The Issue The issues to be resolved in this proceeding concern whether the Respondent has violated various provisions of the Florida Insurance Code as alleged in an Amended Order to Show Cause and, if so, what penalty, if any, is warranted.
Findings Of Fact The Petitioner is an agency of the State of Florida charged with licensing and regulating viatical settlement providers in the State of Florida. The Respondent, Future First Financial Group, Inc., is licensed by the State of Florida as a viatical settlement provider. Its President and Chief Executive Officer is Mr. Randy Stelk. A viatical settlement contract involves the sale of a life insurance policy's benefits in exchange for an immediate discounted cash settlement to the original policy holder. A Florida resident "viator" (the insured) desiring to enter into a viatical settlement contract, acts through a Florida licensed broker, who provides the policy information to licensed viatical settlement providers like the Respondent, for subsequent re-sale of policy benefits to purchasers. Future First was initially licensed as a viatical settlement provider on December 26, 1997. The initial regulation of viatical settlement providers in the State of Florida by the Petitioner began at approximately the time Future First initially became licensed. Consolidated findings concerning Counts 1, 3, 4, 6, 7, 12, 15, 16, 20, 22, 28, 29, 34, 35, 36, 38, 39, 41, 43, 44, and 45: Future First was a licensee of and regulated by the Department of Insurance at all times pertinent hereto. The health status representations on the exhibits (referenced in the Department's Proposed Recommended Order) concerning each of these counts, which are the insurance policy applications in question in these counts, are materially inconsistent with the health status representations related to the later viatical settlement agreements contained in the other exhibits so referenced as to each of the above-enumerated counts. These latter exhibits constitute the showing of actual medical condition to the Respondent by the insureds or viators in each transaction referenced in these counts. The overall effect of this showing is to indicate to the Respondent that the viators in question in these counts were HIV positive or had the disease AIDS, along with related diseases and medical conditions, contrary to the representations initially made to the insurance companies issuing the subject policies, in the insurance policy applications referenced in these counts, wherein the viators represented that they suffered from none of the medical diseases or conditions referenced in those application forms, including AIDS. All the exhibits referenced in these counts came from the business files of Future First and were supplied to the Department by Future First upon the Department's request during the investigation process. These material inconsistencies should have caused Future First to be on notice or to know or believe that the viators in question in these counts had made or indeed may have made fraudulent or material misrepresentations on their insurance policy applications. Subsection 626.989(6), Florida Statutes, requires Department licensees to report to the Department any knowledge or belief that a fraudulent insurance practice, as defined in Section 817.234, Florida Statutes, had been or was being committed. Subsection 817.234(3), Florida Statutes, specifically prohibits the presentation of false, incomplete or misleading information in support of an insurance application or the concealing of any fact material to the application. Thus Subsection 817.234(3), supra, specifically prohibits the very act strongly suggested by the evidence presented in the exhibits supportive of the above-referenced counts of the Amended Order. Future First made no reports to the Department concerning these matters until it contends it first became aware of these inconsistencies in health status representations upon receipt of the Order to Show Cause and later the Amended Order to Show Cause. Consolidated Findings of Fact Concerning Counts 2, 5, 8, 9, 10, 11, 13, 14, 17, 18, 19, 23, 24, 27, 30, 31, 32, 33, 40, and 42: The facts established as to these counts are much the same as those referenced above. The health status representations on the insurance policy applications in question and in evidence (exhibit numbers cited in the Proposed Findings as to these counts in the Petitioner's Proposed Recommended Order) are materially inconsistent with the health status representation on the other exhibits which consist generally of the various documents of health or medical information provided to the Respondent by the viators in question, when the transactions leading to the viatical settlement agreements at issue were being entered into and finalized. The commonality among all of these counts as well as the counts in the above Findings of Fact (Part A above) consist of the viator's having been diagnosed with HIV or AIDS and/or related medical conditions sometime in the past prior to executing the insurance policy applications at issue and then responding in the negative on relevant questions on those policy applications, the overall effect of which was to deny the HIV positive test result, the HIV infection and the diagnosis of AIDS and related medical conditions. The viators at issue then openly revealed these conditions and the dates of the relevant diagnoses, all of which pre-dated the insurance policy applications, in the medical status representations they made to the Respondent and which were also revealed in the medical records provided to the Respondent at some point prior to the issuance of the Order to Show Cause and Amended Order. The health status representations made by the viators at these two different, germane points in time are materially inconsistent. Those material inconsistencies reasonably should have caused Future First and its operating officers to be on notice, to know or to believe that the viators made or may have made fraudulent or material misrepresentations on their insurance policy applications. Moreover, the evidence, as to these counts delineated in Part B above, shows that Future First was actually informed specifically that the policies in question had been rescinded by the insurers because the viators had made material misrepresentations on their policy applications. Exhibits such as the Future First policy summary forms show that Future First had been informed of the policy recisions as to the Counts referenced in Part B above. All of the documents constituting the Department's exhibits supportive of these findings, and the policy summary forms included, were found within the business files of Future First and were supplied to the Department by Future First upon its request during the investigative phase of this prosecution. Subsection 626.989(6), Florida Statutes, requires Department licensees to report to the Department any knowledge or belief that a fraudulent insurance practice as defined in Section 817.234, Florida Statutes, had been or was being committed. Subsection 817.234(3), Florida Statutes, specifically prohibits the presentation of false, incomplete or misleading information in support of an insurance application or the concealing of any fact material to the application. Thus, Subsection 817.234(3), supra, specifically prohibits the acts suggested by the documentary evidence presented by the Department, which supports the Findings of Fact herein. Future First made no report on these matters concerning the viators and policies to the Department, prior to the investigatory audit. Additional Findings of Fact Concerning Counts 2, 5, 41, 42, 43, and 44: Concerning Count 2, Exhibits 15 through 17 are viatical settlement purchase agreements entered into between Future First and various viatical settlement purchasers. These agreements represent to those purchasers that the policies, which are the subject of the agreements, are beyond the contestability period (typically two years) during which an insurer company may rescind its policy. The settlement purchase agreements specify that the "contestability period" runs for two years from the date of policy issuance. Exhibit 2 shows, however, that the policy in question was issued on January 22, 1998, and Exhibits 15 through 17, the agreements, were entered into in February, March and April of 1998, well before the January 22, 2000, conclusion of the contestability period. Future First thus had within its possession, in its files, the documents and information to show that the policies were not beyond contestability when the interests in those policies were sold to the investors or viatical settlement purchasers. The purchasers, by initialing the relevant portion of their purchase agreements had indicated and contracted for the purchase of non-contestable policies or policies which had survived the two-year contestable period before being purchased by these investors or viatical settlement purchasers. The vice-president in charge of underwriting, Mr. Sweeney, under the business practices of Future First, essentially made all the calculations and decisions involved in negotiating and effecting the settlement purchase agreements with the investors and the viatical settlement agreements with the original viators or insureds. As an experienced insurance executive and underwriter who had all of the relevant documents available to him, he is chargeable with knowledge that the policies he and Future First were conveying to the settlement purchasers were still within the contestability period, despite his being on documentary notice that the investors had contracted to purchase only non-contestable policies. The officers and directors of the Respondent allowed him to have this independence of action, freedom of conduct and bargaining power on behalf of Future First and therefore, Future First, the corporation, is chargeable with the conduct it allowed him to engage in, even assuming, arguendo, that no other officer, director or employee of the company knew of the relevant details of these transactions. Thus Future First misrepresented to its investors that the policies were beyond contestability when in fact they were not. It thus is chargeable with knowingly selling interests in contestable policies to investors, who had specifically contracted for the purchase for non-contestable policies. This misrepresentation was material to the purchases because the insurers' ability to rescind the policies during contestability, thereby destroying the very instrument securing the purchasers' investment, was not made known to those purchasers. The potential destruction of that instrument and the consequent loss of the investment to the purchaser is material to any reasoned decision to invest. CEO Randy Stelk's testimony at hearing to the effect that computer input error had caused contestable policies to be inadvertently sold to purchasers who contractually specified a non-contestable policy is rebutted by Future First's own documents from its records which correctly and explicitly identify the policy as contestable. See Exhibits 11a and 11f, at pages 1 and 4, and Exhibit 24, all of which correctly identify the policy as contestable. Exhibit 24 specifically notes the dates at which the policy was projected to emerge from its contestability period. Thus this documented evidence, together with the evidence of Mr. Sweeney's close and direct involvement with arranging for the transactions and making decisions as to which policies to sell to which investors belies Mr. Stelk's testimony in this regard. Concerning Count 5, Exhibits 50, 54, 55, 56 and 57, are viatical settlement purchase agreements which inter alia represented to the respective viatical settlement purchasers that the policy in question was beyond the contestability period during which an insurer may rescind the policy. The "contestability period" runs for two years from the date of policy issuance. However, Exhibit 39, shows that the policy in question was issued on February 3, 1998, and Exhibits 50, 54, 55, 56 and 57, were respectively entered into in February of 1998, well prior to the February 3, 2000, end of the contestability period. Here again, Future First's own records, which correctly and explicitly identify this policy as contestable also specifically note, at Exhibits 42d and 46, the date at which the policy was projected to emerge from the contestability period. The purchase agreements referenced above clearly show that the investors contemplated and contracted to purchase a non-contestable policy. These documents clearly were available to Mr. Sweeney and to Future First at the time Mr. Sweeney was making the underwriting decisions and entering into the agreements with the investors, and consequently this knowledge is chargeable to him and to Future First. Again Mr. Stelks' testimony that computer input error had caused inadvertent sale of contestable policies to purchasers who had contractually specified non-contestable policies is rebutted by Future First's own records, the evidence concerning Future First business practices and specifically Mr. Sweeney's underwriting methods and conduct. Thus, Mr. Stelk's testimony in this regard is not credited. Thus, it is inferred that Future First, through Mr. Sweeney, knowingly represented to investors that the policies were beyond contestability when they were not and such a representation was material to the purchase because the insurers' ability to rescind a policy during contestability and destroy the very instrument securing the investment was not made known to the purchaser. The potential destruction of that instrument and the consequent loss of investment is material to any reasoned decision to invest. Concerning Count 41, the fifth page of Exhibit 428, contains a paragraph entitled "Incontestability" which establishes that the life insurance policy in question was subject to a two-year contestability period, during which the insurer could rescind the policy. Exhibits 446, 447, 448, 449, 450 and 451, are all viatical settlement purchase agreements through which the viatical settlement investors purchased an interest in the death benefit of the life insurance policy in question. Each of those purchase agreements contains a standard section entitled "Minimum Criteria" which is initialed by the purchaser, thereby indicating the purchaser's decision to purchase an interest only in a policy which was beyond contestability. Future First nonetheless placed all of those investors' monies into the policy in question (See Exhibit 428) while it was still within the two-year contestability period without informing the purchasers of that fact. Future First had the policy in its possession and necessarily had to have a copy of it in possession in order to purchase the policy from the viator, which it did in July of 1998. It thus knew the policy was still within its contestability period when interest in it were sold to the purchasers in question. The same reasons found with regard to Counts 2 and 5 prevail here with regard to Mr. Sweeney's involvement. The documents were in Future First's possession and within its knowledge such that the circumstantial evidence clearly shows that Future First is chargeable with knowledge or belief that it sold contestable policies to investors who had no reason to believe they were purchasing contestable policies. Concerning Count 42, Exhibit 453 is dated March 24, 1998, and is a viatical settlement purchase agreement between Future First and the viatical settlement purchaser named therein. The agreement contains the same initialed provision found with regard to the agreements in Counts 2, 5 and 41, indicating the purchasers' decision to invest only in a policy which was beyond the two-year contestability period. The agreement bears the designation "PRA 58075" in the lower left hand corner of the first page (purchaser number). Exhibit 459 is a letter dated May 21, 1998, authorizing Charles R. Sussman, Trustee for the Fidelity Trust (identified in numerous exhibits, including 454 in this count, as the escrow agent used by Future First for viatical settlement contract transactions), to wire funds from that trust to Compass Bank for the purchase of an interest in the death benefits of the Farmers New World Life Insurance policy on the viator named therein, which purchase was accomplished through the execution of Exhibit 454 on June 6, 1998. Among the PRA numbers identified in Exhibit 459, is 58075, corresponding to Exhibit 453, the above-referenced purchase contract. Exhibit 455 is an internally prepared Future First document that clearly states that the life insurance policy in question was still well within its contestability period on May 21, 1998. The exhibits thus establish that Future First represented to the investor that the policy it would purchase with his funds was beyond contestability when, because of the unequivocal documents in its possession, Future First had to have known, through Mr. Sweeney, that it was not. Indeed all of those exhibits were found within the business files of Future First and Future First stipulated that included in those exhibits are its purchase request agreements that contain the contestability provision in question. Exhibits 462 and 463 establish that the Manhattan National Life Insurance policy referenced in those exhibits was issued on March 28, 1998. Exhibit 465, establishes that the Manhattan National Life Insurance policy was purchased by Future First on June 22, 1998. Exhibit 468, establishes that on July 1, 1998, purchaser 58075's funds were used to purchase an interest in that Manhattan National Life Insurance policy obviously well within the two-year contestability period since the policy was only issued on March 28, 1998. This was despite an express representation otherwise in the viatical settlement purchase agreement. Exhibits 471 and 472, show that the Manhattan National Life Insurance policy was rescinded during the contestability period in September 1998. Exhibit 473 establishes that Future First decided to switch the viatical settlement purchaser's funds out of the Manhattan National Life Insurance policy into a John Hancock Life Insurance Company policy. However, it did not inform the purchaser that the Manhattan National Life Insurance policy had been rescinded during its contestability period. Exhibits 485 and 486, establish that the Lincoln Benefit Life Insurance policy referenced therein was issued on January 23, 1998. Exhibit 487 establishes that the Lincoln Benefit Life Insurance policy was purchased by Future First in November of 1998, using the purchaser's funds referenced in Exhibits 488 and 489. Among those purchaser's funds were those of Purchaser 58075. Thus, Purchaser 58075's monies were used to purchase an interest in the death benefit of the Lincoln Benefit Life Insurance policy in question. Despite the "beyond contestability" representation made in the viatical settlement purchase agreement between Purchaser 58075 and Future First, Future First placed that purchaser's money into the Lincoln Benefit Life Insurance policy while it was still in its contestability period. Future First's own records refute Mr. Stelk's testimony that computer input error caused inadvertent sales of contestable policies to purchasers who had specified, contractually, their desire for non-contestable policies. The documents from Future First's own records in evidence, explicitly identify this policy as contestable and that the purchasers involved had desired non- contestable policies. In light of the foregoing reasons found as fact as to Counts 2, 5 and 41, which are adopted as to Count 42, Future First is chargeable with knowledge that it was selling contestable policies to purchasers who had specified contractually their wish and intent to purchase non-contestable policies. Count 43 involves the sale by Future First of interests in the death benefits of J.C. Penny Life Insurance Company Policy No. 25184/74L40L3762 in January of 1998, to three different viatical settlement purchasers. This is evidenced by Exhibits 498, 499 and 500, the respective settlement purchase agreements. Each of those purchase agreements includes a provision that required the purchase of an interest only in a policy which was beyond contestability. Exhibits 494, 496, 498, 499 and 500, together however, show that the interest in the policy sold to those purchasers were sold while the policy was still contestable, without informing the purchasers. All of these exhibits came from the business files or records of Future First and Future First stipulated that included in those exhibits are the purchase request agreements that contain the provisions restricting purchases to policies which were beyond the two-year contestability period. In light of the findings made as to Counts 2, 5, 41 and 42, next above, it is determined that Future First, the Respondent, is charged with knowledge that it, and specifically its vice-president in charge of underwriting, Mr. Sweeney, sold those policies which were still contestable to the relevant purchasers; that those purchasers had specified in their purchase agreements their intent to purchase only policies which were uncontestable and that it had not so informed those purchasers. Count 44, concerns a viatical settlement purchase agreement entered into by Future First on March 24, 1998, relating to the sale and purchase of an interest in the death benefit of an insurance policy. See Exhibit 510, in evidence. That agreement represented to the purchaser that the interest to be purchased was to be from a policy which was beyond the two- year contestability period. See Exhibits 508 and 510. However, the policy selected for investment for that purchaser by Future First was not beyond contestability. Exhibit 506, obtained from Future First's own files, clearly shows that the issuance date of the policy was May 6, 1998, and Exhibits 504, 508 and 510 considered together, indicate that the policy was sold to that purchaser while it was still contestable. Future First thus subjected the purchaser's investment to the undisclosed risk of rescission of the policy. The existence of such a risk would certainly be material to that investor's decision about whether to so invest. Thus by investing the purchaser's funds in a contestable policy instead of an uncontestable policy, without advising that investor of such a deviation from their contractual agreement, is, in effect, a material misrepresentation in that transaction. For the reasons found as to Counts 2, 5, 41, 42 and 43 above, Future First is chargeable with knowledge that the policy was contestable and that it had invested the purchaser's funds in a contestable policy when it was contractually bound to only invest that purchaser's funds in an uncontestable policy, as established by the terms of the viatical settlement purchase agreement. Future First's business practices. Future First conducts its business in various states through representatives resident in such states known as viatical settlement brokers. Viatical settlement brokers gather all relevant information, including available medical information and usually provide it to various viatical settlement providers in order to solicit multiple bids on a particular policy. Future First does not solicit viators itself. During the time period relevant to the allegation in the Amended Order, when Future First initially received a package from a broker, it was divided into its insurance and medical components. The insurance component was provided to Mr. William Sweeney, Future First's Vice-President of Underwriting. The medical component was provided to a nurse on the staff with Future First for initial medical review and then forwarded to Future First's independent medical consultant, Dr. Michael Duffy. During the time period relevant to the Amended Order, Future First offered a one, two or three-year viatical purchase program. That is, viators must have a certified life expectancy of one, two or three years in order to qualify with Future First. After Dr. Duffy reviewed a particular file and the viator was deemed qualified as to one of the three available programs, Dr. Duffy would certify and assign a life expectancy to the viator and return the file to Mr. Sweeney. Life expectancy estimates are inherently subject to many variables, are unpredictable and constitute a risk to the purchaser. Mr. Sweeney's responsibilities included verification that the insurance information provided with any particular file was correct and complete (including insurance policy applications), that the policy actually existed and was in force, that premiums were paid up to date, that the insurance company had the appropriate rating, as well as conducting other verifications. Before a policy was approved for purchase, it was Mr. Sweeney's ultimate responsibility, pursuant to Future First's existing corporate policy, to compare the date of initial diagnosis of a potential viator's medical condition to the insurance policy application to look for any inconsistencies. Mr. Sweeney next completed a "file summary cover sheet" referencing certain information and verifications and attached it to the file. Mr. Sweeney was essentially a "one-man operation" in exclusive control of Future First's underwriting department and was ultimately responsible for deciding whether or not Future First would offer to bid on a particular policy. Future First's business operations in effect at the time relevant to the Amended Order were so compartmentalized that other officers or employees at Future First might not know any details associated with Mr. Sweeney's activities. After Mr. Sweeney authorized Future First to bid on a particular policy, the file was transferred to the bidding department. The bidding department did not re-visit or otherwise question Mr. Sweeney's decision to bid on a particular policy, but only reviewed the cover sheet to establish a bid price. If documentation was missing from any file, it was Mr. Sweeney's responsibility to contact the broker to request the missing documents. All viatical settlement brokers with whom Future First did business in Florida were required to be licensed by the Petitioner. Future First currently no longer conducts business with the broker "Funds For Life" because that particular broker dealt solely in "contestable" policies and Future First no longer purchases such policies, at least since the Petitioner's audit. Future First no longer has a business relationship with the Texas-based broker "Southwest Viatical," in part because Southwest Viatical routinely failed to provide complete documentation to Future First, including the insurance applications of viators. Southwest Viatical was specifically requested to provide insurance policy applications regarding the relevant policies referred to in the Amended Order but refused to do so. Most of the Southwest Viatical files purchased by Future First did not include insurance applications at the time of purchase. The insurance applications were ultimately obtained by Future First, however, at some point prior to the 1999 audit by the Petitioner. Future First became concerned about the character of individuals associated with Southwest Viatical and when requested by Southwest Viatical to forward commission funds to an offshore account, Future First declined to do so and immediately ceased doing business with Southwest Viatical. Future First cooperated thoroughly with Texas authorities in their investigation of Southwest Viatical, ultimately culminating, as a direct result of Future First's assistance, with the apprehension and subsequent incarceration of two principals of Southwest Viatical. During the period of time alleged in the Amended Order Future First received, on the average, between 400 and 600 policies per month from brokers requesting a bid. Future First rejected and never bid on the majority of policies referred to it by Southwest Viatical. On the average, Future First ultimately purchased approximately 25 percent of the policies submitted to it for a bid. Mr. Sweeney was primarily responsible for communicating with brokers as to all aspects of a potential viatical settlement transaction and to request all required documentation, including insurance policy applications. During the course of Mr. Stelk's affiliation with Future First he personally became familiar with the handwriting of William F. Sweeney. It is Mr. Sweeney's initials which appear on the cover sheets entered into evidence by the Petitioner, exemplified by Petitioner's Exhibit 4a. All the remaining "cover sheet" exhibits of the Petitioner contain the initials "WFS" on the top right hand corner which are Mr. Sweeney's initials. Mr. Sweeney is not currently an officer, director or employee of Future First because he was removed from any position with the Respondent corporation by order of the Petitioner. No other officers, directors or employees of the Respondent have been subject to a similar removal order, nor has Future First itself. The criminal proceedings currently pending against the Respondent are the direct result of Mr. Sweeney's activities while employed by Future First. The Petitioner's lead investigator reviewing Future First's business activities recommended that individual charges only be brought against Mr. Sweeney and against no other individual employed by or affiliated with the Respondent. Future First has a business relationship with licensed life insurance agents and/or securities brokers throughout the United States to solicit funds from individuals for ultimate purchase of viatical settlements. Those licensed individuals present an approved Purchase Request Agreement (PRA) to a potential purchaser to discuss the various Future First programs available and to help the purchaser finalize a PRA. Depending on what state the purchaser resided in, the purchaser would then issue a check either to Future First directly or to the Fidelity Trust (Future First's escrow agent), to be held until such time as Future First could purchase from a viator a policy matching the program desired by that purchaser. Thereafter, a formal "closing" would occur when the purchaser was, where appropriate, made a beneficiary on one or more insurance policies; all verifications and notifications to the insurance company and other entities were completed; an attorney and the trustee, would approve all aspects of the transaction within their purview, and a copy of the closing package would be sent to the purchaser for his or her records. After the closing, Future First would engage Life Watch Services, Inc., an unaffiliated company, to monitor the health status of the viator on a monthly basis in order that all appropriate actions may be taken at the time of the viator's death, so that the policy benefits may be promptly paid to the purchaser. Future First initially engaged in the purchase of contestable policies only after being approached by groups of agents with potential purchasers willing to assume the risk associated with contestable policies. Understanding the risk associated with such policies, Future First reserved 20 percent of its potential profit from such transactions and placed those funds in trust in a "Guaranty Fund" in the event that an insurance company rescinded a policy within the contestable period. In the event an insurer rescinded a contestable policy, Future First purchased a new policy for its customer out of the Guaranty Fund, at no additional cost to the customer. No purchaser ever lost any "investment time" if a policy was rescinded by an insurance company because that purchaser would be provided a new policy involving a viator with the same ultimate remaining life expectancy. Thus, without any prompting by a governmental authority, Future First made the business decision to voluntarily exceed the protections of Florida law by establishing the Guaranty Fund in order to purchase replacement policies for its customers if the initial policy was rescinded by the insurer. The Guaranty Fund was also utilized to make the purchaser whole even when an insurance company cancelled or non- renewed an insurance policy on an entire group, or if a new insurance carrier for a particular group later reduced the benefit level assigned to the purchaser. The Guaranty Fund was also used for the benefit of purchasers if a viator as a member of an employer group, quit his or her job and the viator exercised a statutory right to have the group policy benefits converted to an individual policy. Because benefit levels on such individual policies are typically lower, the Guaranty Fund was used to purchase additional insurance benefits to assign to the purchaser. Additionally, if a policy lapsed for any reason, the Guaranty Fund was used to procure a new policy or policies in order that the purchaser would be fully protected according to the terms of the PRA. No policy purchased by Future First has ever lapsed for failure of Future First to pay the premium. Funds from the Guaranty Fund have been used to purchase new policies when a viator committed suicide and the insurance company later rescinded the policy, as well. The Guaranty Fund maintained by Future First existed to cover other contingencies beyond just the possible recession of insurance policies because of the misrepresentation of the viator discovered by the insurer within the contestable period. Future First, through use of the Guaranty Fund, has replaced approximately 17 million dollars in face value of insurance policies, equating to about 12.4 million dollars in direct cost to Future First and, as a result, no Future First purchaser has ever been harmed. The 12.4 million dollars used to purchase replacement policies would otherwise have been retained by Future First as profit. Today Future First does not purchase contestable policies in the regular course of its business. The only exception to that occurs when an insured group undergoes a carrier change and a new contestable period is automatically instituted by the new carrier. There is no prohibition in Florida either presently or during the times relevant to the Amended Order, against the purchase of contestable policies by a viatical settlement provider. The recission of the contestable policies at issue in fact immediately followed an inquiry from the Department of Insurance to the insurers, which alerted them that the Department suspected fraud in the inception of the policies. That is, it suspected fraud on the part of the viators or insureds on those policies, not Future First. Future First immediately utilized the Guaranty Fund and began replacing the policies. None of the rescinding insurers have accused Future First of any complicity in any alleged fraud with respect to the policies referenced in the Amended Order, nor has the Department of Insurance alleged any such fraud against Future First. All but one or two of the rescinded policies have been replaced and the purchasers made whole, pursuant to the terms of their original PRA. One of the two policies not fully replaced as of the date of the hearing was being contested by Future First as to the legality of the insurance company's rescission, and Future First will replace the policy, if needed, at such time as that legal issue is resolved. Of all the policies at issue in the Amended Order, including, as well, any replacement policy subsequently purchased by Future First with money from the Guaranty Fund, only one or two contestable periods had not expired as of the date of the hearing. Those contestable periods were to expire thirty to sixty days after the date of the final hearing in this matter. Future First regularly monitors and verifies the status of all policies assigned to its purchasers, including the status of all replacement policies. The direct costs to Future First to purchase replacement policies for the rescinded policies referenced in the amended order was approximately $1.5 million dollars paid out of the Guaranty Fund. Since its initial licensure in the State of Florida, Future First has cooperated with the Petitioner concerning pending legislation, rule development and other contacts with the Petitioner agency. It has cooperated fully with the Petitioner when the audit of Future First occurred in February of 1999, provided all requested information and documentation and made all personnel available to confer with examiners in a full and frank manner. In the course of the four-week on-site audit, Mr. Stelk personally met with the Petitioner's examiners once or twice a week to discuss the Petitioner's suggestions for improving compliance. The Petitioner issued a draft "Report of Examination" as a result of its audit on August 5, 1999. It contained suggestions, comments and recommendations which had been discussed during Future First's staff meetings with the examiners. Future First addressed many of the Petitioner's concerns raised in the Report of Examination (report) and implemented certain suggested changes in its business practices. Mr. Stelk directed that a formal response to the report be filed, addressing the specific points raised by the Petitioner and explaining any corrective action taken where applicable. Future First viewed certain of the findings and suggestions made at the earlier meetings and later contained in the draft report as potentially helpful to its business. It therefore implemented those suggestions even before receiving the draft of the report. Certain suggestions in the report of such as a request to formalize a refund policy, were not strictly required by a controlling statute. However, Future First nonetheless voluntarily implemented such a refund policy. Future First has cooperated with all governmental agencies interested in reviewing its files at all times during the course of its licensure as a viatical settlement provider and during the course of the relevant investigations. There has been no allegation or suggestion that it has in any way altered any documents, tampered with its files or that any information was purposely missing. The Respondent contends that the Petitioner had no knowledge as to when any particular documents were received into Future First's files, including insurance applications, medical diagnosis information or other documents and has conceded that some policy applications or medical documentations may not have been received until after the bid process and viatical transactions in some cases were actually closed. Thus, Future First would not have been able to compare documents to detect possible fraud as to those situations. Therefore, Future First could not have been guilty of fraud or misrepresentation to its purchasers as to such transactions and files if it had no documentation at the point of the transaction being closed to indicate to it that possible insurance fraud in the inducement, by a viator, had occurred. In point of fact the Petitioner is not accusing Future First of fraud. However, as of the time of the audit in February 1999, because of the discussions and information it received at meetings with Department agents and employees, and certainly as to formal notification on August 5, 1999 in the Department's report, the Respondent knew that many insurance applications in its files had medical diagnosis information or disclosures by viators which were at odds with the medical information it obtained in the viatical settlement and contracting process. It still failed to report that knowledge (and indeed circumstantial evidence clearly indicates that at least Mr. Sweeney had that knowledge even before the February 1999 audit, as to many of the files). Future First still did not report potential fraud on the part of viators to the Department that it obviously had knowledge of until it began to actually report it in a formal way, after the first Show Cause Order was served (January 2000). It is also clear that the Department knew about this inconsistent medical information and probable insurance fraud by the time of its February 1999 audit. In November of 2000, as part of its efforts to cooperate with the requirements of the Department and the relevant statutes and rules, Future First filed an Anti-Fraud Education and Training Plan (Plan) with the Department, Division of Insurance Fraud. Neither Future First nor any of its representatives received any notice from the Department that the Plan was in any way deficient or otherwise non-compliant with Florida law. It has implemented that Plan and adherence to it has had a positive effect on Future First's business. The Anti-Fraud Plan stresses that Future First will not bid on a policy for purposes of viatical settlement unless the viator's insurance application is present in the file at or before the time of the bid. Future First's corporate policy, even prior to the implementation of the Anti-Fraud Plan has been that the insurance application must be reviewed and compared with available medical documentation for any inconsistencies prior to bidding on a policy. It is also apparent, however, that Mr. Sweeney and those under his direction and control apparently did not do so in many cases. During the course of the investigation, the "free- form" stage of this proceeding and the formal stage of this proceeding, Future First has made numerous form and other filings with the Petitioner seeking approval in connection with a new PRA and various other purchaser disclosures required by recent amendments to Florida Statutes. After comments and questions from the Department, resulting in some revisions to such documents, the new PRA and disclosure documents were approved by the Department, approval of the last document being obtained in April 2001. The Respondent, by its involvement through Mr. Stelk with the Viatical Life Settlement Association of American and the National Association of Insurance Commissioners, has made a bonafide effort to gain knowledge of specific, appropriate business practices of other viatical settlement providers doing business in the United States as well as in Florida. Unlike certain other viatical settlement providers operating in Florida and elsewhere, Future First has never made premium payments on insurance policies out of the personal checking accounts of officers, directors or employees, has never instructed viators not to contact insurance companies and has never required viators to sign undated, change-of-ownership forms for filing with the insurer after the contestability period expired for any reason whatever, including as part of an effort to conceal from an insurance company the fact that an insurance policy was subject to viatical settlement. No such activity or effort to conceal has been alleged. (Compare, Accelerated Benefits Corporation documents in evidence pursuant to the Petitioner's Motion for Official Recognition). On March 19, 2000, February 8, 2001, and March 6, 2001, Future First filed with the Department identifying information and documents pursuant to the requirements of Subsection 626.989(6), Florida Statutes, to the effect that fraud may have been involved in the procurement of all of the rescinded insurance policies referenced in the Show Cause Order and the Amended Order. The three separate fraud notifications constitute the Respondent's Exhibits 7, 8 and 9 and correspond to the time period shortly after service of the initial Show Cause Order and the Amended Show Cause Order.
Findings Of Fact The Respondent, Emory Daniel Jones, was not involved or engaged in the insurance business prior to August, 1977. (Tr. 177.) In approximately August of 1977, United Sun Life Insurance Company (USL) hired Respondent as an agent. (Tr. 176, 177.) Respondent passed the insurance test administered by the State of Florida in August, 1977, and was scheduled for a seminar given by USL. (Tr. 178.) In late August, 1977, Respondent attended a three-day seminar established by USL for all its new agents. (Tr. 178.) At this seminar, USL taught the agents about a policy known as T.O.P. This was the only policy taught to the agents even though USL had other policies available. (Tr. 128.) The T.O.P. contract is a life insurance policy. This policy has two primary benefits. (Tr. 230, 231.) The first is the death benefit provided by all life insurance policies. Under the death benefit provision, the owner of the T.O.P. pays a premium to USL. When the insured dies, USL will pay the death benefit (money) to the beneficiary listed on the policy. (Tr. 128, 251.) The second major benefit provided by the T.O.P. is the life benefit feature. (Tr. 251.) The T.O.P. is an insurance policy which provides for the payment of dividends to the owner of the policy. The T.O.P contract states that the owner will share in the divisible surplus earnings of USL as determined by the Board of Directors. (Tr. 120; contract page 5, Exhibit #3.) The dividends were to be paid after the second year. (Tr. 129, 130.) The owner would participate in the divisible surplus earnings of USL through the payment of a dividend. (Tr. 129, 188.) As long as the T.O.P. was in effect, the owner would receive these dividends. USL developed a presentation to be given by the agents to prospective customers. This presentation was taught in the training session by USL. (Tr. 183, 249, 260, 270.) The agents were to memorize the presentation and were not to vary from the wording when they were attempting to sell the T.O.P. to prospective customers. (Tr. 185, 249.) The presentation taught by USL stressed the life benefit feature of the T.O.P. contract. (Tr. 251, 271.) The death benefit was only minimally covered because of the relatively high cost for the life insurance portion of the contract. This presentation further explained several features which made the T.O.P. contract life benefit provisions attractive to future customers: The T.O.P. contract owner was to participate in the divisible surplus earnings of USL. The only other persons that would also participate in the divisible earned surplus were the shareholders. (Tr. 196.) The T.O.P. contract was to be sold only to a limited number of people. After an undisclosed number of T.O.P. contracts were sold, the T.O.P. contract was to be taken off the market. (Tr. 234, 261, 276.) USL was not going to sell or issue any other policies which would participate in the divisible earned surplus of USL. (Tr. 234, 255, 261, 276.) USL would grow (increase its divisible earned surplus) by selling policies other than the T.O.P. contract. The more policies that were sold, the greater the divisible surplus earnings that would be available to the T.O.P. contract owners for dividends. (Tr. 196, 276.) Since the T.O.P. owners were limited and no other participating policies were to be issued, the T.O.P. owners would share in any increases in the divisible surplus earnings of USL. The greater the number of policies sold, the greater the dividends. The T.O.P. owners were then solicited to help the agents sell insurance policies of USL to their friends. This help would reduce the cost of advertising and increase the sales of insurance. The lower expenses and greater volume would mean more divisible surplus earnings in USL and greater dividends available to the T.O.P. owners. (Tr. 201.) To illustrate these points, USL taught the agents to draw circles representing other insurance policy owners. Lines were then drawn from these circles to the T.O.P. owner's circle. The lines between the circles represented the premiums paid on the other policies, which would increase divisible surplus earnings that would increase the dividends of the T.O.P. owners. (Tr. 196, 232, 263, 270.) USL taught the agents to illustrate the features of the life benefit by dollar signs. As the agent would talk about the other policies increasing the dividends to the T.O.P. owners, he was to increase the size of the dollar sign. (Tr. 233.) The whole emphasis of this presentation was on the participating feature. Another feature emphasized in the USL presentation was that the T.O.P. owner would participate in the divisible surplus earnings of USL as long as he was alive. Therefore, the agents were to stress that the T.O.P. owner should be a younger person in the family. If that person lived 70 years, then USL would pay dividends for 69 of those 70 years. This feature of the policy was stressed in the memorized presentation. (Tr. 204, 205, 232, 233, 252, 264, 270.) In late August of 1977, Respondent attended the training session and memorized the presentation. (Tr. 181, 184, 185.) At the end of the training session, USL reviewed the Respondent's presentation and found nothing wrong. (Tr. 187.) In late August of 1977, Respondent went into the field to sell the T.O.P. contract to potential customers. (Tr. 187.) Count I On September 7, 1977, Respondent met with Louis Charles Morrison and made the USL presentation on the T.O.P. policy to Morrison. Respondent made the presentation in the way he had been taught. Morrison was aware that he was purchasing an insurance policy. He was led to believe through USL's sales presentation as given by Respondent that the participating feature of the T.O.P. policy made this policy a good investment. Morrison concluded it was not a good investment because the dividends were not as great as he had anticipated they would be. Respondent's representations to Morrison with regard to the T.O.P. policy were not false. Count II On September 12, 1977, Respondent met with Fred Menk and gave to him the USL presentation on the T.O.P. policy. Respondent gave the presentation as he had been taught. Menk was aware that he was purchasing insurance. (Tr. 51.) Respondent made no representation about future dividends. (Tr. 59.) The interest rate was represented to increase as USL grew, which it did. (Tr. 59.) Menk was dissatisfied and felt the policy was misrepresented because he did not get the rate of return he had anticipated. (Tr. 59.) According to Menk, Respondent's representations made with regard to interest rate increases were accurate, and Respondent made no representations regarding future dividends. Count III Respondent met with Paul Loudin in September of 1978, and gave him the USL presentation on the T.O.P. policy as Respondent had been taught. Loudin was aware he was purchasing insurance. (Tr. 21, 26, 27, 31.) His interest was in life insurance and retirement compensation. (Tr. 36.) In part, Loudin's dissatisfaction was the belief he had lost his money because he did not receive a dividend on his first year's premium. The policy reflects that no dividends are payable in the first year. (Respondent's Exhibit #7.) A copy of the policy was provided to Loudin by Respondent. (Tr. 45.) Loudin also anticipated a dividend of 12 to 18 percent on his premiums based upon Respondent's general comments. However, he did not remember the exact conversation with Respondent. (Tr. 31, 32, 38, 39.) Loudin received a letter from USL which reflects a dividend history based upon an 18-year-old insured with an annual premium of $1,000 as follows: End of 2nd year $100.35 End of 3rd year 130.66 End of 4th year 162.86 The rate of return in the fourth year would be 11.6 percent on the fourth year's premium. The representations made to Loudin by Respondent were substantially true, or the relevant information was made available to Loudin by the Respondent. Count IV On November 30, 1977, Respondent met with Gayle Mason and gave the USL presentation on the T.O.P. policy as he had been taught. Mason knew she was purchasing insurance. (Tr. 107.) Respondent represented that the number of participants in the T.O.P. policy would be limited. (Tr. 108.) The current rate of return was taken by Respondent to be 11 percent, and it was represented that the return could be more. (Tr. 109.) Dividends were to be paid from surplus earnings. (Tr. 114.) Mason called the Better Business Bureau and the State Insurance Commissioner's office, and she was aware that USL was an insurance company and she was engaged in an insurance transaction. (Tr. 115.) Respondent represented that as USL grew, the dividends would increase. (Tr. 118.) Mason received a dividend in the second year in accordance with the policy. The representations made to Mason by Respondent were true or thought by Respondent to be true.
Recommendation Having found the Respondent, Emory Daniel Jones, not guilty of violating any of the statutes or rules as alleged, it is recommended that the Administrative Complaint against Respondent be dismissed. DONE and RECOMMENDED this 17th day of January, 1983, in Tallahassee, Leon County, Florida. STEPHEN F. DEAN, 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 17th day of January, 1981. COPIES FURNISHED: David A. Yon, Esquire Department of Insurance 413-B Larson Building Tallahassee, Florida 32301 Paul H. Bowen, Esquire 600 Courtland Street, Suite 600 Post Office Box 7838 Orlando, Florida 32854 The Honorable William Gunter State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32301
The Issue The issue for determination is whether Respondent committed the offenses set forth in the Administrative Complaint and if so, what penalty should be imposed.
Findings Of Fact At all times material to this case, Respondent is licensed as a life insurance agent and as a life and health insurance agent. Respondent operated through his agency listed as Tax Saving Concepts, Inc., 1003 10th Lane, Lake Worth, Florida 33463-4354. Petitioner is the agency of the State of Florida vested with the statutory authority to administer the disciplinary provisions of Chapter 626. This case was initiated by an anonymous complaint submitted by fax on August 23, 1999, to a Department office. The anonymous complainer faxed a copy of a newspaper ad from that day's edition of The Palm Beach Post. The ad reads as follows: “85% OFF TERM LIFE INSUANCE COMMISSIONS! LEGAL SAVINGS per Florida Statute 626.572 PERSAVE (sic) $1,000’s. Call 800-2-save-75. www.lifeinsurancediscounts .com Tax Saving Concepts Since 1986” The web page advertisement reads: 90% OFF 2ND-TO-DIE LIFE INSURANCE COMMISSIONS LEGALLY! YOU CAN SAVE $100,000+ IN YOUR POCKET! Save 90% off your 2nd-to-die life insurance commission costs legally when you sign your application in Florida with Tax Saving Concepts, Inc., a registered legal rebating broker since 1986. Our tax-free rebates can save you $100,000+. References from our happy clients will prove to you that you too will save thousands of dollars on your 2nd-to-die life insurance commission costs. We also offer deep discounts on term life insurance. Tax Saving Concepts, Inc. Of Florida America’s Oldest & Deepest Discount Life Insurance Broker Since 1986™ Registered Legal Rebating Broker Since 1986 We have never had a consumer complaint Email us: since 86@gate.net 561-439-6974 “Palm Beach agent Barry H. Small offers a 90% commission rebate. ” The Wall Street Journal March 25, 1993 By letter dated August 31, 1999, the Department, through an authorized representative, requested that Respondent get in touch to discuss the newspaper ad and website. Respondent answered by letter dated September 9, 1999, wherein he stated, “ABSOLUTELY NO life insurance companies are mentioned at my seminar.” He further stated, “I have not and do not intend to run this Palm Beach Post listing again.” After receiving this non-response, the case was referred to William Darryl May (May) of the Department’s Bureau of Agent and Agency Investigations for follow-up. May initiated the Department's investigation with a call to Small on January 26, 2000. May was successful in making telephone contact, but the conversation was unproductive due to Small's distrust of the Department's staff and unwillingness to provide information. Small believes himself to be the victim of a conspiracy between the Commissioner of Insurance and insurance agents who do not rebate commissions; he therefore felt justified in refusing to cooperate with May in answering questions concerning whether and to whom he had rebated commissions to customers, saying only, “You know the companies I am licensed with.” More specifically, Small would not provide the names of any customers he had rebated commissions to. Small feared adverse impacts upon his relationship with any customers state investigators might choose to contact. Small elaborated on his fears in a letter to May dated October 15, 1999 which states in part: I am writing the following facts from a consciousness that I can be killed at any moment. There is a contract on my life to have me killed, taken out by business competitors. On 6 occasions in the last 3 years, mafia hitmen, paid for by these business competitors have tried to kill me. Taking Small up on his implicit suggestion that the state deal directly with companies with whom Small had contractual relationships, May sent identical letters to the insurance companies for which Small was then authorized, or appointed, to sell insurance. May later received responses from companies, as follows: Banner Life Insurance Company, responded on January 26, 2000, through its legal department, with a letter to Small, which stated in pertinent part: We are in receipt of the enclosed newspaper advertisement and Internet website advertisement from the Florida Department of Insurance. Since these advertisements could potentially result in the sale of Banner Life Insurance Company products, they should have been submitted to our company for prior approval. We have thoroughly reviewed our records and advertising logs, and have determined that you never received permission from us to use the enclosed advertisements. Furthermore, if these advertisements had been submitted, they would not have been approved for use. First Colony Life Insurance Company, through its law department, wrote to May on December 15, 1999, and stated that it did not approve of the newspaper and website advertisements; did not authorize Small to rebate commissions; and had no record of a rebate schedule filed by Small. Unum Life Insurance company, through its customer relations manager, wrote to May on December 14, 1999, and stated that it did not approve of the newspaper and website advertisements; did not authorize Small to rebate commissions, and had no record of a rebate schedule filed by Small. Lincoln Benefit Life Company, through its Vice President and Assistant General Counsel, by letter to May dated December 14, 1999, stated that it did not approve of the newspaper and website advertisements and did not authorize Small to rebate commissions. The letter also stated that Lincoln Benefit's file research revealed a letter from Small to a general agent for Lincoln Benefit detailing his rebating schedule, but did not supply any details regarding that document. Transamerica Life Companies, through a compliance officer, wrote to the Insurance Commissioner on December 7, 1999, stating that it had not approved the newspaper or web site advertisements, and further noting that ". . . when Mr. Small was recontracted as a producer in June 1999, the company had him sign a document acknowledging [its strict anti- rebating policy].” Midland National Life Insurance Company, through its Consumer Affairs Associate, wrote to May on February 2, 2000. The letter stated that Small had produced little business for the company and that the company was in the process of terminating Small's appointment. It further stated that the company had not approved either of the advertisements. Finally, the letter made reference to its cooperation in a prior investigation of Small arising out a 1993 advertisement, and noted that it had been informed by the Department in August 1996 that that investigation was being closed. Sun Life of Canada, through its markets [sic] compliance office, wrote to May on November 2, 1999, stating that the company affirmatively requires that ads "used to promote Sun Life products" are subject to review and approval, and that the company does not permit rebating. Hartford Life, through its legal office, addressed a December 17, 1999, letter to May which stated that neither Respondent individually, nor through the Tax Savings Concepts entity, ever sought permission to rebate commissions with that company and no such authorization was ever granted. At a minimum, the language of the advertisements published by Small to readers of The Palm Beach Post and to the entire world via the Internet, demonstrates that Small promotes his business by advertising to the public his willingness to grant rebates. Yet, he feels well justified in his unwillingness to cooperate with regulatory authorities by providing information which would facilitate a determination as to the bona fides of his advertisements, and the details of his rebating practices. Rather, Small insists that the regulators find out what they can from the companies with whom he is authorized. In this case, that procedure compels the conclusion that with the possible exception of Lincoln Benefit, Small has not filed rebate schedules at any time material to this case. AS TO THE COUNT I ALLEGATIONS Respondent’s newspaper advertisement is, when viewed in the light most generous to Small, unclear, ambiguous, and misleading. "85% off commissions" in the context of the entire advertisement doesn't tell the prospective purchasers what he is saving, if anything. Small's representation that the prospective customer will enjoy “Legal Savings per Florida Statute 626.572” is false with respect to at least eight of the companies he represented at all times material to this case. As to these companies, clear and convincing evidence establishes that he was not authorized to rebate pursuant to that statute. In his untimely and unauthorized Motion to Quash, Small asserts that the baffling expression “PERSAVE $1,000’s” is there due to an error by The Palm Beach Post. It should have read, he contends, "You Save $1,000's." Thus, by Small's own admission, the suggestion to readers was intended to be that they stood to realize thousands of dollars in savings by doing business with Small. AS TO THE COUNT II ALLEGATIONS The web site advertisement is similarly unclear to the point of being intentionally misleading. Small is not a "Palm Beach agent." His office is located within his home in Lake Worth, a municipality within the greater Palm Beaches area. Palm Beach is one of the best known playgrounds of some of the world's wealthiest people, and carries a cachet which the truth--that Small never leaves his home in Lake Worth--does not. It suggests to readers that Small's clientele includes the rich residents of Palm Beach, whom he makes richer. The "85% off insurance commissions" advertised in the newspaper is upped to 90% off for Internet readers, and again begs the question, “90% off of what?” In this advertisement, the phrase “$100,000+” of savings “in your pocket,” made without any factual predicate, convincingly suggests an intent to mislead. Beyond self-serving and often incoherent testimony, Respondent's only effort to rebut the Department's case was through testimony that he had once “discussed” with Richard Scalesse (Scalesse), a Hartford Life account executive, “a large insurance case of about $120,000 of annual premium.” Scalesse could not remember details of the case. Assuming the accuracy of Small's testimony, in particular the claim that this case was “a very, very large case,” it does not rebut any element of the administrative charges nor does it support any element of an affirmative defense. The last statement in the web page ad reads: “We also offer deep discounts on term life insurance.” What other type of insurance is being offered? Did the other discounts apply only to whole life? Annuities? Universal life? The advertisement offers no concrete information upon which a consumer could make a rational decision to consider doing business with the advertising agent. Respondent's claims that the newspaper advertisement was placed by mistake and will never be repeated is too little, too late. The advertisement is not benign in that it simply advertises a "seminar," as Small contends. The advertisement says nothing about a seminar, and even if it did, Small, when attempting to attract customers to his insurance business, is at all times bound by the statutes and rules governing the conduct and business practices of state- licensed insurance agents, no matter what he thinks of their constitutionality, or the people whose jobs it is to enforce those statutes and rules. Each of the false and misleading statements contained in The Palm Beach Post ad, as well as on Small's website, was, at all times material to this case, authorized by Small.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Insurance enter a final order finding the Respondent, Barry Howard Small, guilty of violating Subsections 626.572(1), 626.611(7); 626.611(9); 626.611(13); 626.621(2); 626.621(3); 626.621(6); 626.9541(1)(a)1., and 626.9541(1)(e)1., and Rules 4-150.101; 4-150.105(1)-(4); 4-150.107(1)(a); and 4-150.114(10), and suspending his license for a period of one year. DONE AND ENTERED this 9th day of September, 2002, in Tallahassee, Leon County, Florida. __________________________________ FLORENCE SNYDER RIVAS 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 9th day of September, 2002. COPIES FURNISHED: David J. Busch, Esquire Department of Insurance 200 East Gaines Street Tallahassee, Florida 32399-0333 Barry Howard Small 3200 South Ocean Boulevard Apartment 103D Palm Beach, Florida 33480 Honorable Tom Gallagher State Treasurer/Insurance Commissioner Department of Insurance The Capitol, Plaza Level 02 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Insurance The Capitol, Lower Level 26 Tallahassee, Florida 32399-0307
The Issue Whether Respondent's license as an insurance agent should be disciplined, pursuant to the charges of a seven-count Administrative Complaint. Counts I through VI, allege that Respondent willfully, fraudulently, and dishonestly misrepresented insurance policies and annuity contracts, contrary to the provisions of Sections 626.611(5), 626.611(7), 626.611(9), and 626.592(1)-(3), and (7), Florida Statutes. Count VII alleges that Respondent failed to designate a primary agent in the course of dealing under his license, thereby violating Sections 626.592(1) and 626.621(2), Florida Statutes.
Findings Of Fact Respondent has been licensed in Florida as a life, health, and variable annuity insurance agent since 1993, holding license number A254850. Pursuant to Florida law, the term "insurance business" includes the sale of annuities. Respondent began employment as a Knights of Columbus insurance agent in 1993, and renewed his "field agent" contract with the Knights of Columbus Fraternal Benefit Society (Order) on December 1, 1999. Joseph Spinelli, Jr., became his supervising general agent for the Knights of Columbus at that time. Mr. Spinelli and Respondent are very productive insurance sales producers, and both applied for the same Knights of Columbus general agent position that included the Pensacola sales territory. The selection of Mr. Spinelli over Respondent for the general agent position resulted in friction between them. The Order's insurance products are available only to Knights of Columbus, their wives, their children under the age of eighteen, and their legally dependent grandchildren. Prospective Knights may be sold insurance, provided they are Roman Catholic men, over the age of 18, who agree to join the Order within 90 days of the insurance policy application. One of the reasons Knights of Columbus insurance is attractive is because it is generally less expensive than commercially available insurance, due to the fraternal nature of the Order. Some men will join the Order merely to get the insurance. Knights of Columbus field agents are not permitted to sell any type of insurance except life, annuities, and long-term care for the Knights of Columbus. The Knights of Columbus field agent contract required Respondent to devote his full-time and energy to the Order's insurance business, prohibited him from soliciting insurance applications "or to assist another agent to solicit such applications from any member of the Order" for any other insurance company. Therefore, Knights of Columbus agents are referred-to as "captive agents." Respondent was also contractually required to "accurately record applicants' answers to all questions in the Order's application form." Notwithstanding the foregoing contract, Respondent owned and operated "The Stidham Agency" located at 111 N. Palafox Street, Pensacola, in addition to conducting Knights of Columbus insurance business out of his home. Among the insurance products sold from the Stidham Agency were those of AmerUs Life Insurance Company and Great American Insurance Company. Ameritus was a company "of" AmerUs. Respondent acted as the de facto primary agent for the Stidham Agency. He was in charge of the agency, acted as general agent, and did not share responsibilities with anyone else. He maintained that this did not affect his relationship with the Knights of Columbus because he avoided taking business away from that insurance entity. However, it is undisputed that he sold other companies' life insurance from the Stidham Agency for a commission. In his capacity as primary agent for the Stidham Agency, Respondent also received an override commission on any commissions his agents earned from their sales of annuities or policies for insurers other than the Knights of Columbus. Respondent acknowledged having as many as six other agents operating out of the Palafox Street address, including licensed insurance agents, Joseph McGovern and Albert Ban, Jr. Mr. Ban left Respondent's agency in December 2002. Mr. McGovern left Respondent's agency in April 2003. In July 2002, it came to Mr. Spinelli's attention that Respondent was appointed by other companies, and after giving Respondent a chance to divest himself of those appointments, which Respondent did not do, the Knights of Columbus terminated Respondent in October 2002. Mr. Spinelli replaced Respondent, first with agent Jeff Fischer, and later with agent Timothy Crooke, who is also a complaining insured in this case. Regardless of the insurance company involved, after a field agent completes an insurance application, the application is sent to the general agent of the respective insurance entity, where it is reviewed; it is then sent to the home office; and it is acted upon by underwriters at the home office. Either the general agent or the home office has the option of "kicking the application back to the agent" if it is incomplete or for any other reason. None of the problems raised by the Administrative Complaint herein were detected by any general agent prior to the applications being forwarded to the respective home offices. Regardless of the insurance company involved, at the home office, underwriters pursue the prospective insured's medical information on the basis of the disclosures on the application. They can decide, for medical reasons, to reject the application outright or to "rate" the policy at a higher premium than at the amount the prospective insured was quoted by the field agent for a "standard" premium. The applicant and the agent do not always know what the premium will be until the policy is issued from the home office. However, the applicant is "covered," that is, "insured," until such time as he is notified that his application has been rejected. If a straight life insurance policy is issued by the home office and the premium comes back at a different rate than that quoted by the agent, the insured has three options: (1) The insured can keep the policy and pay the more expensive "rated" premium; (2) The insured can make other arrangements with the agent to amend the policy, accepting a lower face value of the policy so as to pay the premium amount originally quoted; or (3) The insured can cancel the policy entirely. Similar options exist for income protection riders on such policies. Therefore, a policy, once issued, is sent by the home office to the agent of record, and that agent is expected to deliver the policy to the insured. Personal delivery by the field agent to the insured should result in the insured being fully advised as to what, exactly, his policy contains, and can result in additional sales to that insured or can result in the insured canceling the policy. Regardless of the insurance company involved, a field agent's commission for selling a whole life policy is greater than the commission he receives for selling a term life policy with the same death benefit. COUNT I: Margaret Rodak In this Count, it is charged that Respondent did not inform Margaret Rodak that he was representing AmerUs when, as that company's agent, he "facilitated," her purchase of AmerUs life insurance policy AB00956240 in the amount of $28,968.00 for an initial payment of $40.00, by means of willful misrepresentations or fraudulent or dishonest practices; that Respondent induced her to believe that she was purchasing from the Knights of Columbus and that she was making out her check to the Knights of Columbus; that the names "Joseph P. McGovern" and "Albert Ban" falsely appear as agents on the policy application and other pertinent forms related thereto; that Respondent did not leave Ms. Rodak a copy of the AmerUs application or copies of any other pertinent paper pertaining to the transaction; and that, unbeknownst to Ms. Rodak, Respondent arranged for automatic premium payments to be deducted from her checking account. Margaret Rose Rodak, nicknamed "Peggy", was 52 years old in 2002. She has been totally blind since 1986. She also suffers from hypothyroidism, for which she takes daily medication and is tested by a physician every three months. Ms. Rodak's deceased father, Walter Rodak, was an active member of the Knights of Columbus. He died at aged 80, on November 10, 2002. The events giving rise to this count of the administrative complaint occurred in August, September, and October 2002. During most of this period of time, Respondent was "mentoring" agents McGovern and Ban within the Stidham Agency. Ms. Rodak grew up in the company of her father's fellow members of the Knights of Columbus. Respondent had been her father's friend within the fraternal Order, and Ms. Rodak knew him on a first-name basis. Ms. Rodak knew Respondent by reason of his affiliation with the Knights of Columbus and therefore trusted him as a Knight and because of his presumed status as a "Roman Catholic in good standing." Ms. Rodak wanted to invest in an annuity which would pay her money later in life for retirement or living expenses. Because of her father's affiliation with the Knights of Columbus, she thought an annuity from the Knights of Columbus would be a good investment. It is probable that Mr. Rodak and Respondent understood that Margaret Rodak was not eligible to purchase Knights of Columbus insurance. On or about August 15, 2002, Respondent received a $50.00 check on Harvester's Credit Union from Walter Rodak for the initial premium to pay for a $50,000 AmerUs Flexible Premium Adjustable Life Policy, which the AmerUs home office issued on August 22, 2002, with the number AB00933310 (Policy 310). Also on August 15, 2002, Walter Rodak provided Respondent with a void deposit slip with which to begin automatic monthly deductions of premiums for Policy 310 from his credit union account. Policy 310, purchased by Walter Rodak, insured the life of Margaret Rodak and is clearly not an annuity. However, Mr. Ban, who considered himself Ms. Rodak's insurance agent because Respondent had him sign the application for this policy, testified that Policy 310 would have done what Margaret wanted, because it would have built cash value. Although he considered himself her agent, Mr. Ban never met Margaret Rodak. When AmerUs Policy 310 was issued, Mr. Ban did not deliver it to her, although his acknowledged signature and her purported signature appear on a Policy 310 delivery receipt dated August 30, 2002. Mr. Ban acknowledged filling out part of the Policy 310 application, but testified that Respondent filled out the "application information" and "medical information" sections. The medical information section on the AmerUs 310 application is clearly incorrect because it states Margaret took no medication regularly, when in fact, she regularly took medicine for hypothyroidism. On the other hand, other parts of the medical section of the application, such as the omission of one doctor's name and the statement, "three months checkup" are open to interpretation as to their falsity or incompleteness and are not clearly fraudulent. Mr. Ban could not remember with certainty where he got the remainder of the information he filled in for the AmerUs Policy 310 application but guessed he got it by copying over information from a Knights of Columbus insurance application or that the information was otherwise supplied by Respondent. Mr. Ban was not authorized to sell Knights of Columbus insurance. Mr. Ban told Respondent at the Stidham Agency that the AmerUs Policy 310 application did not have Ms. Rodak's signature on it. Mr. Ban then left for lunch for an hour or so. When he returned, there was a "Margaret Rose Rodak" signature on the application. Ms. Rodak testified that she never signed the Policy 310 application; a later amendment thereto, dated August 30, 2002; or an August 30, 2002, Policy 310 delivery receipt, all purportedly showing "Margaret Rose Rodak" as the "Policyholder Signature." On or about September 6, 2002, Joseph McGovern accompanied Respondent to the Rodak home. Mr. McGovern did not make out any papers for either of the Rodaks. He understood that he was there to learn from Respondent about selling long- term care insurance, but he spent most of his time discussing the Marine Corps with Walter Rodak. Respondent conceded that by this second meeting, he knew that Walter could not qualify for a Knights of Columbus long-term care policy. Mr. McGovern was not authorized to sell Knights of Columbus insurance, long-term care or otherwise, and when Respondent handed him a completed AmerUs application to sign, Mr. McGovern perceived this as being Respondent's way of making him (McGovern) the "agent of record" so he could receive a commission from AmerUs, a company for which Mr. McGovern was authorized to sell. Respondent handed Mr. McGovern a completed application for what eventually became AmerUs Flexible Premium Life Insurance Policy AB00956240 (Policy 240), issued September 12, 2002, by the AmerUs home office in the amount of $28,968.00 on the life of Margaret Rose Rodak. When Petitioner handed Mr. McGovern the application, Respondent said, "Here. Fill this out. It's done." Mr. McGovern signed. At the September meeting, Ms. Rodak thought she was transacting insurance business only with Respondent and the Knights of Columbus and not with Mr. McGovern or AmerUs Insurance Company. Specifically, the AmerUs Insurance Company was never mentioned. She gave Respondent a check on her account at SunTrust Bank for $40.00, which she believed covered an initial premium for a Knights of Columbus annuity. Ms. Rodak believed her $40.00 check had been made out to the Knights of Columbus. In fact, her check was made out to the Stidham Agency, an entity Ms. Rodak had never heard of. Respondent admits to converting this check to a money order to be applied to the AmerUs premium. Ms. Rodak does not remember if she authorized automatic deductions from her SunTrust checking account for future monthly premiums on Policy 240. Mr. Ban denied filling out the application for AmerUs Policy 240. Although his signature purports to show that he witnessed the signature of Ms. Rodak on an amendment to the 240 policy, in fact, she did not sign that document in Mr. Ban's presence. Ms. Rodak denied signing any application or any delivery receipt for any insurance policy or annuity. Her September 6, 2002, check, which she acknowledges was signed by her, and which Respondent acknowledges that he cashed, matches the signature exemplars she provided at the hearing. The signatures purporting to be hers on the documents related to Policies 310 and 240 are clearly dissimilar both to her acknowledged signature on her check and to her exemplars. Ms. Rodak denied receiving any paperwork for any insurance policy or annuity. By herself, she is not credible with regard to this information, due to her blindness and described procedures for handling her mail and other important papers, but given Mr. Ban's evidence that he never delivered any AmerUs papers to her, it is found that no paperwork was provided to Ms. Rodak. When Walter Rodak died in November 2002, Margaret Rodak complained to Respondent that she could not keep up her payments. Respondent understood her to be referring to both the AmerUs policies in her name. At her request, he returned $90.00 to her by a Stidham Agency check, even before any administrative charges were brought against him. He testified that he/the Stidham Agency lost money on the two Rodak transactions, because he refunded all the Rodaks' money and AmerUs recouped the commissions paid to himself and his agents. However, there is in evidence, correspondence from the AmerUs home office indicating that Policy 310 was charged $200.00 by automatic withdrawals and Policy 240 (or possibly Policy 310) was charged $120.00 by automatic withdrawals. It is not clear upon whose account (Walter's or Margaret's) these deductions were made. (See Defendant's [sic.] Exhibit 8.) Clearly, as to both policies, much opprobrium should attach to both Mr. Ban and Mr. McGovern for signing documents attesting to representations they knew were untrue or to representations of which they had no knowledge whatsoever, but Mr. Ban and Mr. McGovern are not charged herein. Likewise, Respondent is not charged herein with any irregularities concerning Policy 310. As to Policy 240, which is the only policy referred-to in the charges brought against Respondent, Mr. McGovern was not the agent Ms. Rodak dealt with, and therefore, his name should not appear on the application as the agent of record. (See Findings of Fact 28-29.) The medical section of the Policy 240 application contains a substantial error (the indication of no regular medication) for which no one but Respondent can be held responsible, because he made out the application (see Findings of Fact 28-29) and because the signature purporting to be Ms. Rodak's on that application clearly is not hers (see Finding of Fact 31). Ms. Rodak was deceived by Respondent, or, at a minimum, Respondent failed to correctly advise her, as to what she was purchasing (an AmerUs insurance policy instead of a Knights of Columbus annuity) when she gave him her $40.00 check. Respondent further deceived her, or deliberately failed to correctly advise her, as to which insurance company was involved. Also contrary to Respondent's representations, it appears that despite his $90.00 refund, Ms. Rodak lost more than that via automatic deductions. COUNT II: Charles Williams Charles Williams is married. He has two children (Charles David, Jr. and Victoria Jean) and three grandchildren (David Charles, Adam Brandon, and Raven Lindsey). At all times material, Adam and Raven were under the age of 18. Mr. Williams had a term life insurance policy with another company that was about to expire, and the agent for that policy thought the Knights of Columbus might give Mr. Williams, a Roman Catholic, a better deal than he could offer. That agent referred Mr. Williams to Respondent. In January 2001, Mr. Williams invited Respondent to his home to discuss insurance. Respondent told Mr. Williams that he was a Knight of Columbus insurance agent and offered to sell Mr. Williams a Knights of Columbus insurance policy. Mr. Williams explained to Respondent that he (Williams) was not a Knight of Columbus. Respondent answered, "No problem." Respondent claimed he explained that Mr. Williams did not have to be an active member of the Knights of Columbus or even go to their meetings, but that Mr. Williams had to join the Order to qualify for its insurance. Respondent claimed to have relied on Mr. Williams' representation that he (Williams) would apply for membership in the fraternal Order, although Respondent conceded that he also understood that Mr. Williams never intended to attend any Knights of Columbus meetings or events once he was admitted to the Order. Contrariwise, Mr. Williams claimed that at no time did he (Williams) indicate to Respondent that he would apply for membership in the Order, but Mr. Williams also admitted that he only discussed Knights of Columbus insurance with Respondent and that he knew he was only applying for Knights of Columbus insurance. Therefore, there is an equipoise of testimony as to what oral representations Mr. Williams made to Respondent with regard to Mr. Williams' intent, or lack of intent, to apply for membership in the Knights of Columbus. 1/ The written materials make things only a little clearer. A question on the first page of the Knights of Columbus whole life policy application form that Respondent filled out with Mr. Williams clearly asks, "Is the applicant a member of Knights of Columbus?" and Respondent checked, "Yes." This portion is followed by the instruction, "(If yes, indicate associate member or insurance member. If no, application for membership must be made and approved by council)."2/ Respondent checked the box for "associate member." A Knights of Columbus council number is filled in and "New 0101" (apparently referring to January 2001) appears for Mr. Williams' membership number. Likewise, immediately above what Mr. Williams recognized as his true signature is the language, "I agree that the insurance hereby applied for shall be cancelled if the applicant is a candidate for membership and has not been initiated into the First Degree of the Order within 90 days of the commencement of Temporary Insurance." Similar language appears on policy applications Mr. Williams requested from Respondent for his wife, Delia, and two of his three grandchildren, Adam and Raven, although on some items, "insurance member" instead of "associate member" was checked. There was no evidence that Respondent had any continuing obligation to verify that any insured followed-up on his signed pledge in an insurance application to obtain his first degree in the Knights of Columbus. Mr. Williams testified that, in all, he signed five applications, including one for his grandson David. Contrariwise, the evidence shows that his grandson David, aged 20, applied and signed for his own policy, paid for by his grandmother, Delia. (See Finding of Fact 58.) Mr. And Mrs. Williams received five policies (including one for David) from the Knights of Columbus, which they examined and were pleased with, because the policies were what Mr. Williams thought he had purchased. They had no questions about the policies until Mr. Williams received a letter from the Knights of Columbus in the wake of accusations against Respondent by others. All five of the policies are still in full force and effect, although by their terms they should have been considered null and void by the insurer (Knights of Columbus) because Mr. Williams did not join the Order and attain the first fraternal degree within 90 days of the applications' dates. This continuation of the policies occurred only because the two years' period to contest any anomaly in the applications passed without discovery of Mr. Williams' lack of membership in the Order. In response to inquiries from the Knights of Columbus in approximately November 2002, Mr. Williams re-examined his five policies. Since then, and at hearing, he has claimed that the signatures purporting to be his on all Internal Revenue Service W-9 forms, State 1080 forms, and Knights of Columbus confidential dependant grandchild forms associated with all of the five policies were falsified. He also testified that none of the "Charles D. Williams" signatures were placed on the documents by his wife, who had a power of attorney to sign his name, because she was present with him at all times material and he did not see her sign his name. However, Mr. Williams also denied as his, the "Charles D. Williams" signature appearing on a LabOne form, which showed that various medical questions had been put to him and tests had been administered to him by a registered nurse as part of the application process for his own Knights of Columbus whole life policy. The Department stipulated, after consultation with that registered nurse, that the signature in question on the LabOne document was, contrary to the testimony of Mr. Williams, Mr. Williams' true signature. Due to the foregoing misidentification by Mr. Williams of his own signature and his complete absence of memory of the medical tests and medical interview for his policy, and because the undersigned cannot independently discern any difference among the "Charles D. Williams" signatures, and there is neither testimony from Mrs. Williams or from a handwriting expert corroborating Mr. Williams' denial of the validity of all the signatures in his name, and some in his wife's name, Mr. Williams' denial of the validity of all the "Charles D. Williams" signatures is simply not credible. Additional reasons for his lack of credibility in identifying specific signatures are also given hereafter. Mr. Williams' social security numbers on some documents have been crossed-out and replaced with social security numbers for the respective grandchildren, but when, why, or by whom this interlineation occurred was not proven on this record. Indeed, the Department has proposed no findings of fact related to "clearly erroneous social security number(s)" being placed by Respondent on any document, as alleged in the administrative complaint. IRS Form W-9s are supposed to be given to the requester, in this case, to Respondent and the Knights of Columbus, not to the Internal Revenue Service (IRS) or Mr. Williams. The purpose of these forms is to assure the requester (here, the Knights of Columbus) that the signator/insured has given the correct social security number on the insurance application and that he is not subject to backup withholding by the IRS. Not only did Mr. Williams not credibly deny the validity of his purported signature on these forms for his, Raven's and Adam's policies, he also conceded that all the W-9 forms contained his correct social security number and that he was not subject to backup withholding tax, just as had been represented on these forms. Therefore, there clearly is no proof that any fraud or misrepresentation was committed with regard to Mr. Williams' own W-9 form for his policy. Mr. Williams also confirmed that he was the primary beneficiary on Raven's and Adam's policies, that his social security number appeared with his name on those applications, and that he intended to pay all the premiums. The policies specify that the insured is the "owner" of the policies, but in places, Mr. Williams signed as both "applicant" and as "owner if other than applicant." The evidence further shows that these grandchildren's respective social security numbers appeared on the policy applications beside their names. (See Findings of Fact 40-41, 44, and 48.) Therefore, if it was appropriate for Respondent to receive the W-9 Form information from the "applicant" (Mr. Williams), who was paying for the policies, instead of from the minor "insureds," Raven and Adam, no fraud was committed with regard to the content of Raven's or Adam's W-9 forms. Quite probably, the grandchildren's respective social security numbers should have been given initially on the W-9 forms associated with the insurance policy applications made for them by their grandparents, or interlineated in place of Mr. Williams' number on the W-9 forms, as was done on the policy applications. However, given Respondent's testimony that he did not interlineate the grandchildren's correct social security numbers on the applications and that those interlineations occurred later by a person or persons unknown, and since no one testified one way or the other as to whether the submission of Mr. Williams' tax information on the W-9 forms associated with Raven's and Adam's policies was legal or appropriate until such time as the minor grandchildren's social security numbers could be supplied, and because the forms themselves permit using another social security number when the grandchildren do not yet have social security numbers of their own, it must be found that no fraud or misrepresentation has been proven against Respondent with regard to these W-9 forms, either. According to Mr. Williams, Mrs. Williams also signed her own application. Her true and correct social security number and signature appear on the W-9 Form associated with her policy application. The 1080 forms are required by the State of Florida when an existing insurance policy is replaced by another policy with a different company. Two 1080 forms in evidence, one for Raven and one for Adam, purport to give notice to the insurance company which had issued their existing policies (State Farm) that Mr. Williams was replacing that current coverage with Knights of Columbus policies. These forms also warn Mr. Williams, as the owner and as a beneficiary of both the old and new policies, to consult with both State Farm and the Knights of Columbus before canceling the existing State Farm policies. Mr. Williams did not credibly deny the validity of all signatures purporting to be his on these forms. He conceded that all the remaining information on all the 1080 forms was accurate, true, and valid, thereby demonstrating that no fraud was committed with regard to the content of these documents. The "confidential dependent grandchild" forms, referencing grandchildren Raven and Adam, and required by the Knights of Columbus, attest, "Please be advised that the individual named above is, in fact, my grandchild. I attest herewith that I am responsible for and do take and claim him/her on my income tax as my lawful dependent." The respective child's correct social security number is filled in, and then appear the words, "I understand that you require this letter so as to allow me to purchase Knights of Columbus Insurance Protection for him." Mr. Williams denied the validity of what purported to be his signature on these forms, but his denial of the signatures was not credible for the reasons already stated. Mr. Williams was, however, credible that he has never claimed any of his grandchildren as a dependent on his income tax return. It is undisputed that children and grandchildren over the age of 18 are not eligible for Knights of Columbus insurance through a member grandfather. It is undisputed that grandchildren under the age of eighteen must also be entirely dependent upon their member grandfather in order to qualify for Knights of Columbus insurance through him. Mr. Williams testified that at least grandsons Adam and David lived with him and his wife at the time of the insurance applications. The application for Adam, offered by the Department, shows Adam to be 17 years old on the date of application. The application for David, offered by Respondent, shows that David was 20 years old on the date of the application. Therefore, David would have been ineligible for a Knights of Columbus policy based on his grandfather's membership in the Knights of Columbus, whether David were dependent on Mr. Williams or not. However, David's application contains the same language attesting to his own membership in the Knights of Columbus and council number as quoted in Finding of Fact 40, except that it states that his membership number is "New 2/13/01," the date the applications for the grandchildren were taken by Respondent on his second visit to the Williams' home. This application bears a signature for "David Williams," as does an accompanying W-9 form. No dependant grandchild form for David is in evidence, but there is a premium check on David's behalf purportedly signed by Delia, Mr. Williams' wife, who is David's grandmother. (See Defendant's [sic.] Exhibits 18-19.) Mr. Williams was not questioned concerning these items. Neither Mrs. Williams, nor Adam, nor David testified. No one clearly identified who, including David, might have signed David's name. From this evidence, there must arise at least the inference that the grandson, David, aged 20, applied for his own Knights of Columbus insurance, representing that he was, or would become, an associate member of the Order. One might also infer that Respondent solicited the 20-year-old David to join the Knights of Columbus and to sign his own policy application, knowing that David was already too old to qualify under his grandfather's membership in the Order. However, without more, it cannot be inferred that Respondent forged David's signature. More to the point, however, the Administrative Complaint herein does not charge Respondent with any misbehavior concerning David's policy, and therefore, whatever happened as to David's application is extraneous to the charges herein. In the absence of more than was proven by Mr. Williams' testimony and the documents in evidence, Respondent's explanations that he has to accept whatever a client tells him; that he got his information about the grandchildren from Mrs. Williams; and that he saw all the grandchildren in Mr. Williams' house each of the two times he visited there and assumed they were dependent on the basis of the information he was given, presumably including the signed dependency forms, sufficiently refute the charges with regard to the applications and other papers related to Raven and Adam.3/ The evidence as a whole is not clear and convincing that Respondent either falsified to the Knights of Columbus that Mr. Williams was going to apply for membership in the Order, that he falsified the dependency of Raven, Adam, or David, or that Respondent forged Mr. Williams' signature, or any signature, including that of David Williams, on any document so as to mislead the Knights of Columbus, the Order, or Mr. Williams (grandfather). COUNT III: Dawn Crooke In July, 2001, about three months after giving birth to her second child, Dawn Crooke and her husband, Timothy Crooke, invited Respondent to their home to explain Knights of Columbus insurance policies. Respondent subsequently mentored Mr. Crooke into becoming a Knights of Columbus agent. After Respondent's termination by Mr. Spinelli, Mr. Crooke was assigned half of the Knights of Columbus councils Respondent had been servicing, and Mrs. Crooke worked in Mr. Crooke's insurance business. However, in July 2001, neither Mr. nor Mrs. Crooke was knowledgeable about insurance. In July 2001, Mrs. Crooke decided to purchase a $125,000 ten-year term life Policy 2438358. While going over the application with Mrs. Crooke, Respondent asked her the many health questions on the form. He checked "no" to every health question. Mrs. Crooke testified, and Mr. Crooke corroborated, that she had told Respondent that she had suffered from an "epilepsy seizure disorder" since the age of nine. At hearing, Mrs. Crooke described her condition both forthrightly as "epilepsy" and in the ambiguous terms that "some people". . . "define the condition as 'epilepsy'." Mrs. Crooke and Respondent agree that he checked the "No" response on her application form with respect to Item 6.b., inquiring if the insured had a history of "dizziness, fainting spells, epilepsy. . ." However, Respondent maintained that he checked the "No" response because Mrs. Crooke did not reveal her epilepsy to him. Mrs. Crooke acknowledged that she signed the $125,000 policy 2438358 application, which omitted the seizure information, thereby agreeing that "the statements and answers contained in this application are complete and true to the best of my knowledge and belief." Also, Mrs. Crooke conceded that Respondent correctly recorded her doctor's name on the application, so Knights of Columbus underwriters would have had the opportunity to inquire in greater detail concerning her health status, and thereby should have discovered her seizure disorder. They did not discover it. (See Finding of Fact 73.) Due to Mrs. Crooke's acknowledged signature on the application testifying that the health answers on it are true, her representations at hearing that she did not mean what she agreed to then are subject to close scrutiny and skepticism. Mr. and Mrs. Crooke lodged complaints with the Knights of Columbus and the Department after he became a Knights of Columbus agent. A bar code appearing in the lower right-hand corner of Mrs. Crooke's application for the $125,000 term life policy is intended to show that a saliva test was administered to her. She testified herein that she did not sign a consent form for a saliva test, did not take a saliva test, and did not take an HIV/AIDS test in conjunction with her $125,000 policy application. Mr. Crooke corroborated Mrs. Crooke's testimony to the extent that he did not hear his wife agree to a saliva test, that Respondent did not administer a saliva test to his wife in his presence, and also that Respondent did not administer a saliva test to him, as Respondent testified he had done. In order for a saliva test to have occurred, the Crookes had to sign consent papers that matched the bar codes. Respondent had admitted, without objection, a December 13, 2002, memorandum from Dennis W. Hogan, FLMI, FIC, with the Knights of Columbus, stating, in pertinent part, A review of the signatures in the aforementioned files seems to indicate an inconsistency between Dawn's signatures in policies 2438358 and 2449888, the latter policy containing signatures which may not be authentic. Mr. Crooke's comments regarding the saliva consent forms may not be accurate, since both forms appear to bear authentic signatures. This memorandum is sufficient, as a business record, to show that consent forms and saliva tests were, in fact, received by the home office bearing what purported to be the Crookes' signatures. Also, at hearing, Respondent produced an HIV-AIDS test consent form with a signature which Mrs. Crooke acknowledged was her true signature. Respondent testified that, indeed, he had administered a saliva test to Mrs. Crooke which simultaneously tested for HIV-AIDS, a variety of other diseases, medications (such as anti-convulsives for epilepsy), and tobacco. Contrary to Mrs. Crooke's testimony that saliva tests for Knights of Columbus policies are never administered by agents, Mr. Crooke confirmed that, in his experience as a Knights of Columbus agent, the saliva test is administered by agents and covers HIV/AIDs, specific illicit and prescription drugs, and tobacco use. Knights of Columbus general agent Spinelli also confirmed that Knights of Columbus agents are required to obtain a saliva swab and a signed HIV/AIDS consent form from any prospective insured in his or her early thirties, like Mrs. Crooke, who wanted to purchase a term policy with a death benefit over $100,000. He further testified that saliva test kits with bar codes and related consent forms have always been provided to the agents, not to separate medical personnel, for this purpose. Although the designations after Mr. Hogan's name in the letter described in Finding of Fact 66, show that he has some expertise in insurance investigation and security matters, there is no assurance that he is a handwriting expert; he did not testify; and his conclusion as to who did, or did not, sign the saliva test consent forms or any other forms received by the home office does not constitute the type of hearsay admissible over objection. Therefore, Mr. Hogan's independent conclusion that the Crookes probably each validly signed saliva test consent forms does not serve to supplement or explain other evidence. His ambiguous opinion with regard to who signed the consent forms cannot be cross-examined and is no more reliable than that of any casual observer of the signatures. Therefore, Mr. Hogan's letter does not explain or supplement Respondent's testimony that Mr. and Mrs. Crooke signed their consent forms. (See Section 120.57(1)(c), Florida Statutes.) However, in light of all the evidence, most particularly Mrs. Crooke's acknowledgment of her signature on her HIV-AIDS consent form and the receipt by the home office of saliva consent forms, saliva tests, and HIV-AIDS consent forms for both Mr. and Mrs. Crooke, it is more probable than not that both Mr. and Mrs. Crooke consented to a saliva test as well as to an HIV-AIDS test. Therefore, it cannot be concluded that Respondent falsified the saliva consent forms submitted to the company. Respondent testified that his saliva would have shown his gender and his ingestion of high blood pressure medicine, so that a test of his saliva would have alerted underwriters that the saliva test submitted on behalf of Mrs. Crooke had been falsified or was otherwise compromised. His testimony on this issue was unrefuted. Therefore, no evidence was offered to clearly show that, as charged, Respondent used his own saliva to hide the fact that Mrs. Crooke had epilepsy. Nonetheless, it appears that the saliva test submitted to the Knights of Columbus by Respondent on behalf of Mrs. Crooke either did not alert anyone to her seizure disorder and her use of anti-convulsive medicines as Respondent testified it should have, or that her condition did not matter to the underwriters. Indeed, Mr. Crooke disclosed Mrs. Crooke's condition to the Knights of Columbus when he discovered it had not been included on her application, and the home office determined she would have been insurable from the beginning. Just because there is no clear reason that Mrs. Crooke's saliva test did not reveal her seizure disorder or her use of anticonvulsive medicine, it does not automatically follow that Respondent falsified her saliva sample. This allegation has not been clearly and convincingly proven against Respondent. Because the Knights of Columbus home office later determined that disclosure of Mrs. Crooke's epilepsy on the application would not have rendered her uninsurable; because, when Mr. Crooke reported her condition to the home office, the Knights of Columbus never even rated her for epilepsy; and because there was strong evidence that no significant amount of commission was to be gained by Respondent from not checking the correct box on Mrs. Crooke's $125,000 policy application or by falsifying her consent form and saliva test,3/ the Department has not established a motive for Respondent to falsify the medical part of Mrs. Crooke's policy application form or to submit falsified consent forms and a falsified saliva test. Without motive, Respondent's explanation that Mrs. Crooke did not fully inform him of her seizure disorder and that he did not know what happened with the saliva test is more credible than Mr. and Mrs. Crooke's testimony that Respondent intentionally checked the wrong box so as to falsify her application, failed to take saliva samples, and/or falsified the saliva test submitted. A second insurance application made on behalf of Mrs. Crooke for a $15,000.00 whole life Policy 2449888, also failed to disclose that Mrs. Crooke suffered from epilepsy in the same ways as described above. Mrs. Crooke testified that her purported signature on that application as "the insured" and on the health disclosure authorization form for this policy are not truly hers. Mr. Crooke corroborated that neither of these signatures was that of his wife. Mr. Hogan's letter opinion of the validity or lack of validity of Mrs. Crooke's denied signature on the second policy application is useless for the reasons given above. (See Findings of Fact 66 and 71.) Both Mr. and Mrs. Crooke agreed that Mr. Crooke's authentic signature appears on the application and disclosure form for this second policy as the "applicant." Mr. Spinelli verified that the Knights of Columbus will not insure an adult who does not sign a policy application as the "insured." He further verified that the Knights of Columbus will not insure an adult simply upon the request or signature of an "applicant," even where that applicant is the spouse of the proposed insured. Mr. Crooke testified credibly concerning the details surrounding Respondent having him sign this policy application in blank as "applicant," in Respondent's truck one night on the way home from a Knights of Columbus "degree." Mr. Crooke also related credibly that Respondent had told him that Mrs. Crooke's signature would not be needed on the application, due to the recent $125,000 policy. This careless attitude of Respondent toward the accuracy of applications and other insurance paperwork is a proven repeated theme throughout Counts I-VI herein. At the time, Respondent's representation made sense to Mr. Crooke, but after instruction to become an agent, he realized that a Knights of Columbus policy application is required to contain the "proposed insured's legal signature" as stated on the application, and he disclosed the situation to the Knights of Columbus. Mrs. Crooke's testimony that Respondent discussed the second policy with her but did not have her sign the application at that time is perplexing, but upon the evidence as a whole, her testimony that she did not sign the new application or medical release as the "insured" is credible. Because Mrs. Crooke did not sign these documents, the most reasonable inference is that Respondent copied the information from the first policy onto the second policy application, and signed Mrs. Crooke's name or caused her name to be signed by someone else. Signing the insured's name, even for expediency's sake, which is what apparently occurred with the second policy, was clearly fraudulent on Respondent's behalf, and likewise was deceptive to the insurer. Therefore, this much of Count III of the Administrative Complaint has been proven. However, Mr. and Mrs. Crooke admitted that they got the second policy they wanted, at the price quoted, covering the exposure they had bargained for, so they were not deceived, except as to who could sign, and did not suffer any real world harm. COUNT IV: Timothy Crooke In July 2001, in his home, Timothy Crooke also purchased a $125,000.00 ten-year term policy on his own life. Respondent filled out the application, which Mr. Crooke signed, stating that "the statements and answers contained in this application are complete and true to the best of my knowledge and belief." The application represented Mr. Crooke as eligible for the discounted low premium for those who have never used tobacco. While Mr. Crooke admitted that he signed the application, he denied that he initialed the non-use of tobacco clause or noticed the "non-tobacco" designation when he signed the application. Mr. Crooke originally contended to the Department that he had told Respondent that he used tobacco and snuff while making out the application, but at hearing, he admitted that in his prior statements he had relied on Respondent's having seen him use chewing tobacco and using snuff at other times prior to making out the insurance policy application. He could not recall if Respondent had asked him about the use of tobacco during the application process. He speculated at hearing that perhaps Respondent had put the question about tobacco to him incorrectly or in such a way that he answered incorrectly, but he could not say for certain that the question had been put by Respondent or that he had disclosed his tobacco use during the application process. He was not using tobacco in any form while the application was being made out and conceded there were no ashtrays or other tobacco paraphernalia in his home when Respondent was there making out the application. Respondent credibly denied that he had ever seen Mr. Crooke use tobacco products prior to making out his insurance application form and that he had seen no tobacco paraphernalia while in the Crookes' home. Mrs. Crooke corroborated Mr. Crooke's testimony that he had never given consent to a saliva test or taken one in conjunction with his policy application, but Respondent testified to the contrary that, indeed, he had administered the required saliva test to Mr. Crooke which simultaneously tested for HIV-AIDS, a variety of other diseases, medications, and tobacco. Once again, the home office had received an HIV-AIDS test consent purportedly signed by Mr. Crooke, a signed saliva test consent form for Mr. Crooke, and a saliva sample that did not reveal that Mr. Crooke used tobacco. Mr. Crooke's policy was issued with the "no tobacco" premium discount. He notified the home office that he used tobacco as soon as he understood that his application did not make a full disclosure of his tobacco use. His policy has remained in force, but he now pays the undiscounted premium. Mr. Crooke admitted that the commission Respondent would have earned for selling him his policy would have been greater if the initial application had disclosed his tobacco use, and that it would be absurd and not worth the risk to Respondent's insurance agent's license for Respondent to deliberately conceal Mr. Crooke's tobacco use. For the same reasons given in Count III, particularly in Findings of Fact 69-71, and 74, but applied to Mr. Crooke's testimony and situation, this count is not proven. Further, because, Respondent would have earned a higher commission if he had disclosed Mr. Crooke's tobacco use from the very beginning, no motive to falsify Mr. Crooke's application, testing consent, or saliva test was proven. The evidence is not clear and convincing that Respondent is guilty of the charges brought in this Count. COUNT V: Phillip Keane At all times material, Phillip Keane, born August 9, 1939, has been gainfully employed and a member of the Knights of Columbus. He trusted Respondent as a fraternal brother when he and his wife sought new life insurance policies. At all times material, Mrs. Keane (Virginia) was not gainfully employed. On July 10, 2001, Mr. Keane invited Respondent to his home and told Respondent he wanted to buy the maximum amount of life insurance on himself for which he was eligible and an "income protection rider" (IPR) on his policy that would pay an additional amount to Mrs. Keane after his death, as a replacement for the income he was currently earning. (TR-305) He claimed that Respondent did not mention any age restrictions on his eligibility for the IPR he had requested. Respondent testified more credibly that the only way he could quote any policy information to Mr. Keane was to plug the information Mr. Keane gave him into Respondent's laptop computer, which would immediately refuse an IPR on Mr. Keane's income because Mr. Keane was about to become 62, the cutoff age for a Knights of Columbus IPR, and that Respondent had, at Mr. and Mrs. Keane's request, filled out an insurance application for Knights of Columbus Policy 2439783 (P-35) for $30,000 whole life protection on Mr. Keane's life and an IPR to insure Mr. Keane's "spouse" (Mrs. Keane), who was eligible for an IPR at her age of 55. In addition to the $30,000 whole life coverage on Mr. Keane's life, such an IPR would provide a 15- year income stream to Mr. Keane, who was producing income, if Mrs. Keane, who was not producing income, predeceased Mr. Keane during the 15 years of the rider. Although Mr. and Mrs. Keane's testimony at hearing is both clear and credible that they never understood that the IPR applied for on Policy 2439783 (hereafter, "Mr. Keane's policy") was being written on Mrs. Keane's life, they both acknowledged signing the application, he as "applicant," and she as "spouse covered under rider." Mrs. Keane was required to sign the application because her life was also being insured. The fact that Mrs. Keane was unemployed and producing no income to be replaced was not required to be disclosed on the application form in Mr. Keane's name, although this fact, if disclosed, could have raised concern at the Knights of Columbus' home office. Mr. Keane gave Respondent a check for two months' premiums, calculated by Respondent's laptop computer for the type of policy/IPR Mr. Keane had signed the application for, assuming that a standard premium would be charged on Mr. Keane's life and that a standard premium would be charged on Mrs. Keane's life. This is a common way to sell insurance. If the standard premiums on both Mr. and Mrs. Keane were ultimately charged, then the total premium for Mr. Keane's policy would not exceed Mr. Keane's government allotment, but there was always a possibility that the underwriters would "rate" one or the other person's life for medical reasons. (See Findings of Fact 12 and 13.) Knights of Columbus general agent Spinelli explained that an IPR is a product that potential insureds, such as Mr. and Mrs. Keane, and often even field agents, such as Respondent and Mr. Crooke, have difficulty understanding. Respondent and Mr. Spinelli agreed that one reason a whole life policy in Mr. Keane's name with the IPR on it for Mrs. Keane's death was an attractive product was because the $1600 per month for 15 years, available under her IPR, would have cost Mr. Keane much less in premiums than he would have had to pay for a whole life policy on Mrs. Keane in the same amount. If a full 15 years were calculated for the IPR his application requested, an equivalent whole life policy on Mrs. Keane would have amounted to more than $200,000.00 face value. Another advantage of Mr. Keane's policy with its IPR as originally applied-for was that if Mr. Keane predeceased Mrs. Keane, the IPR on Mrs. Keane's life would not disappear when Mr. Keane died, and she would have the very valuable right to convert it to another form of benefit. No one testified that such a conversion could have provided Mrs. Keane with additional income after Mr. Keane's death, but this conversion benefit of the IPR could be very attractive for protecting their assets or providing for their children via other insurance on Mrs. Keane if she survived Mr. Keane. That said, the Keanes testified that they never really wanted to insure Mrs. Keane for more than $10,000.00. Also, the longer she lived, the less Mr. Keane could collect under Mrs. Keane's IPR, which was limited by 15 years from the date of the policy, not the date of his or Mrs. Keane's death. Still, it is clear the Keanes did not understand what they had agreed- to by their signatures on his policy application. Mr. Spinelli further testified that there would be a lower agent commission on the sale of IPRs than on straight whole life policies. For this reason and because no clear calculation was put forth as to the differences between what Respondent's commission would have been for the policy applied-for with the IPR, compared to a straight $30,000.00 whole life policy, compared to the higher value whole life policy that Mr. Keane ultimately received (see Finding of Fact 102), it appears that Respondent would not have been motivated by a commission differential to write a policy with an IPR, and would not have written one unless he thought the client were asking for one. Respondent's error here, if any, was that he did not clearly convey to the Keanes what they were getting for the application. Mr. Keane actually reached age 62 on August 9, 2001, and accordingly became clearly ineligible for an IPR on his own life to pay Mrs. Keane. This occurred during the period that Knights of Columbus underwriters were pursuing medical information about him with regard to his application 02439783, and about Mrs. Keane, who had simultaneously applied for a $10,000.00 whole life Policy 02439784 on her own life (hereafter "Mrs. Keane's policy"), payable to Mr. Keane. See infra., this Count and Count VI. Because of delays in obtaining medical information and filling-in some of Respondent's sloppy paperwork, which the Knights of Columbus home office has euphemistically called "additional requirements"5/ in correspondence to the Department, the home office had to refund Mr. Keane's initial premium checks on both Mr. and Mrs. Keane's policy applications, and Respondent requested a "replacement check" for the first two months' premiums for each policy. There is no credible evidence, however, to suggest that this was other than the Knights of Columbus' standard operating procedure of starting over, to avoid long periods of being liable under the State's "temporary insurance" requirements, when faced with similar lengthy delays; no evidence that the Keanes lost any money by this procedure; and no evidence that Respondent misbehaved in any way in connection with this procedure. Respondent eventually delivered two Knights of Columbus policies to Mr. Keane, who filed them away without thoroughly examining them.6/ Mr. Keane continued to incorrectly believe his policy provided $30,000.00 of whole life coverage for himself and that its IPR would protect Mrs. Keane at the rate of $1600.00 per month for 15 years if he died. What he had actually received was a straight whole life policy with a $40,813.03 face value in case of his death and no IPR of any kind. Many months later, Mr. Keane met with Timothy Crooke, Respondent's replacement. Only then did Mr. Keane comprehend that the face of his policy clearly showed that his life was insured for $40,813.03, which was much more than the $30,000.00 he had assumed he had. However, reading his policy containing the original application, Mr. Keane still believed that he should have received an IPR that covered Mrs. Keane's life as requested in the original application (see Findings of Fact 91- 92), but he told Mr. Crooke that he had never wanted an IPR on her life. Mr. Crooke informed Mr. Keane that Mr. Keane had been ineligible from the start for the IPR which Mr. Keane had originally wanted to cover his own income and pay to Mrs. Keane in the event of Mr. Keane's death. (See Finding of Fact 90.) Apparently, this further explanation by Mr. Crooke led Mr. Keane next to believe that Respondent had deceptively added an unrequested IPR on Mrs. Keane to his contract application. Mr. Keane therefore wrote to the Knights of Columbus home office, saying he had applied for an IPR on his life and that IPR had been removed from his policy. (P-32-34) At hearing, Mr. Keane denied executing a Knights of Columbus 515 amendment to application form, dated October 15, 2001, which reads, "Sell [to] premium of 172.40 Govt allotment. No Income protection rider." (P-42; Defendant's [sic.] 33) That amount was the amount of Mr. Keane's government allotment and the amount he had been paying for his $40,813.03 whole life/no IPR policy, which Respondent had delivered to him and which Mr. Keane had kept in his safe until showing it to Mr. Crooke. That 515 application amendment form, although denied by Mr. Keane, together with Mr. Keane's acknowledgment that he had never wanted to spend more on a premium for his policy than the amount that came from his government allotment and that he and his wife had also only bought Mrs. Keane insurance at the amount of the government allotment provided to her (see Findings of Fact 110-111), lead to the conclusion that, despite Mr. Keane's confusion and denial of certain signatures, he agreed on October 15, 2001, to drop the IPR he applied for to get the premium he could pay, and that he received from Respondent the type of Knights of Columbus policy he had finally agreed to accept. COUNT VI: Virginia Keane Virginia Keane was once employed by the Navy Exchange, but has not worked there since 1997 and has not held other employment in recent years. In July 2001, Mr. and Mrs. Keane only wanted to purchase enough insurance on Mrs. Keane to "bury her suitably in a nice fashion," and "without financial hardship to the family." After consultation with Respondent, Mrs. Keane applied for a $10,000.00 whole life Knights of Columbus policy. Mrs. Keane's initial application for what eventually became Knights of Columbus Policy 0243974, shows the desired face amount as being $10,000.00. Respondent filled-out the application. Mrs. Keane signed that application, attesting that all elements thereof were true, and submitted a check for two months' premiums for the standard rate quoted at $23.80 x two. Certain health history questions on Mrs. Keane's initial application were improperly answered so as to omit her history of stroke, blood clots in the lungs, high blood pressure, and diabetes. Her height and weight figures on the application also erroneously showed her taller and lighter than she really was. She maintained that Respondent filled-in the wrong information and omitted the correct information. However, it is undisputed that Respondent told the Keanes on July 10, 2001, the day of the application, that someone else would come to their home to weigh them, take samples, do blood pressure readings, and complete a detailed health questionnaire about them. This health examination, in fact, occurred within two weeks, and Mrs. Keane gave complete, correct information to the "health person" who came to her home. Accordingly, there would seem to be no motivation for Respondent to deliberately falsify Mrs. Keane's health information on her application, since he knew she would be interviewed and examined by a health care professional. After her application was forwarded to the insurance company, a long delay occurred while underwriters obtained further health information on Mr. and Mrs. Keane as related in Count V, supra. (See also Findings of Fact 12 and 13.) The policy on Mrs. Keane that was delivered by Respondent to her clearly stated, "Rated Class. See Endorsement,"7/ immediately under the $10,000 face value shown. The remainder of the explanation on the endorsement pages is a series of comparisons of rated premiums and benefits, and it is easy to see how the Keanes were confused thereby, but the endorsement does clearly show a monthly premium for $36.70 per month, which all testimony established exceeded Mrs. Keane's monthly government allotment. At hearing, Mr. and Mrs. Keane both denied signatures purported to be theirs on a number of 515 amendment of application forms.8/ However, Mrs. Keane ultimately acknowledged that she had signed Defendant's [sic.] Exhibit 39, which was an amendment of application form, dated October 31, 2001, for her Knights of Columbus Policy 02439784, providing "Sell [to] premium of 23.80. Check enclosed for 2 payments 23.80 X 2= 47.60." This amendment had the effect of being an election by Mrs. Keane to keep the premium initially quoted for a standard policy by reducing her policy's face value from $10,000.00 to $6,302.35, rather than canceling the policy or paying the additional premium necessary to retain the $10,000.00 face value. After examining this exhibit, Mr. Keane conceded that the couple had decided to keep Mrs. Keane's premium within her government allotment. It was Knights of Columbus' procedure to have Respondent deliver the straight $10,000.00 policy endorsement and get a signed receipt from Mrs. Keane, acknowledging that she was accepting the lower face value. No such receipt appears of record, but it is not disputed that Mrs. Keane signed the 515 amendment form and got a policy endorsement showing on its face that she was insured for only $6,302.35. Respondent's sloppy habits and lack of attention to detail clearly delayed her receiving her coverage, but it must be concluded that Mrs. Keane got the policy she requested, within her economic and health limits. COUNT VII: Primary Agent Findings of Fact 7-9 are here adopted by reference. While Respondent owned and operated the Stidham Agency, was the boss there, and the one who hired and fired other agents working for him, he operated under his appointment as an agent for the Knights of Columbus. As owner and operator of the Stidham Agency, Respondent was required to register as a primary agent with the Department. Although he never made a primary agent filing, Respondent acted as the de facto primary agent for the Stidham Agency and was responsible and accountable for all of the activities of the staff at the Stidham Agency. (See Findings of Fact 7-9) Although Respondent did not register as a primary agent, the Department has conceded that his failure to register, while volitional, may not have been "intentional and willful," as charged. He apparently confused the requirements of "the primary agent law" (Section 626.592(1), Florida Statutes) with the statutory requirement that he keep the Department advised of his current address (Section 626.551, Florida Statutes).
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, enter a final order that: (1) finds the Respondent, Darrell E. Stidham, guilty of twice violating Subsections 626.611,(5)(7), and (9) in Counts I and III, herein, and once violating Section 626.592(1), Florida Statutes, and (2) revokes his license. DONE AND ENTERED this 9th day of August, 2005, in Tallahassee, Leon County, Florida. S ELLA JANE P. DAVIS 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 9th day of August, 2005.
