underwriting profit it earned during the 2005-2007 period. These expenses were included under section four(E). No guidance is provided in section 627.215, in rule 60O- 189.007, or in the instructions for Form F, to identify what expenses may properly be included in the Form F filing. There is no indication in any of these three sources, or in any other document identified by the Office, that identifies whether federal income taxes are to be included or excluded from expenses to be reported in a Form F filing. While the form clearly references taxes, licenses and fees incurred under section 4(D), the instructions do not delineate what types of taxes, licenses and fees should be included. The instructions simply state: "for each of the expenses in item 4, please provide an explanation of the methodology used in deriving the expenses, including supporting data." The Office takes the position that federal income taxes should not be reported as an expense for the purpose of determining excess profits. It position, as characterized by Petitioner, is that "in determining what expenses may be deducted in calculating whether and to what extent excessive profits have been realized during the reporting period, the Office shall disallow any deduction for federal income tax or the net effect of federal income tax accrued or paid during the reporting period." According to James Watford, a Department actuary who reviews the excess profits reports, this position has not changed at any time in the last ten years. In August 2009, a petition was filed against the Office challenging the statement stated above as an unadopted rule. FFVA Mutual Insurance Co. v. Office of Insurance Regulation, DOAH Case No. 09-4193RU. The proceeding in the FFVA case was placed in abeyance based upon the Office's agreement to initiate rulemaking. A Notice of Development of Rulemaking was published and a workshop was conducted on February 22, 2010. On or about June 17, 2010, James Watford circulated proposed changes to rule 69O-189.007, which included changes to the instructions to Form F. Among those proposed changes was the addition of the following statement: "[f]ederal income tax is not to be included as an expense because the 'anticipated underwriting profit' is based on a pre-Federal income tax profit and contingencies factor." This language would have placed the position consistently taken by the Office in the materials incorporated into the rule. On November 17, 2010, a second rule development workshop was held on the proposed changes to rule 69O-189.007. However, no further action toward adopting the proposed revisions took place. At some point, the FFVA challenge was dismissed based upon a settlement between the parties, and the Office never sought approval from the Commission to notice the proposed changes for rulemaking. No further action has been taken to adopt the Office's position through the chapter 120 rulemaking process, and no credible explanation was provided to explain why the Office did not present the proposed changes to the Commission to obtain permission to notice the proposed rules. Although Mr. Watford testified that the Office has "clearly enunciated [its] position on federal income tax," he acknowledged that it has not been adopted through the rulemaking process. He stated, "before that ever came into existence, we had discussions with companies about the appropriateness of including that the fact that it is already included in the profit factor. . . . It was not published in a rule, because it is -- we thought it was pretty commonly understood by most parties." The Office insists that it is not feasible to consider federal income taxes in the excess profits calculation. It pointed to no real impediment to adopting its position of not considering federal income taxes through the rulemaking process. On January 4, 2011, Governor Scott issued Executive Order 11-1, which temporarily suspended rulemaking for executive branch agencies reporting to the Governor. Executive Order 11-1 was issued 11 months after the Office published its first Notice of Rule Development in February 2010, and did not apply to either the Office or the Commission. The Office also points to publications published by other entities, such as the Actuarial Standards Board and the National Association of Insurance Commissioners ("NAIC"), to support its position that federal income taxes may not be considered in determining excess profits. However, section 627.215 does not reference any of these publications, and they are not incorporated by reference in the Office's rule regarding excessive profits. Nor do these publications expressly reference what can be considered for excess profits calculations. During the 2012 legislative session, section 627.215 was amended to delete the excess profits filing requirement for workers' compensation insurance. § 7, ch. 2012-213, Laws of Fla. Section 627.213 had not been amended prior to this year since 2003. However, the Office continues to assert its position with respect to the exclusion federal income taxes as an expense to those filings remaining in the "pipeline." Section 627.215 continues to apply to other types of insurance.
The Issue At issue is whether respondent committed the offenses alleged in the administrative complaint and, if so, what disciplinary action should be taken.
Findings Of Fact At all times pertinent hereto, respondent, James Brian Cantwell, was licensed by petitioner, Department of Insurance and Treasurer (Department) as an insurance agent. At all times pertinent hereto, respondent was, pursuant to a written agreement of appointment dated January 11, 1993, appointed as an agent for Capital Security Life Insurance Company (Capital) to solicit applications for insurance on behalf of Capital. In exchange therefor, Capital obligated itself to pay respondent such commissions, progress and persistency bonuses, and service fees due under its schedule of compensation for policies issued as a result of applications submitted by respondent. Following respondent's resignation in October 1993, Capital undertook an audit of respondent's accounts. Such audit revealed that between March 17, 1993, and September 23, 1993, respondent submitted to Capital fifty applications for insurance in the name of fictitious or non-existent persons, and that in reliance on each application Capital had issued a policy of insurance and had paid respondent the total sum of $4,035.09 in first-year commissions, progress and persistency bonuses, and service fees for securing such policies. 1/ Such audit further demonstrated that each of the fifty policies lapsed following issuance due to nonpayment of premium. As a consequence, Capital lost the premiums it would have earned had the policies been predicated on legitimate applications and had they remained in effect; however, the value of that loss is not of record. The out-of-pocket loss to Capital as heretofore noted, of $4,035.09, has, however, been established.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department enter a final order revoking the licenses and eligibility for licensure of respondent, James Brian Cantwell. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 1st day of March 1995. 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 1st day of March 1995.
