The Issue The central issue in this case is whether the Respondent is guilty of the violations alleged in the Administrative Complaint and, if so, what penalty should be imposed.
Findings Of Fact Based upon the testimony of the witnesses and the documentary evidence received at the hearing, I make the following findings of fact: At all times material to allegations of the Administrative Complaint, Respondent, William John Harnett, has been licensed or been qualified for licensure as an insurance agent in the State of Florida. Respondent currently holds licenses for service lines insurance, debit insurance, ordinary life and health insurance, and general lines insurance (which is property, casualty, or surety). The Department is charged with the administration of Chapter 626, Florida Statutes. On December 15, 1975, the Department was appointed to serve as Receiver of Southern American Fire Insurance Company (Southern) . The purpose of this receivership was to seek the rehabilitation of the insurance company. On February 10, 1976, Southern was determined to be insolvent pursuant to Section 631.011(3), Florida Statutes and the Department, as Receiver, obtained an Order of Liquidation. The Department was charged with the responsibility of marshalling the company's assets in order to settle the outstanding claims against it. To this end, the Department filed civil suits against insurance agents and agencies which had allegedly failed to remit premium monies owed to Southern. One such suit was against Harnett, Inc., Respondent, and other individuals associated with Harnett, Inc. From April 9, 1947 until November 14, 1986, Harnett, Inc. was a corporation organized under the laws of the State of Florida whose general business was insurance. Respondent served as the treasurer and a director for Harnett, Inc. Respondent was authorized to and did sign checks and correspondence on behalf of Harnett, Inc. The Department's civil suit against Harnett, Inc. (Case No. 76-23143) was filed in Dade County on July 26, 1976. This suit claimed Harnett, Inc. had failed to remit premium monies owed to Southern and that Respondent, as an officer and director of Harnett, Inc. having direct supervision or control over individuals acting on behalf of Harnett, Inc., was personally liable for the amounts owed. On March 6, 1981, a final judgment (Case No. 76-23143) was entered in favor of the Department as Receiver of Southern. This judgment found against Respondent and Harnett, Inc., jointly and severally, in the sum of $78,617.85. This judgment was affirmed on appeal. 1/ The Department has attempted to collect the funds awarded in this judgment. From October 26, 1962 until November 14, 1986, Franklin Insurance Agency of Miami, Inc. (Franklin) was a corporation organized under the laws of the State of Florida. At all times material to this cause, Respondent was president and a director of Franklin. On October 20, 1976, the Department as Receiver of Southern filed a civil suit against Respondent and Franklin. This suit (Case No. 76-32799) claimed monies were owed to Southern for premiums Franklin had failed td remit. Further, the suit alleged that Respondent, as Franklin's president and director, was personally liable for the refusal and continued refusal of Franklin to pay the premiums. A final judgment was entered for the Department as Receiver of Southern in the Franklin suit on December 9, 1980. This judgment (case No. 76- 32799) provided for recovery against Franklin and Respondent, jointly and severally, in the sum of $35,983.39. The Department has attempted to collect the funds awarded in this judgment. Gables Insurance Agency, Inc. (Gables), organized on November 28, 1967, continues as an active corporation in this state. At all times material to the allegations in the Administrative Complaint, Respondent was the sole officer and director for Gables. Norfolk & Dedham Mutual Fire Insurance Company, Inc. (Norfolk) entered into Agency Agreements with Gables and Harnett, Inc. on February 1, 1976. Subsequently, Norfolk sued Harnett, Inc. (Case No. 84-03815) and Gables (Case No. 84-03816) for premium monies it was claimed to be owed. These suits resulted in final judgments in favor of Norfolk. The suit against Harnett, Inc. (Case No. 84-02815) found the sum of $54,556.00 was owed to Norfolk. The suit against Gables (Case No. 84-03816) found the sum of $18,843.20 was owed to Norfolk. The four judgments identified herein (paragraphs 8, 11, 14 and 15) total $188,000.44 and remain unsatisfied. These judgments represent money damages owed for unpaid insurance premiums. An applicant for licensure with outstanding judgments incurred during the course of doing the business of insurance would not be approved by the Department without a showing of restitution or rehabilitation. The Department deems such an applicant to be untrustworthy, incompetent, and not fit to become qualified and licensed in Florida. Respondent offered no evidence of restitution or rehabilitation. Respondent maintained that no monies were owed by the respective debtor companies or Respondent individually.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That Department of Insurance and Treasurer enter a Final Order revoking the licenses held by Respondent, William John Harnett. DONE and RECOMMENDED this 5th day of July, 1988, in Tallahassee, Florida. JOYOUS D. PARRISH Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 5th day of July, 1988.
The Issue The issue is whether proposed rule 4-141.020 is an invalid exercise of delegated legislative authority.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Background These cases arose after respondent, Department of Insurance (DOI), published in the Florida Administrative Weekly its notice of intent to adopt new rules 4-141.020 and 4-141-021, Florida Administrative Code. The first rule prescribes procedures for the withdrawal and surrender of a certificate of authority, or the discontinuance of writing insurance in the state. The second rule specifies procedures for implementing the moratorium phaseout process in Section 627.7013, Florida Statutes. By agreement by the parties, rule 4-141.021 is no longer in dispute. Contending that rule 4-141.020 is invalid for numerous reasons, petitioners, United States Fidelity and Guaranty Company (USF&G) and Fidelity and Guaranty Insurance Company (FGIC), filed their petition to determine invalidity of proposed rules on February 25, 1994. Generally, the petition alleges that the rule as a whole conflicts with other statutory and constitutional provisions, as well as the authorizing statute. It further alleges that subsections (3), (5), (8), and (9)(b) of the rule conflict with the authorizing statutes, and that paragraph (9)(b) is also arbitrary, capricious and vague. Petitioner, Holyoke Mutual Insurance Company in Salem (Holyoke), filed its petition to determine invalidity of proposed rules on February 25, 1994. The petition generally alleges that the rule as a whole conflicts with the law being implemented and is arbitrary and capricious. More specifically, the petition alleges that subsections (2)(b), (5), (6)(e)4., (7)(a), (7)(b), (8), (9), (9)(a), and (9)(b) contravene statutory provisions, and that the rule as a whole violates the due process, equal protection, commerce, and impairment of contract clauses of the state and federal constitutions. The Parties Respondent is the state agency charged with the responsibility of administering and enforcing the laws of the state governing insurance companies. Petitioners USF&G and FGIC are foreign insurers authorized to transact insurance in the State of Florida, including personal lines and residential insurance. USF&G and FGIC filed a notice to withdraw from homeowners multi-peril lines of insurance on July 7, 1993, in accordance with Subsection 624.430(1), Florida Statutes. Under that law, petitioners were required to give ninety days notice to the DOI before discontinuing those lines of insurance. The ninety-day notice period would have expired on October 5, 1993. Due to various emergency rules adopted by DOI and newly enacted legislation, the notice to withdraw never became effective. Because the proposed rule would affect their right to discontinue writing certain lines of insurance, petitioners are substantially affected by rule 4-141.020. Petitioner Holyoke is a mutual insurance company that writes business in all the New England states, New York and Florida. As of December 31, 1994, Holyoke had 4,027 homeowner policies and 1,541 dwelling fire policies outstanding in the State of Florida. Some of these property and insurance contracts were entered into prior to the enactment of Section 627.7013, Florida Statutes, which provides for a phaseout of a moratorium imposed by the legislature on the cancellation or nonrenewal of certain policies. On March 11, 1993, Holyoke filed a notice of withdrawal from all lines and kinds of insurance in the State and of the surrender of its certificate of authority pursuant to Section 624.430, Florida Statutes. Its plan was to withdraw over six months, giving all policyholders six months notice before nonrenewing policies over a twelve month period. Due to various emergency rules and statutes, Holyoke has been unable to cease doing business in the state. Since rule 4-141.020 would regulate Holyoke with regard to withdrawing from the homeowners multi-peril insurance market, it is substantially affected by the proposed rule. Events Leading to the Adoption of the Rule Following Hurricane Andrew's landfall in South Florida on August 24, 1992, the insurance industry suffered catastrophic casualty losses which totaled around $15 billion. Many insurance companies announced they were either withdrawing from the state altogether, were withdrawing from the homeowners' line of business, or were cancelling or nonrenewing substantial blocks of policyholders. Beginning on August 31, 1992, the DOI began to issue a string of emergency rules designed to limit cancellations and nonrenewals of insurance policies. None of these rules, however, purported to regulate the withdrawal of insurers from the state or from particular lines of insurance. During this same time period, the DOI adopted two emergency rules establishing procedures for insurers wishing to withdraw from any property lines in Florida. These emergency rules pertaining to insurer withdrawals expired on May 12, 1993, and no authority to restrict withdrawals retroactively has been authorized by the legislature. On May 18, 1993, the DOI imposed emergency rule ER 93-18 which represented its response to market stabilization in homeowners insurance lines. The rule imposed a moratorium on the nonrenewal and cancellation of homeowners insurance policies. The rule did not purport to regulate insurer withdrawals under Section 624.430, Florida Statutes, which governs the surrender of certificates of authority or discontinuance of writing certain lines of insurance in the state. Effective June 8, 1993, the legislature enacted Chapter 93-401, Laws of Florida, which essentially codified a DOI emergency rule and imposed a moratorium on cancellation or nonrenewal of personal lines residential property insurance policies from May 19, 1993, until November 14, 1993. The law was specifically confined to imposing a time-limited moratorium on only the "cancellation and nonrenewal of residential property coverages." Just prior to the expiration of the moratorium, the legislature enacted Section 627.7013, Florida Statutes, which provided for a "phaseout" of the moratorium imposed in Chapter 93-401. The statute provides for the extension of the moratorium on nonrenewal or cancellation of personal lines property insurance imposed by Chapter 93-401, limits unrestricted nonrenewals to five percent per year, and is to remain in effect until November 14, 1996. The statute makes no reference to withdrawals by insurers. Indeed, its purposes, as stated in subsection (1) of the statute, "are to provide for a phaseout of the moratorium (on cancellation or nonrenewal of personal lines residential property insurance policies) and to require advance planning and approval for programs of exposure reduction." It is especially noteworthy that during the same legislative special session in which section 627.7013 was enacted, the legislature considered and rejected legislation that would have created a new section 624.431 granting DOI the authority to condition and prevent withdrawals by insurers. Thus, the legislature rejected a statute which would have provided the DOI with the same authority included in the proposed rule. There is no clear expression in section 627.7013 that the legislature intended the law to operate in a retroactive manner. Because the statute imposes new obligations on insurers, it must be presumed that the legislature intended it to operate prospectively. In contrast, and in response to Hurricane Andrew, when the legislature adopted Chapter 92-345, Laws of Florida, in its December 1992 special session, subsection (2) of section 1 of that law contained specific language that "this section shall take effect upon becoming a law and shall apply retroactively to August 24, 1992." On February 4, 1994, the DOI published notice of its intent to adopt new rules 4-141.020 and 4-141.021. However, the latter rule is no longer in issue. Rule 4-141.020, which is sometimes referred to as the "withdrawal rule," generally sets forth the procedures for withdrawal, surrender of certificate of authority, or discontinuance of writing insurance in the state under section 624.430. More specifically, it provides definitions of various terms [paragraph 2)], provides a DOI interpretation of section 624.430 (paragraphs (3) and (5)], prescribes procedures for withdrawals and reduction of insurance (paragraphs (6)-(8)], and sets out DOI policy regarding the relationship of reduction in business to the moratorium phaseout in section 627.7013 [paragraph (9)]. Sections 624.308(1) and 624.6012, Florida Statutes, are cited as the specific authority for adopting the rule while Sections 624.430, 624.6011, 624.6012 and 627.7013, Florida Statutes, are identified as the law implemented. Prior to Hurricane Andrew, if an insurer wished to (a) discontinue the writing of any one or more multiple kinds of insurance, (b) withdraw from the state, or (c) surrender its certificate of authority, it would simply provide to the DOI notice of its intent to do so as required by section 624.430. As long as the notice complied with the statutory requirements, the withdrawal was self- executing, and DOI did not require specific approval or impose further conditions on the insurer. Thus, before this controversy arose, DOI took the position that the only duty or power granted to it under the section was a ministerial one of altering the certificate of authority to reflect the insurer's withdrawal from certain lines of insurance or, in the case of complete withdrawal from the state, to cancel the insurer's certificate of authority. It has never adopted any permanent rule construing the statute in any other fashion. Although section 624.430 has not been amended by the legislature since it was enacted in 1963, under the proposed rule, section 627.7013 is interpreted as restricting the right of an insurer to withdraw from the state entirely or from a line of insurance. Indeed, the rule provides that section 627.7013 takes precedence over section 624.430, and unless an insurer had filed its notice of withdrawal prior to August 24, 1992, insurers are severely limited in their ability to discontinue lines of business or withdraw from the state through at least November 14, 1996. The Petitions, Stipulation and Proposed Final Orders Because the initial petitions, prehearing stipulation, and proposed final orders sometimes speak to different issues, and some of the allegations are either unclear or not precisely pled, it is necessary to comment on these matters before making findings as to the validity of the rule. Since the initial petitions frame the issues in these cases, and DOI counsel has objected to expanding the issues through stipulation or otherwise, the undersigned has limited the issues to those raised in the initial petitions and deemed all others to be untimely raised. Further, where a party has framed an allegation in its complaint, but failed to argue that issue in its proposed order, that allegation has been deemed to be abandoned. Finally, where allegations are nonspecific and speak to the rule as a whole, and the undersigned is unable to determine the language in the rule being challenged, those allegations have been disregarded. In their initial petition, USF&G and FGIC first contend that the rule as a whole is invalid because it conflicts with, extends or modifies sections 624.430, 627.7013 and "other existing (but unnamed) statutory authority," and it violates the Florida and U. S. Constitutions by interpreting section 627.7013 as taking precedence over section 624.430. In actuality, only subsection (9), and not the entire rule, speaks to this issue and thus the broad allegation has been narrowed in this respect. They have also alleged that the rule in its entirety is invalid because it conflicts with, extends or modifies the "authorizing statute" in that it purports to require filings and information not authorized by statute. Because these alleged illegal filing requirements are found in paragraph (6)(e), the undersigned has considered only that provision as subject to attack. USF&G and FGIC also allege that subsections (3), (5), (8) and (9)(b) are invalid because they conflict with, extend or modify the "authorizing statute." Finally, they allege that paragraph (9)(b) is invalid on the additional grounds that the language is arbitrary, capricious, and vague. Since the reference to paragraph (9)(b) appears to have been in error, and petitioners actually intended to challenge paragraph (9)(a), the undersigned will address the latter provision. In summary, then, and notwithstanding the broad allegations in the petition, only parts, and not the whole, of the rule have been placed in question by these petitioners. Because the proposed final order of USF&G and FGIC fails to address subsections (5) and (6)(e), the undersigned has deemed those allegations to be abandoned. Finally, the proposed order raises for the first time a contention that subsection (4) is invalid. This contention has been disregarded as being untimely raised. In its initial petition, Holyoke first contends that the rule in its entirety is invalid "because it would enlarge, contravene, and modify the specific provisions of law that it purportedly implements and because it would be arbitrary and capricious." It then goes on to plead that subsections (2)(b), (5), (6)(e)4., (7)(a), (7)(b), (8), (9), (9)(a), and (9)(b) are invalid on the ground they conflict with, extend, or modify other statutory provisions. Since no specific factual allegations have been made regarding the arbitrary and capricious nature of the rule, and there are no statutory allegations regarding the remaining parts of the rule, the undersigned will treat the petition as challenging only these paragraphs for the single ground stated. Finally, Holyoke alleges that the rule in its entirety violates the due process, equal protection, commerce, and impairment of contract clauses in the State and U. S. Constitutions. In its proposed order, Holyoke has further contended that the above paragraphs are also invalid on the grounds they are arbitrary and capricous, vague, fail to establish adequate standards and vest unbridled discretion in the agency. Because the latter three grounds were never raised in the initial petition and, as noted above, there are no specific allegations regarding the arbitrary and capricous nature of the cited paragraphs, these grounds have been disregarded as being untimely raised. Is the Rule Invalid? a. Rule 4-141.020(9) Petitioners' chief concern is the DOI's interpretation, as expressed in subsection (9) of the rule, that section 627.7013 takes precedence over section 624.430 "as to all attempted or desired reductions" affecting personal lines residential policies. Because "reductions" are broadly defined in paragraph (2)(b) of the rule as including the discontinuance of one or mulitiple lines of business, the withdrawal from the state, and the surrender of a certificate authority, subsection (9) effectively prevents an insurer from exercising its rights under section 624.430 until November 14, 1996, when the phaseout statute expires. Since the vitality of much of the rule turns on the validity of subsection (9), the multiple allegations concerning this provision will be addressed first. The exact language in subsection (9) is as follows: (9) Relationship of Reduction to Moratorium Phaseout. The department interprets Section 627.7013(2)(a)4., Florida Statutes, relating to certain applications for reduction filed prior to August 24, 1992, as indicating a legislative intent that as to all attempted or desired reductions affecting "Florida per- sonal lines residential policies" (hereinafter "residential policies"), other than those in which such reduction notice was filed prior to August 24, 1992, Section 627.7013 applies and takes precedence over Section 624.430, and prohibits or limits such reductions affecting residential policies, where there is any relation- ship between the reduction sought, and the risk of loss from hurricane exposure. Subparagraph (2)(a)4. of section 627.7013 provides the principal statutory support for the rule and reads as follows: 4. Notwithstanding any provisions of this section to the contrary, this section does not apply to any insurer that, prior to August 24, 1992, filed notice of its intent to dis- continue its writings in this state under s. 624.430, and for which a finding has been made by the department, the Division of Administrative Hearings of the Department of Management Services, or a court that such notice satisfied all re- quirements of s. 624.430. As explained at hearing by the author of the rule, "by implication" or "negative inference" the DOI construed the above statutory language as manifesting an intent on the part of the legislature to make all types of withdrawals, and not just the cancellation or nonrenewal of personal lines residential property policies, subject to the moratorium phaseout statute. In other words, DOI posits that the legislative exemption from the moratorium phaseout statute of an insurer who filed, prior to August 24, 1992, a notice of its intent to discontinue writings, supports the broad negative inference that section 627.7013 prohibits an insurer not only from "discontinuing its writing" of one or more lines of business after August 24, 1992, but also from withdrawing from the state and surrendering its certificate of authority. In making this interpretation of section 627.7013 in its rule, the DOI ignored the distinctions between "discontinuance of lines of insurance" versus "withdrawal from the state" versus "surrendering a certificate of authority." Section 627.7013 refers only to "discontinue," as opposed to a total withdrawal coupled with a surrender of a certificate. Whatever negative inference might be drawn from subparagraph (2)(a)4. regarding the discontinuance of a line of insurance before August 24, 1992, as opposed to after that date, it cannot be extended to prohibit an insurer's total withdrawal from Florida and the surrender of its certificate of authority. Such an interpretation is not only contrary to the plain language in sections 624.430 and 627.7013, but also subsection 624.416(1), which recognizes an insurer's right to surrender its certificate of authority. To this extent, then, the rule is an invalid exercise of delegated legislative authority. Assuming that the statute is a proper source of authority for imposing restrictions on discontinuing lines of insurance by virtue of the words "discontinue its writings" in subparagraph (2)(a)4., petitioners argue further that DOI has used the rule to interpret the statute so as to have it apply in a retroactive manner to insurance contracts in existence prior to the enactment of the statute. It is undisputed that all petitioners had insurance contracts in existence as of the date of the enactment of the law, and that the rule operates in a retroactive manner by applying to all notices of withdrawal filed prior to the enactment of section 627.7013 but after August 24, 1992. In resolving this issue, the undersigned cannot find, and respondent has not credibly reported, any clear expression in the statute that the legislature intended to apply the statute retroactively. At the same time, the statute affects petitioners' substantive rights by imposing new obligations or duties in connection with their right to withdraw under section 624.430, and thus it is deemed to be substantive in nature. Because the rule has the effect of imposing retroactive obligations and duties on petitioners in contravention of section 627.7013, subsection (9) is found to be an invalid exercise of delegated legislative authority. b. Rule 4-141.020(2)(b) Proposed rule 4-141.020(2)(b) defines the terms "reduce presence in Florida," "reduce," and "reduction" as follows: (b) "Reduce presence in Florida," "Reduce," and "Reduction," as used in this rule are inclusive terms meant to collectively refer to any and all of the following actions as may be desired or taken by an insurer: to surrender its Florida certificate of authority; to withdraw from Florida; or to discontinue the writing of any one or multiple lines or kinds of insurance in Florida. Holyoke contends that the foregoing language is invalid because the term "reduction" is defined as including a total withdrawal from all lines of insurance in Florida and the surrender of a certificate of authority, and thus it contravenes sections 624.430, 624.415, 624.416 and 627.7013. 34. Sections 624.430, 624.6011, 624.6012 and 627.7013 are cited by DOI as the source of authority for the definition. There is nothing in section 624.6011, which classifies insurance into seven "kinds of insurance," nor section 624.6012, which defines the term "lines of insurance," authorizing the broad and sweeping definition of the word "reduction." Similarly, section 627.7013(2)(b) authorizes the DOI to "adopt rules to implement this subsection," but subsection (2) deals only with "the cancellation or nonrenewal of personal lines residential property insurance policies that were in force on November 14, 1993, and were subject to the moratorium." Section 624.430 does speak in general terms to "(a)ny insurer desiring to surrender its certificate of authority, withdraw from this state, or discontinue the writing of any one or multiple kinds of insurance in this state," but in the context of this rule, which seeks to prevent all types of withdrawals under the authority of section 627.7013, the rule clearly contravenes the law being implemented. Therefore, paragraph (2)(b) constitutes an invalid exercise of delegated legislative authority. c. Rule 4-141.020(3) Proposed rule 4-141.020(3) reads as follows: (3) Actions Having the Substantial Effect of a Withdrawal or Discontinuance of Writing Insurance in this State. Reductions subject to Section 624.430, Florida Statutes, include any action or actions the reasonably forseeable substantial effect of which is, or will be when the action is completed, to have discon- tinued the writing of a kind or line of insurance or to have withdrawn from Florida. "Substantial effect" means that, for example, the continuance of a token amount of writing in Florida will not prevent a conclusion that a reduction subject to Section 624.430 has or will occur. Furthermore, it is not determinative of the existence of a reduction requiring notice under Section 624.430, that the action is taken in a single step, or by a series of steps over time, if the reasonably forseeable effect of the action or actions is or will to be to (sic) have substantially effected a reduction. The application of Section 624.430 does not depend upon the insurer's subjective statement of desire or intent as to the effect of its actions. In their petition, USF&G and FGIC contended this part of the rule impermissibly "conflicts with, modifies or extends the authorizing statutes in that the rule adopts a 'reasonably forseeable substantial effect' test for determining whether a proposed action is subject to Section 624.430, Florida Statutes." While petitioners have addressed other somewhat similar provisions in paragraph (9)(a), no argument has been made in their proposed order as to subsection (3), and the undersigned has accordingly assumed the issue to be abandoned. d. Rule 4-141.020(5) Proposed rule 4-141.020(5) prescribes the following time limitations in which an insurer can take no action after filing a notice of reduction with DOI: (5) Notice to Precede Action to Reduce Presence in Florida. An insurer shall take no action in furtherance of a reduction, prior to the expir- ation of 90 days after the receipt by the depart- ment of the notice required by Section 624.430. Prohibited actions include sending any notice of cancellation or termination, or notice of intent to cancel or terminate, to any policyholder, agent, managing general agent, reinsurer, or other person or entity. In their petition, USF&G and FGIC have alleged that the proposed rule conflicts with, modifies or extends "the authorizing statute in that it prohibits an insurer from taking action in furtherance of the proposed reduction prior to the expiration of the 90-day period under section 624.430, Florida Statutes." Holyoke makes the same allegation and contends the rule contravenes sections 624.430, 624.415 and 624.416. The record is not clear on the exact manner in which section 624.430 operates. It may be reasonably inferred, however, that once a notice of withdrawal is filed, the insurer may then begin notifying customers and other interested persons that it will withdraw at the end of the ninety-day statutory time period. By restricting insurers from taking this action in contravention of the terms of section 624.430, and there being no other valid source of authority, subsection (5) is found to be an invalid exercise of delegated legislative authority. e. Rule 4-141.020(6)(e)4. Paragraph (6)(e) describes the content of the notice to be given to DOI when providing a notice of reduction. Subparagraph 4. therein requires the following information to be provided in the notice of reduction: 4. Insurers shall also provide the department with the following information in the notice: A listing of all lines of insurance the insurer than has in force in Florida which will be affected by the reduction, and for each line, a statement of the approximate number of policies and dollars of premium then in force in Florida and which will be affected by the desired reduction. A description of what notice and treatment will be given by the insurer to its affected Florida policyholders concerning the reduction; and what steps will be taken by the insurer regarding processing of any outstanding covered claims of such policyholders while and after the insurer accomplishes its reduction. A description of projected impact of the reduction upon the insurer's Florida agent and agency force, if any. In addition to any other information related to the impact on agents, the insurer shall state the number of affected agents and give a brief description of what they are being told. Holyoke claims that this portion of the rule is invalid because it requires an insurer "to provide excessive information" in contravention of sections 624.430, 624.415 and 624.416. Since the proposed rule is based upon the premise that the DOI has the authority under section 627.7013 to restrict the ability of insurers to withdraw in any fashion, and such statutory authority has been found to be lacking in the laws being implemented, the rule is deemed to be an invalid exercise of delegated legislative authority on the ground it modifies or extends sections 624.430 and 627.7013. f. Rule 4-141.020(7)(a) and (b) These paragraphs describe the DOI's responsibilities once an insurer files a notice of reduction. They read as follows: (7) Department Action Upon Receipt of Notice. Subsequent to receiving the initial filing the department will request the insurer to provide further information, or will conduct such other investigation as is necessary to determine whether the initial information provided is accurate and whether the proposed action will have the effects projected by the insurer. Reduction Tolled During Certain Investi- gations. The department shall inform the insurer by (sic) that the proposed reduction would be in violation of, or cause a violation of, any provision of the Insurance Code or rule of the department, and thereafter the insurer shall not effect the reduction and shall terminate any action then under way towards accomplishment of the reduction, until such time as the department's allegation is determined under Section 120.57, Florida Statutes, and such appeals as may be taken by either party are concluded. Like so many other parts of the rule, Holyoke contends here that the foregoing language is invalid because it contravenes sections 624.430, 624.415, and 624.416. Since the proposed rule purports to place new restrictions on insurers seeking to withdraw, and it has no source of statutory authority, the above language is found to be an invalid exercise of delegated legislative authority on the ground it extends or modifies sections 624.430 and 624.7013. g. Rule 4-141.020(8) This provision provides that no surrender of a certificate is effective until approved by DOI. The specific language in the subsection reads as follows: (8) Certificate of Authority Surrender Effected by Department Order. No surrender or attempted surrender of a certificate of authority is effective until accepted by order of the department. USF&G and FGIC contend the rule conflicts with, modifies or extends section 624.430 since that statute requires an insurer to provide notice that it intends to surrend a certificate of authority, but does not require it to obtain DOI approval to do so. In its petition, Holyoke has alleged that the foregoing language contravenes not only section 624.430, but also sections 624.415 and 624.416. As noted in finding of fact 17, until the enactment of section 627.7013, DOI has always taken the position that a notice of withdrawal did not require specific agency approval. Rather, DOI has said that the only power or duty granted it under section 624.430 was a ministerial one of altering the certificate of authority to reflect the insurer's withdrawal from certain lines of insurance or, in the case of complete withdrawal from the state, to cancel the insurer's certificate of authority. Since section 624.430 has not been amended, and section 627.7013 does not enlarge DOI's rights with regard to a notice of withdrawal filed by an insurer, the paragraph is found to in conflict with both sections 624.430 and 627.7013. Therefore, it is deemed to be an invalid exercise of delegated legislative authority. h. Rule 4-141.020(9)(a) This paragraph generally provides that any reductions in residential policies proposed by an insurer must be unrelated, directly or indirectly, to a reduction of risk of loss from hurricane exposure. The rather lengthy rule reads as follows: Reduction Must be Unrelated to Risk of Loss From Hurricane Exposure. Pursuant to Section 627.7013, where the reduction affects residential policies, the proposed reduction must be unrelated to the risk of loss from hurricane exposure. The department notes that Section 627.7013 does not in any way qualify or limit the requirement that the reduction be unrelated to the risk of loss from hurricane exposure. The department interprets the word "unrelated," as used in Section 627.7013, in the context of the exigent circumstances motivating the enactment of the statute, and the remedial nature of the statute, as requiring a liberal, wide-reaching definition, so that the reduction must be completely unrelated, directly and indirectly, to reduction of risk of loss from hurricane exposure. As stated in subsection (3), above, the department is not bound by the reason facially asserted for the reduction. If the reduction is related in part to reduction of risk of loss from hurricane exposure, the reduction is prohibited unless authorized as type one, two, or three relief, under Rule 4-141.021, notwith- standing that some other reason is in good faith also part of the reason for seeking the reduction. The objective effect of the propose (sic) reduction in reducing hurricane exposure is given more weight than the insurer's subjective motivations, in determining whether the reduction is unrelated to risk of hurricane exposure. Subjective motivation is relevant primarily only where the objective effect is equivocal. Factors which will be given great weight in evaluating whether a desired reduction is related to risk of hurricane loss are: Would the reduction in Florida be accompanied by reduction action by the insurer in other states? If so, would a disproportionate amount of the impact be in areas of the country especially subject to risk of loss from hurricane? How much of the reduction in Florida would be in residential policy exposures as compared to exposures in other lines of insurance in Florida? If the insurer is discontinuing writing only some lines of insurance are the lines being discontinued especially subject to risk of loss from hurricane, as compared to the lines not being discontinued? Does the insurer have a significant con- centration of residential policies and exposure to risk of loss from hurricane exposure under residential policies in Florida? Would the desired reduction significantly reduce the insurer's exposure to risk of loss from hurricane exposure under residential policies in Florida? Holyoke argues that the paragraph contravenes sections 624.430, 624.416 and 627.7013 by stating that any "reduction" must be "unrelated to risk of loss from hurricane exposure" and that "unrelated" means "completely unrelated, directly and indirectly, to reduction of risk of loss from hurricane exposure." At the same time, USF&G and FGIC contend the rule is invalid since it "improperly" defines the term "unrelated" to permit the DOI to apply a subjective "effects" test "using illegal, arbitrary, capricious, and vague factors which fail to establish adequate standards for agency action and which exceed the agency's delegated authority." Although several statutes are cited as being the law implemented, section 627.7013 is the principal source of authority for the rule. Subparagraph (2)(a)1. of the statute provides in relevant part that (t)his subparagraph does not prohibit any cancellations or nonrenewals of such policies for any other lawful reason unrelated to the risk of loss from hurricane exposure. The statutory language unequivocally reserves to insurers the right to cancel or nonrenew policies "for any other lawful reason unrelated to the risk of loss from hurricane exposure." To the extent the rule authorizes DOI to prohibit nonrenewals or cancellations if they are related in part to reduction of hurricane exposure, even if other reasons are in good faith and are part of the reason for seeking the cancellations or nonrenewals, the language contravenes the statute. The rule further provides that if the effect of a reduction in exposure is to avoid hurricane exposure, the nonrenewal or cancellation can be denied even if the insurer has given a lawful reason unrelated to the risk of loss from hurricane exposure. Since it can be reasonably inferred that the ultimate effect of every withdrawal is to reduce to zero the insurer's risk of loss from hurricane exposure, the "effects" test strips the statute of its clear mandate that insurers maintain the right to cancel or nonrenew policies "for any other lawful reason unrelated to the risk of loss from hurricane exposure." For this additional reason, the rule contravenes the statute. Next, while there is some evidential support as to DOI's theory in adopting the rule as a whole, there is no factual basis in the record to support the rationale for the language in paragraph (9)(a). As such, it is deemed to be arbitrary and capricious. Finally, in applying the six factors that would be given "great weight" in evaluating whether a desired reduction is related to risk of hurricane loss, the DOI acknowledges that there are no criteria or guidelines to follow in weighing these objective effects. Indeed, the DOI author admitted he had insufficient experience to fashion more specific guidelines. Even so, the language is not so vague as to confuse a person of reasonable knowledge, nor can it be said that the rule fails to establish adequate standards for agency action which exceed the agency's delegated authority. i. Rule 4-141.020(9)(b) The final provision under challenge is found in paragraph (9)(b) which reads as follows: (b) If the department determines that any proposed reduction violates Section 627.7013, the insurer shall not proceed with the reduction as it affects residential policies, and shall file an application under Rule 4-141.021 which implements Section 627.7013. The reduction in residential policies shall be limited to the extent of relief granted the insurer by the department under Section 627.7013 and Rule 4-141.021. Holyoke contends that this language is invalid because it contravenes sections 624.430, 624.415 and 624.416. Although the allegation is imprecise, it is assumed that petitioner contends the rule impermissibly broadens the definition of the word "reduction" to include an insurer's withdrawal from the state or the surrender of a certificate of authority. Because the undersigned has previously found that the DOI clearly lacks statutory authority under section 627.7013 to limit withdrawals from the state or the surrender of a certificate of authority, and the broad definition of "reduction" in paragraph (2)(b) has been deemed to be invalid, it is found that the language in the rule conflicts with sections 624.430 and 627.7013 and is an invalid exercise of delegated legislative authority. D. Constitutional Claims Even if the rule is a valid exercise of delegated legislative authority, Holyoke nonetheless contends the rule is invalid because it violates the Florida and United States Constitutions in several respects. USF&G and FGIC join in this claim. Due process and takings clause Article I, section 9 of the Florida Constitution provides that "(n)o person shall be deprived of life, liberty or property without due process of law . . ." USF&G, FGIC and Holyoke contend the proposed rule violates this provision and its federal counterpart, the 14th Amendment of the United States Constitution. Holyoke's presence in the state may be characterized as small. Therefore, the absence of economies of scale assures continuing operating losses for the company. Indeed, in 1993 and 1994, Holyoke suffered operational losses in the state of $822,071 and $736,000, respectively, without the landfall of a hurricane. The rule bars Holyoke from withdrawing totally from Florida and surrendering its certificate of authority as it wishes to do. In Holyoke's case, every dollar of risk required to be underwritten in Florida requires that it forego writing business in another state, or increase its surplus-to-writings ratio, thereby increasing the financial risk assumed. The prospect of continuing losses in Florida impacts Holyoke in two ways. First, it suffers a drain on its surplus to the extent of the forced losses. Second, given the relationship between surplus and writing capacity, the loss of surplus caused by the operating losses results in its inability to write business in another state upon the lost surplus. USF&G is now in the process of downsizing its firm. In 1991, it was on the verge of insolvency having suffered losses of $600 million in that year alone. Based on marketing studies performed after 1991, the company has reshaped its corporate strategy and has subsequently withdrawn entirely from two states (Texas and Louisiana), and has withdrawn all personal lines from nine states. In addition, USF&G has made selected withdrawals for particular lines in many other states, and has pared its total employees from 12,500 to 6,000. The proposed rule prevents it from meeting its corporate objective of filing with DOI a notice of withdrawal for personal homeowners multiperil insurance. Equal protection clause Section 2 of Article I of the Florida Constitution provides in part that "(a)ll natural persons are equal before the law." Under the proposed rule, Holyoke must continue to do business in the personal lines market of the state indefinitely, or at least until November 1996. Holyoke contends this is to the detriment of residents of other states in which it writes business, and that the rule favors Florida residents over residents of other states for an illegitimate purpose. Commerce clause The federal commerce clause limits the power of the states to interfere with interstate commerce. Holyoke contends that the interstate allocation of capital and surplus constitutes interstate commerce, and because the proposed rule seeks to regulate its decision as to how to allocate capital and surplus, it violates the commerce clause. Impairment of contracts Article I, section 10 of the Florida Constitution provides that "(n)o . . . law impairing the obligation of contracts shall be passed." All three petitioners contend that section 627.7013, as interpreted by the proposed rule, violates the impairment of contract clauses of both the Florida and United States Constitutions. All petitioners had insurance contracts in existence at the time section 627.7013 was enacted and the rule proposed. Prior to that time, petitioners' rights with respect to those contracts were set forth in section 624.430. The DOI's interpretation of section 627.7013, as expressed in its rule, prohibits the insurers from exercising these pre-existing contractual rights, including the right to withdraw. To this extent, an impairment has occurred. By prohibiting an insurer from withdrawing from the state, DOI's impairment of those rights can be deemed to be substantial. Petitioners operate in a heavily regulated industry. At the same time, according to the findings and purposes of section 627.7013, that legislation was prompted by Hurricane Andrew's "enormous monetary impact to insurers," proposals by insurers to make "substantial cancellation or nonrenewal of their homeowner's insurance policyholders," and the legislature's "compelling state interest in maintaining an orderly market for personal lines residential property insurance."
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 acted as an agent for a membership organization, International Water Safety Foundation (IWSF), and its insurance underwriter, North American Marine (NAM), that had been ordered to cease and desist transacting insurance related business in this state; if so, whether (and what) discipline should be imposed on Respondent's license to transact business as an insurance agent.
Findings Of Fact The Parties Petitioner is the state agency charged with the licensing and regulation of insurance agents in Florida and is responsible for administrating the disciplinary provisions of chapter 626, pursuant to section 20.121(2)(g) and (h), Florida Statutes. At all times material to this case, Respondent was a licensed general lines insurance agent in the state of Florida. Respondent also is a director and officer of the Marta De La Paz Agency, Inc. (MDLPA), which she has co-owned with her daughter, Jenny Mondaca Toledo, since 2000. Respondent was a "captive agent" of Allstate Insurance Company (Allstate) for the period of 2000 to 2010. During this time, pursuant to an agreement with Allstate, Respondent could only sell Allstate insurance products. If Allstate did not carry a particular insurance product line, Respondent was allowed to sell the products of other carriers to her clients if the other carrier was approved by Allstate. The Events Giving Rise to the Recommended Revocation Insurance agents licensed by the State of Florida are only permitted to sell insurance provided by entities which have a "certificate of authority" and which are authorized to sell in Florida. Agents are fiduciaries of the consumers who use their services. Sales of insurance through unauthorized entities place the consumer at risk because unauthorized entities do not participate in the Florida Insurance Guarantee Fund (FIGA), a fund maintained by the State to protect consumers from losses should an authorized insurance carrier become insolvent or unable to pay claims. IWSF is a membership organization which offers various benefits and services to its members, including watercraft insurance through a master policy with NAM. NAM, an unlicensed and unauthorized insurer, through IWSF, solicited Florida consumers to purchase insurance from NAM. On October 15, 2003, the Office of Insurance Regulation issued a cease and desist order (Order) against IWSF and NAM from conducting insurance related activities in Florida, including but not limited to, "transacting any new or renewal insurance business in this state, and from collecting any premiums from Florida insureds." The unlicensed, unauthorized, and, therefore, illegal transaction of insurance by IWSF and NAM was deemed to present an immediate danger to public health, safety, or welfare of Florida residents. On or about April 14, 2009, Carlos Guzman (Guzman), on behalf of himself and his brother-in-law, Jorge Saez (Saez), sought to purchase watercraft insurance for a boat which they co-own. Guzman went to MDLPA and met with employee, Odayls Chiullan (Chiullan). Chiullan, who has held a 2-20 Florida general lines insurance license for approximately 15 years, worked at MDLPA as an agent for approximately three months during the spring of 2009. Respondent, as the principal agent of MDLPA, had the responsibility to supervise Chiullan during the period she worked for MDLPA. In April 2009, Allstate was not providing watercraft insurance for customers in Florida. To determine which carrier, if any, could provide the insurance sought by Guzman and Saez, Chiullan referred to a list maintained in the office of MDLPA. Chiullan found the name of IWSF on the list and assumed that it was approved by Allstate as a licensed entity with which MDLPA could do business. Chiullan was unaware of the 2003 Order against IWSF and NAM. Chiullan contacted IWSF and secured an insurance price quote for Guzman and Saez. Chiullan arranged for Guzman and Saez to become members of IWSF, thereby enabling their boat to become insured under the master policy of IWSF with NAM for the initial period of May 6, 2009, through May 6, 2010, which was subsequently renewed for an additional year. Chiullan contacted Standard Premium Finance Company (Standard) on behalf of Saez and Guzman to assist them in financing the premium payments for their boat insurance. Respondent was on a cruise and not in contact with Chiullan during the period when Chiullan assisted Saez and Guzman with securing boat insurance or the financing for their premium payments. Although correspondence to and from IWSF and MDLPA was on MDLPA letterhead and fax transmittal sheets, Respondent had no contact with Saez, Guzman, IWSF, or NAM regarding this May 2009 transaction. Respondent became aware of the purchase of insurance from IWSF by Saez and Guzman when she was asked by Chiullan to sign the premium finance agreement with Standard as the owner of MDLPA. That was the full extent of Respondent's connection to this particular transaction which is at issue. Saez and Guzman renewed their policy through MDLPA with IWSF and NAM for the period of May 6, 2010, through May 6, 2011. Saez and Guzman made no claims against the policy or policies in effect from May 6, 2009, through May 6, 2011. Prior to receipt of the Administrative Complaint, Respondent was unaware of the Order against IWSF and NAM. Respondent was also unaware that neither entity was authorized to transact business in Florida. Respondent received no notice of the Order from Petitioner, Allstate, IWSF, NAM, or Standard. While serving as a captive agent for Allstate, Respondent did not receive alerts from Petitioner regarding unauthorized insurers. Although Respondent was aware of her obligations under Florida to stay apprised of which entities were authorized to issue insurance in Florida, she did so by maintaining a list in MDLPA, provided by Allstate, which she presumed was vetted and approved as state-authorized insurers. In fact, Respondent sold her son, Osmany Mondaca, insurance for his boat through IWSF and NAM for the period of November 26, 2007, through November 26, 2008, and this policy was renewed for two additional years. Respondent also sold boat insurance through IWSF and NAM for the coverage period of June 24, 2010, through June 24, 2011, to her boyfriend for a boat which they co-own. Prior to purchasing insurance through IWSF for her boyfriend and son, Respondent checked with Petitioner regarding the status of IWSF and was told there was no problem. As recently as December 2013, Respondent checked again with Petitioner and was advised there was no problem writing insurance through IWSF and NAM. Respondent credibly testified that, had she known about the Order, she certainly would not have sold policies through IWSF and NAM for a boat she co-owns with her boyfriend or for her son's boat. Although Petitioner offered evidence that it regularly provides updates on its website and in newsletters alerting agents to unauthorized insurers attempting to do business in Florida, including but not limited to alerts about IWSF and NAM, no evidence was provided that these communications were sent to, received, or reviewed by Respondent or Chiullan. Further, Respondent's testimony, that this information was not available by telephone from Petitioner, was not contradicted.1/
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Insurance Agents and Agency Services, enter a final order which dismisses the Administrative Complaint filed against Respondent. DONE AND ENTERED this 28th day of March, 2014, in Tallahassee, Leon County, Florida. S MARY LI CREASY 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 28th day of March, 2014.
