The Issue The issue presented is whether Petitioner is entitled to be reimbursed for its attorney's fees incurred in the underlying proceeding.
Findings Of Fact On December 31, 1997, Respondent Department of Insurance issued its Notice of Intent to Issue Cease and Desist Order, alleging that Petitioner And Justice for All, Inc., d/b/a Legal Club of America, was engaged in the legal expense insurance business without being properly licensed, and Petitioner requested an evidentiary hearing regarding that Notice of Intent. That cause was thereafter transferred to the Division of Administrative Hearings and assigned DOAH Case No. 98-0442. Prior to the scheduled evidentiary hearing, the parties stipulated that there remained no genuine issues of material fact and that the controversy could be resolved based upon an agreed record, a joint pre-hearing stipulation, and proposed recommended orders. After the submission of those documents, a Recommended Order was entered on February 3, 2000, finding that Petitioner was not selling legal expense insurance and, therefore, was not subject to regulation by the Department. On May 2, 2000, the Department entered its Final Order modifying portions of the Recommended Order and finding that Petitioner was selling legal expense insurance and was subject to regulation by the Department. Petitioner appealed that Final Order. On September 26, 2001, the District Court of Appeal of Florida, First District, filed its Opinion finding that the Department improperly rejected the holdings in the Recommended Order, reversing the Department's Final Order, and remanding the cause for entry of an order consistent with its Opinion. On January 11, 2002, the Department entered its Amended Final Order determining that Petitioner was not selling legal expense insurance and was not subject to regulation by the Department. On May 1, 2002, Petitioner filed its Motion for Attorney's Fees in this cause seeking an award for fees incurred in the underlying proceeding in the amount of $7,500, pursuant to Section 120.595(3), Florida Statutes. On May 14, 2002, the Department filed its Response to Motion for Attorney's Fees, alleging that the Department does not dispute the factual or legal basis for Petitioner's Motion and further alleging that the Department has no objection to the Motion being granted.
Findings Of Fact On December 31, 1997, the Department of Insurance issued a Notice of Intent to Issue Cease and Desist Order against Petitioner, alleging that Petitioner is engaged in the legal expense insurance business in the State of Florida without being licensed. The Department alleges that Petitioner is in violation of several statutory provisions requiring licensure. Petitioner timely requested an evidentiary proceeding regarding the allegations contained within that Notice of Intent to Issue Cease and Desist Order. Jurisdiction over the matter was transferred to the Division of Administrative Hearings on January 28, 1998, to conduct the evidentiary proceeding. The matter was assigned DOAH Case No. 98-0442. By Notice of Hearing entered February 17, 1998, that cause was scheduled for final hearing on June 15 and 16, 1998, and the parties have engaged in extensive discovery. By agreement of the parties that cause was re-scheduled several times and then was placed in abeyance. On February 24, 1999, Petitioner filed with the Division of Administrative Hearings its Petition for Administrative Determination of Invalidity of Existing Rule and Unpromulgated Rule. That Petition was assigned DOAH Case No. 99-0771RX, was consolidated with DOAH Case No. 98-0442, and is the subject of this Final Order. The Petition asserts the invalidity of the Department's Rule 4-201.003, Florida Administrative Code, and the invalidity of an alleged unpromulgated rule consisting of a statement by the Department that the amount of the membership fee Petitioner charges its members will determine whether Petitioner is a legal expense insurance corporation subject to regulation under Chapter 642, Florida Statutes. The existing Rule and the alleged unpromulgated rule are the subject of the Petitioner's Motion for Summary Final Order and the Department's Cross Motion for Summary Final Order. Petitioner alleges that Rule 4-201.003, Florida Administrative Code, is an invalid exercise of delegated legislative authority because (a) it enlarges, modifies, and contravenes specific provisions of the statute it purports to implement; (b) the Department exceeded its rulemaking authority; and (c) the Department materially failed to follow the requirements set forth in Chapter 120, Florida Statutes, by failing to repeal a rule for which there was no legislative rulemaking authority. Petitioner argues that the Department's alleged unpromulgated rule is an invalid exercise of delegated legislative authority because (a) the statement is an unpromulgated rule; (b) the statement enlarges, modifies, and contravenes specific provisions of the statute it purports to implement; and (c) the statement is vague, fails to establish adequate standards for the Department's decisions, and vests unbridled discretion in the agency. The Department's Cross Motion for Summary Final Order alleges that Petitioner lacks standing to assert its challenges, that the challenge to the existing Rule is moot, and that the alleged unpromulgated rule does not exist. Rule 4-201.003, Florida Administrative Code, relates to exemptions from the statutory definition of "legal expense insurance." The Department's Notice of Intent to Issue Cease and Desist Order does not allege that Petitioner has violated that Rule and does not even cite to that Rule as a basis for the Department's action against Petitioner. Since Petitioner is not charged with violating that Rule, Petitioner cannot show that it is substantially affected by the Rule. Further, the Department has now commenced the repeal of that Rule and has filed in this cause an affidavit from the Department's Bureau Chief of Specialty Insurers that Rule 4-201.003, Florida Administrative Code, has not been and will not be used against Petitioner in DOAH Case No. 98-0442 or in any other enforcement proceeding. As to the alleged unpromulgated rule, the record in this cause reveals that the Department in both correspondence and conversations with Petitioner raised a concern about the amount of Petitioner's membership fees in re-considering whether Petitioner is a lawyer referral service or a legal expense insurer. However, Petitioner does not allege that the amount of the membership fee has been considered as to any entity other than Petitioner. Conversely, the Department has filed affidavits from the Bureau Chief of Specialty Insurers and from the employee charged with handling licensure of legal expense insurers on a day-to-day basis that they have never heard of a Department policy in which the price of a legal service plan determines whether that plan is legal expense insurance. Those affidavits further state that no such policy has been applied by the Department and that the first time the Department heard of such a policy is when Petitioner asserted that such a policy existed. Accordingly, since it has not been shown that such a policy exists, it cannot be shown that the alleged policy constitutes an unpromulgated rule.
The Issue The issue in this case is whether Respondent condominium association should have assessed unit owners, in proportionate shares, to pay for the replacement of hurricane-damaged balcony screens, in accordance with Petitioner's policy that repair costs which do not exceed an insurance deductible are "costs of insurance" that must be paid as "common expenses" regardless of what the declaration of condominium provides concerning reconstruction or repair after a casualty.
Findings Of Fact Respondent Fountains South Condominium No. 3C Association, Inc. ("Association") is the entity responsible for operating the Fountains South Condominium No. 3C ("Condominium"). As such, the Association is subject to the regulatory jurisdiction of Petitioner Division of Florida Land Sales, Condominiums, and Mobile Homes ("Division"). The Condominium was created——and continues to be governed by——a Declaration of Fountains South Condominium No. 3C ("Declaration"), which instrument was recorded, in 1987, in the public records of Palm Beach County, Florida. On October 24, 2005, Hurricane Wilma struck Palm Beach County, causing damage to elements of the Condominium. The damaged property included some portions of the "Common Elements." Also damaged were some parts of the "Limited Common Elements." (The terms "Common Elements" and "Limited Common Elements" are defined in the Declaration, the relevant provisions of which will be set forth verbatim below. Generally speaking, though, the Common Elements comprise all of the property of which the Condominium is composed except for that included within the residential units. The Limited Common Elements, which are a subset of the Common Elements, consist of properties or structures whose use is reserved to a particular unit or units to the exclusion of other units.) Fulfilling a statutory obligation (that will be discussed in detail below), the Association had purchased property insurance to protect the Common Elements and Limited Common Elements. Issued by Nutmeg Insurance Company ("Nutmeg"), Policy No. SW 0000071 (the "Policy") provided coverage to the Association for loss or damage to property from multiple risks, including hurricanes. The premium for the Policy——the effective dates of which were from December 31, 2004 to December 31, 2005——was $395,000. The Policy provided for various deductibles depending on the cause of the covered loss. For loss or damage caused by a hurricane, the deductible was 5 percent of the value of the insured property. It is undisputed that, at the time of Hurricane Wilma, this deductible was approximately a quarter of a million dollars. Under the relevant provisions of the Policy, therefore, Nutmeg would not be obligated to indemnify the Association for any loss or damage caused by Hurricane Wilma unless and until the total losses from that particular occurrence exceeded (roughly) $250,000. The Association paid about $5,000 to repair the damage that Hurricane Wilma caused to the Common Elements, using funds on hand that had been saved for such contingencies. Because this expense was far below the applicable deductible, the Association did not submit a claim to Nutmeg. The Association's position regarding the damage to the Limited Common Elements, consistent with its longstanding view of such matters, was that the costs of repairing or replacing such properties should be borne by the respective unit owners to whose exclusive use the damaged elements were reserved. The Association based its position on a provision of the Declaration (which will be quoted below) that assigns the general responsibility for maintenance and repair of the units, together with the Limited Common Elements appurtenant thereto, to the respective unit owners. At the time of Hurricane Wilma, Haskell and Flora Ginns (the "Ginns") owned Unit No. 201 in the Condominium. (As of the final hearing, the Ginns were still the owners of this unit.) The hurricane caused damage both to their unit and to the screens surrounding the balcony outside their unit. It is undisputed that the balcony and screens appurtenant to the Ginns' unit are part of the Limited Common Elements. The Ginns submitted a claim for these losses to their insurer, Allstate Floridian Insurance Company ("Allstate"). By letter dated January 7, 2006, Allstate denied the portion of the Ginns' claim relating to the damaged screens, asserting that the screens were not covered property under the Ginns' policy because they were within the "insuring responsibility" of the Association. The Ginns did not protest Allstate's decision in this regard. (Allstate paid the full policy limit of nearly $30,000 on the Ginns' claim anyway; thus, its denial of coverage for the damaged screens actually had no effect on the reimbursement that the Ginns received from Allstate.) The Ginns then wrote a letter to the Association's president, Milton Kutzin, requesting that the Association pay to replace the damaged screens. Dated January 16, 2006,i the letter reads as follows: Dear Milton: As you may be aware, the screens on the deck of our condo were severely damaged because of Hurricane Wilma. According to the attached memo, the condo is responsible for replacing them. For your information, my insurance company, Allstate Floridian, has refused payment and has advised us that our condo association is responsible (by law) to replace them. We do have an estimate to replace the screens. I shall be happy to discuss this matter with you at any time. Please let me know approximately when this matter will be settled. (The "attached memo" to which the Ginns referred purports to be an undated letter from the Director of Maintenance of Versailles Court (evidently a residential community) to the homeowners of that project, clarifying the responsibilities of the homeowners, on the one hand, and their homeowners' association, on the other, vis-à-vis maintenance obligations. As far as the undersigned can tell, this Versailles Court memorandum has no bearing whatsoever on the issues at hand.) If the Association responded in writing to the Ginns' letter of January 16, 2006, the document is not in evidence. In any event, the Association refused to repair the screens surrounding the Ginns' balcony because (a) it believed that the Ginns were responsible, under the Declaration, for the cost of such repair and (b) the total losses to the Common Elements and Limited Common Elements (including the screens in question) did not come near the deductible under the Nutmeg Policy, meaning that there were no insurance proceeds to distribute to unit owners for repairs to Limited Common Elements. On January 18, 2006, the Ginns paid a company called Rainguard, Inc. either $1,100 or $1,200 to replace the damaged screens around "their" balcony.ii Meantime, on January 13, 2006, the Division rendered a Declaratory Statement in In Re Petition for Declaratory Statement of Plaza East Association, Inc., Docket No. 2005059934, Final Order No. BPR-2006-00239 (DBPR Jan. 13, 2006)(the "Plaza East Declaration"). In the Plaza East Declaration, the Division made a number of statements concerning the meaning and effect of certain provisions of the Florida Condominium Act ("Act") pertaining to the duties of condominium associations as they relate to property insurance. These statements will be examined in greater detail below. For now, it suffices to quote several sentences that form the core of the Division's policy regarding the scope of an association's "insuring responsibilities": As association is not required to insure 100% of the replacement cost of the condominium property, but must have adequate insurance to replace the property destroyed by a hurricane. The board may include reasonable deductibles in replacement value insurance policies. § 718.111(11)(a), Fla. Stat. A deductible amount is part of the cost of insurance and is a common expense for which reserves might be set aside. § 718.111(11), 718.115, Fla. Stat. As such, an association may not shift the cost of an insurance common expense to an individual unit owner as common expenses must be assessed in the proportions or percentages required under sections 718.104(4)(f), 718.116(9), Florida Statutes. [An association therefore] may not shift the cost of the deductible, a common expense, to only those unit owners whose windows were damaged by the insurable event such as a hurricane. Plaza East Declaration at 16 (emphasis added). The Plaza East Declaration reflected——and continues to be authoritative regarding——the Division's firmly fixed policy, which is that the deductible under a property insurance policy is a "cost" that an association must incur, using common funds collected through proportionate-share assessments. The Division's expert witness made this clear, giving the following testimony (which the undersigned accepts as credible) in deposition: Q. Doesn't [the] Plaza East [Declaration] declare that a deductible is a common expense? A. Well, it makes the deductible a common expense because insurance is a common expense and the deductible is just a part of the insurance purchase decision. * * * Q. Let me ask you this: Is there anything in [the Act] that clearly states that a casualty loss insurance deductible is a common expense? A. No, sir, there's nothing [in the statutes] that specifically says that. Q. But [the] Plaza East [Declaration] says that, doesn't it? A. Plaza East says that, yes, sir. Q. So that's a policy of the Department? A. Yes, sir, that is. Q. And it's a general policy, isn't it? A. Yes, sir. Q. And it's a general policy that would apply to any condominium in South Florida regardless of what the declaration of condominium said? A. Yes, sir. Q. And that's being applied in this case, isn't it? A. Yes, sir. Deposition of James T. Harrison, Jr. (10/29/07) at 20-21. At some point after the issuance of the Plaza East Declaration, the Ginns sought the Division's help in persuading the Association to reimburse them for the new screens. The Division informed the Ginns of the Plaza East Declaration. Armed with this information, the Ginns again pressed the Association to reimburse them for replacing the screens. The Association, again, declined. By letter dated May 3, 2006, the Ginns made a formal complaint to the Division regarding the Association's refusal to pay for the replacement of the screens. The Division acted promptly, completing its investigation into the matter on or before May 10, 2006. Siding with the Ginns, the Division demanded, in a letter dated May 22, 2006, that the Association either reimburse the Ginns or (possibly) be fined. Yet, the Association resisted. On July 28, 2006, the Division entered a Notice to Show Cause against the Association, charging as follows: Count 1: Respondent [Association], in violation of section 718.115(2), Florida Statutes, failed to asses unit owners in their proportionate shares for the common expense insurance deductible to repair damage to condominium property caused by a hazard to be insured by Respondent under section 718.111(11), Florida Statutes. The Respondent refused to treat the hurricane damage to the wrap-a-round deck and screens in unit #201 as a common expense covered by the association's policy under sections 718.111(11) and 718.115(1), Florida Statutes. Specifically, the Respondent failed to reimburse Haskell Ginns and Flora Ginns for damage sustained by Hurricane Wilma to their wrap-a-round screens. Since the May 22, 2006, warning letter, the complainants have replaced their wrap-a- round deck screens at a cost of $1,200.00 and have requested reimbursement from Respondent. The Association demanded a formal hearing.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Division enter a final order rescinding the Notice to Show Cause and exonerating the Association of the charge of failing to assess unit owners, in proportionate shares, to pay the cost of repairing or replacing Limited Common Elements damaged during Hurricane Wilma. DONE AND ENTERED this 10th day of January, 2008, in Tallahassee, Leon County, Florida. JOHN G. VAN LANINGHAM Administrative Law Judge Division of Administrative Hearings 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 10th day of January, 2008.
Findings Of Fact At all times material herein, the Respondent was a licensed Health and Legal Expense Insurance agent in the State of Florida. By criminal indictment filed October 4, 1984, Respondent was charged with the crimes of conspiracy to commit fraud, use of the mails to defraud and the use of a fictitious name or address to defraud. After a jury trial, Respondent was convicted of the offenses of conspiracy to commit fraud, in violation of Title 18, USC, Section 1341, Title 29, USC, Section 501(c), all in violation of Title 18, USC, Section 371, as charged in Count One of the Indictment and mail fraud, all in violation of Title 18, USC, Sections 1341 and 1342, as charged in Counts Two through Five of the Indictment. The American Federation of State, County and Municipal Employees (AFSCME) was at all times material herein a labor union affiliated with the AFL- CIO, a labor organization as defined in Section 402 of Title 29, United States Code. Florida Public Employees Council 79 (Council 79) was at all times material herein a labor union affiliated with AFSCME and the AFL-CIO, a labor organization as defined in Section 402 of Title 29, United States Code. The scheme upon which the Respondent's conviction rests, was directed toward both AFSCME and Council 79. At all times herein, Respondent was employed by either AFSCME or Council 79. Upon Council 79 being chartered, Respondent became its Tallahassee Regional Director. The record does not reflect any persons as victims of the scheme upon which the Respondent's conviction rests other than AFSCME and Council 79. Respondent's participation in the schemes upon which his conviction rests was as follows: (a) at the directions of William Van Zandt, Assistant to Jerry Wurf, President of AFSCME, and Thomas J. Fitzpatrick, President of Council 79, Respondent enrolled David J. Michalski as an employee of Council 79 and met with David J. Michalski in November 1979 to set up an address where payments on expense account vouchers and salaries would be delivered, and assisted David J. Michalski in opening an account at the bank for this purpose, and; (b) contacted George Albert Cuneo, Jr., President and owner of Cuneo Advertising, Inc., and requested that Cuneo mail bills for printing a Council 79 newspaper directly to G.A.D., Inc. G.A.D., Inc. was a corporation used by defendants other than Respondent to funnel inflated bills for advertising and public relations for payment by AFSCME or Council 79. The record is clear that Respondent had no knowledge of the schemes, was following orders of his superiors, and received no money, property, or other consideration for his participation in the schemes. The only evidence in the record concerning the Respondent's participation in the mail fraud is that the Respondent did apparently mail some matters concerning David R. Michalski's expense vouchers. Whether he mailed anything concerning the "kick-back scheme" or the inflated bills for advertising and public relations is not clear from the record. Respondent had never been convicted of a crime before this conviction. Respondent was sentenced to three (3) years on Count One but served only eight (8) months. The sentences in Count Two through Five were suspended and Respondent was placed on probation. Respondent was placed on probation for six (6) months on Counts Two through Four which began immediately and was placed on three (3) years probation on Count Five which was to run consecutively with the sentence imposed in Count One. After serving the eight (8) months of his sentence, Respondent returned to Tallahassee and enrolled in, and completed, a course in insurance at Tallahassee Community College hoping to further expand his existing insurance license. The record is clear that Respondent's reputation for truth and veracity in the community is good despite his conviction, and the Respondent enjoys a good reputation as far as his integrity in dealing with others in concerned.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record and the candor and demeanor of the witnesses, it is, therefore, RECOMMENDED that Petitioner, Department of Insurance, enter a Final Order dismissing all counts of the Administrative Complaint filed herein. Respectfully submitted and entered this 31st day of March, 1987, in Tallahassee, Leon County, Florida. WILLIAM R. CAVE 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 31st day of March, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-4404 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties in this case. Rulings on Proposed Findings of Fact Submitted by the Petitioner Adopted in Finding of Fact 1. Adopted in Finding of Fact 2. Adopted in Finding of Fact 3 as clarified. Adopted in Finding of Fact 5 with the exception of the phrase "with in excess of ten numbers" which is rejected as immaterial since there was no substantial competent evidence in the record to show that any individual member had been defrauded or that any conspiracy to defraud was directed at any individual member. Rulings on Proposed Findings of Fact Submitted by the Respondent 1. Adopted in Finding of Fact 3. 2-7. Rejected as immaterial and irrelevant. Adopted in Finding of Fact 9. Adopted in Finding of Fact 7. Adopted in Findings of Fact 9 and 11. Adopted in Findings of Fact 9 and 11. Adopted in Findings of Fact 9 and 11. Adopted in Finding of Fact 9. Adopted in Findings of Facts 9 and 11. Rejected as immaterial and irrelevant. Adopted in Finding of Fact 15. Rejected as immaterial and irrelevant. Adopted in Finding of Fact 13. 19.-20. Adopted in Finding of Fact 16. COPIES FURNISHED: Robert V. Ellias, Esquire Department of Insurance 413-B Larson Building Tallahassee, Florida 32399-0300 Ben R. Patterson, Esquire PATTERSON and TRAYNHAM 1215 Thomasville Road Post Office Box 4289 Tallahassee, Florida 32315 Honorable William Gunter State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 =================================================================
Findings Of Fact At all times pertinent to this proceeding Respondent, HOWARD P. HAUSER, was eligible for licensure and licensed in this state by the Florida Department of Insurance as a Life and Health Insurance Agent; General Lines Insurance Agent - Property, Casualty, Surety, and Miscellaneous Lines; and Legal Expense Insurance Agent. At all times pertinent hereto, Respondent was the registered agent and an officer or director of Hauser and Associates Insurance Agency, Incorporated of 7770 Davie Road Extension, Hollywood, Florida. Beginning on or about January 1, 1986, and continuing through August 31, 1987, Respondent represented to one of his clients that he had obtained insurance coverage for that client's three restaurants. This representation of coverage was false. Respondent received from the client insurance premium payments of $56,550.00, more or less, for the insurance of the client's three restaurants. These funds were obtained by Respondent under false pretenses. Respondent provided the mortgagee of one of the restaurants owned by his client with a document purporting to be a certificate of insurance on that restaurant from Scotsdale Insurance Company insuring the restaurant for the period December 11, 1985, to December 11, 1986. Respondent further provided the mortgagee with a declaration sheet stating that Protective Insurance Company would insure the restaurant from January 1, 1987, to January 1, 1990. Respondent falsified these declaration sheets. Respondent's client suffered no loss, other than the loss of his premium dollars, because of Respondent's misrepresentations as to coverage. Respondent was charged with one count of Grand Theft of the Second Degree, a second degree felony, based on the dealings with his client. Respondent entered a plea of nolo contendere to the charge of Grand Theft of the Second Degree. The Circuit Court, in and for Broward County, Florida, placed Respondent on probation for a period of three years and withheld adjudication of guilt. As a condition of the Order of Probation, the court required that Respondent make restitution to his client in the amount of $56,550.00 and further required that $15,000.00 be paid toward restitution on October 24, 1988, the date Respondent entered his plea of nolo contendere and the date the court entered the Order of Probation. Respondent made a restitution payment of $15,000.00 on October 24, 1988. Respondent has been licensed by Petitioner since April 1972. Although Petitioner has received other complaints about Respondent, no formal action has been previously taken against him. Respondent has been a good citizen, except for this misconduct, and a good family man. Respondent regrets his misconduct. Respondent timely requested a formal hearing after the Administrative Complaint was served upon him.
Recommendation Based on the foregoing findings of fact and conclusions of law it is RECOMMENDED that the Department of Insurance enter a final order which revokes all licenses issued by the Department of Insurance to Respondent, Howard Paul Hauser. DONE and ENTERED this 21st of July, 1989, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 904/488-9675 Filed with the Clerk of the Division of Administrative Hearings this 21st day of July, 1989. APPENDIX The proposed findings addressed as follows: of fact submitted on behalf of Petitioner are 1. Addressed in paragraph 1. 2. Addressed in paragraph 2. 3. Addressed in paragraph 6. 4. Addressed in paragraph 3. 5. Addressed in paragraph 4. 6. Addressed in paragraphs 3-4. The proposed findings of fact submitted on behalf of Respondent are addressed as follows: Addressed in paragraph 9. Addressed in paragraph 6. Addressed in paragraph 6. Rejected as being unnecessary to the conclusions reached. Addressed in paragraph 7. Addressed in paragraph 5. Addressed in part in paragraph 7. Rejected in part as being speculative. Rejected as being a conclusion of law and not a finding of fact. COPIES FURNISHED: Robert G. Gough, Esquire, (at the hearing) and Charles Christopher Anderson, Esquire, (on the proposed recommended order) Office of Legal Services 412 Larson Building Tallahassee, Florida 32399-0300 Gary D. Weiner, Esquire, Glendale Federal Building Suite 209 901 Southeast 17th Street Fort Lauderdale, Florida 33316 Honorable Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, FL 32399-0300 Don Dowdell, General Counsel Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, FL 32399-0300
The Issue Whether Petitioner is entitled to a legal expense insurance agent's license.
Findings Of Fact On October 17, 2001, Petitioner applied for licensure as a legal expense insurance agent. On December 20, 2001, the Department denied Petitioner's application for licensure based upon his unfitness and untrustworthiness due to Petitioner's guilty plea to conspiracy to engage in racketeering, for conduct which occurred while he was a sitting circuit court judge and which was related to his judicial duties. Petitioner had fully disclosed the plea and the details of the crime in his application to the Department. Petitioner received a juris doctorate degree in 1975 and a master's in criminal law in 1977. After being admitted to the Florida Bar, Petitioner worked as an assistant state attorney, as an associate with a private firm, as a practitioner in his own law firm, and finally was elected to a judgeship at the county court level. Petitioner served two years as a county court judge. In 1988, Petitioner was elected to the circuit court. As such, Petitioner was required to read, know, and abide by the Code of Judicial Conduct. He swore to uphold the Code of Judicial Conduct and voluntarily assumed an office that encompassed the highest level of responsibility and fiduciary duty to the public found in any public office in the United States of America. Petitioner was assigned to the criminal law division of the circuit court. Petitioner knowingly took bribes while he was a sitting circuit court judge. Because Petitioner was in debt, he approached an attorney named Raymond Takiff for a loan. Petitioner admitted that Mr. Takiff agreed to give him money in exchange for Petitioner's helping him out some time in the future. At that time, Mr. Takiff was being used by the Federal Bureau of Investigations (FBI) to set up an undercover bribery investigation. In return for Mr. Takiff's financial help, Petitioner ruled in favor of Mr. Takiff and ordered the return of some property that was the subject matter of one of the false criminal/forfeiture cases used by the FBI in their investigation. Petitioner knowingly helped Mr. Takiff establish a group of judges who would also take bribes. Petitioner stated that he introduced Mr. Takiff to ten other judges and that these instructions included Petitioner's saying that Mr. Takiff was trustworthy, that he could make it worth their while, and convincing the judges that Mr. Takiff was not working for the government. Petitioner continued to be involved in the on-going scheme to bribe multiple judges. One of the judges who received money from Mr. Takiff proceeded to send a portion of this bribe back to Respondent. Petitioner ultimately received $88,000.00 from Mr. Takiff in exchange for actions such as ruling for Mr. Takiff in one case and for knowingly establishing Mr. Takiff with other judges in an attempt to perpetuate the bribery scheme. Petitioner also accepted money from friends in exchange for setting them up with some appointments. Eventually, Petitioner was caught and arrested by the FBI. Petitioner agreed to help the FBI in the on-going investigation and multiple trials stemming from the FBI sting operation. As a result of the aforementioned acts on April 9, 1992, Petitioner pled guilty to conspiracy to engage in racketeering in Federal District Court in the Southern District of Florida and was sentenced to 12 years and seven months in federal prison. Petitioner's actions violated the fiduciary duty he had voluntarily assumed upon becoming a circuit court judge, and by introducing other judges to Mr. Takiff, he was promoting and causing a continuous and increasing breach of the judiciary's fiduciary duty to the public. The offense for which Petitioner was convicted did not have any relation either directly or indirectly upon the insurance business. Petitioner was disbarred on September 26, 1991. While in prison, Petitioner continued to live up to his agreement to help the FBI in the prosecution of criminal cases stemming from the sting operation, even though he did not have to, and was in grave danger because of his continued help. Petitioner had numerous threats made on his life, including contracts to kill him. Petitioner was nearly beaten to death in the attempted execution of one of the contracts on his life. He continued to help the FBI and felt it was one way to make up for his absolute breach of conscience and faith in committing the crime for which he was imprisoned. Subsequent to an unusual Rule 35 hearing held on June 9, 1995, Petitioner's sentence was shortened to five years' incarceration followed by three years' supervised release. The Rule 35 hearing was unusual in that the FBI agents and prosecutors were strongly in favor of Petitioner's release from prison and testified in his favor. Petitioner has completed his supervision and has since tried to pick up the pieces of his life. As a result of his conduct, Petitioner lost everything--family, friends, reputation and property. He clearly has learned the value of integrity and trustworthiness. He helps in various community organizations and serves as a mentor to others who might follow a less than trustworthy life. Petitioner had his civil rights, except the specific authority to possess or own a firearm, restored by the Office of Executive Clemency on August 31, 2002. Petitioner did not lie, mislead, or attempt to conceal in any way his past felony conviction. Petitioner has shown remarkable achievements in rehabilitating himself. Multiple witnesses testified as to his many deeds and rehabilitative achievements in ameliorating his admitted misdeeds in the face of actual death threats and brutal physical attacks resulting in severe and permanent bodily injury. Given this rehabilitation, Petitioner is entitled to be licensed as a legal expense insurance agent.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED: That a final order be entered granting Petitioner's application for licensure as a legal expense agent in the State of Florida. DONE AND ENTERED this 2nd day of December, 2002, in Tallahassee, Leon County, Florida. DIANE CLEAVINGER 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 2nd day of December, 2002. COPIES FURNISHED: John R. Forbes, Esquire 8825 Perimeter Park Boulevard Suite 102 Jacksonville, Florida 32216 Matthew A. Nowels, Esquire Department of Insurance 200 East Gaines Street Tallahassee, Florida 32399-0333 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 The issue is whether Respondent complied with Sections and 440.38, Florida Statutes, with regard to workers' compensation insurance for his subcontractors, and if not, the appropriate amount of penalty that should be assessed.
Findings Of Fact Hernandez, Inc., is a contractor based in the Jacksonville, Florida area, and is in the business of installing dry wall, among other construction related activities. The Department of Financial Services is the state agency responsible for enforcing the Workers' Compensation Law. This duty is delegated to the Division of Workers' Compensation. On February 5, 2004, Hernandez, Inc., was engaged in installing drywall in the Bennett Federal Building in Jacksonville, Florida. Hernandez, Inc., was a subcontractor for Skanska, Inc., who was the general contractor for the building. Hernandez, Inc., was accomplishing the installation of drywall by using two subcontractors, GIO & Sons (GIO), of Norfolk, Virginia, and U&M Contractors, Inc., (U&M), of Charlotte, North Carolina. Hernandez, Inc., was also using its own personnel, who were leased from Matrix, Inc., an employee leasing company. Prior to contracting with GIO and U&M, Hernandez, Inc., asked for and received ACORD certificates of insurance, which on their face indicated that the subcontractors had both liability coverage and workers' compensation coverage. It is the practice of Hernandez, Inc., to ensure that certificates of insurance are provided by subcontractors and the office staff of Hernandez, Inc., tracks the certificates so that they are kept current. Since the beginning of 2001, Hernandez, Inc., has received approximately 310 certificates of insurance from subcontractors. These certificates listed Hernandez, Inc., as the certificate holder. Though most of the producers and insureds on these certificates are from Florida, a substantial number are from other states. Hernandez, Inc., relied on the certificates as evidence that the subcontractor's workers were covered by workers' compensation insurance. Hernandez, Inc., has relied on certificates of insurance for more than twenty years and, with the exception of this case, has never known an instance where the underlying policy was invalid. On February 5, 2004, Katina Johnson, an investigator with the Division, made a routine visit to the Bennett Federal Building with another investigator. She observed personnel from Hernandez, Inc., and its subcontractors, installing dry wall. On February 5, 2004, Ms. Johnson determined that Hernandez, Inc., also had a contract to install dry wall as a subcontractor participating in the construction of the Mayport BEQ. L. C. Gaskins Company was the general contractor engaged in the construction of the Mayport BEQ. U&M worked at both the Bennett Federal Building site and the Mayport BEQ site as a subcontractor of Hernandez, Inc. Ms. Johnson issued a Stop Work Order on February 26, 2004, to Hernandez, Inc., GIO, and U&M. By the Stop Work Order, Hernandez, Inc., was charged with failure to ensure that workers' compensation meeting the requirements of Chapter 440, Florida Statutes, and the Florida Insurance Code, was in place for GIO and U&M. The Stop Work Order indicated that the penalty amount assessed against Respondent would be subject to amendment based on further information provided by Hernandez, Inc., including the provision of business records. An Amended Order of Penalty Assessment dated March 19, 2004, was served on Hernandez, Inc., which referenced the Stop Work Order of February 26, 2004. The Amended Order of Penalty Assessment was in the amount of $157,794.49. The Amended Order of Penalty Assessment reached back to September 29, 2003. An Amended Order of Penalty Assessment dated March 22, 2004, was served on GIO. This Amended Order of Penalty Assessment was in the amount of $107,885.71. An Amended Order of Penalty Assessment with a March 2004 date (the day is obscured on the document by a "filed" stamp), was served on U&M. This Amended Order of Penalty Assessment was in the amount of $51,779.50. The sum of these numbers is $159,665.21. However, the parties agreed at the hearing that the amount being sought by the Division was $157,794.49, which represented the total for GIO and U&M. Hernandez, Inc.'s, employees leased from Matrix were covered by workers' compensation insurance through a policy held by Matrix. The Matrix policy did not cover the employees of GIO and U&M. Although Skanska, Inc., and L. C. Gaskins Company had workers' compensation insurance in force, their policies did not cover the workers used by Hernandez, Inc., or the employees of GIO or U&M. GIO and U&M employees were considered by the Division to be "statutory employees" of Hernandez, Inc., for purposes of the Workers' Compensation Law. This meant, according to the Division, that Hernandez, Inc., was required to ensure that the employees of GIO and U&M would receive benefits under the Workers' Compensation Law if a qualifying event occurred, unless the subcontractors had workers' compensation insurance policies in force that satisfied the Division. GIO had a policy of workers' compensation insurance evidenced by an ACORD certificate of liability insurance for the period December 3, 2002, until December 3, 2003. The policy was produced by Salzberg Insurance Agency in Norfolk, Virginia. It listed Hernandez as the certificate holder. The policy was issued by Maryland Casualty Company, a subsidiary of the Zurich American Insurance Company. These companies are admitted carriers in Florida. The Classification of Operations page of this policy indicated class code 5022, masonry work. GIO employers were installing drywall during times pertinent. Rates for drywall installation are substantially higher than for masonry work. In the policy section titled "Other States Insurance," Florida is not mentioned. William D. Hager, an expert witness, reviewed the certificate of insurance and the policy supporting the certificate. Mr. Hager is a highly qualified expert in insurance and workers' compensation coverage. Among other qualifications, he is an attorney and a former member of the National Association of Insurance Commissioners by virtue of his position as Insurance Commissioner for the State of Iowa. He concluded that this policy did not conform to the requirements of Chapter 440 because the policy was Virginia based and did not apply Florida rates, rules, and class codes. Mr. Sapourn, testified as an expert witness. Mr. Sapourn has a degree from the University of Virginia in economics with high distinction and a juris doctorate from Georgetown. He is a certified insurance counselor and owned an insurance agency in the District of Columbia area. As an insurance agent he has issued tens of thousands certificates of insurance and written hundreds of workers' compensation policies. Mr. Sapourn, opined that this certificate represented workers' compensation coverage that complied with Chapter 440, Florida Statutes. Upon consideration of the testimony of the experts, and upon an examination of the documents, it is concluded that the policy represented by the certificate of insurance for the period December 3, 2002, to December 3, 2003, did not comply with the requirements of Chapter 440. Subsequently, someone forged an ACORD certificate of liability insurance, which indicated that it was produced by Salzberg Insurance Agency, and that indicated that GIO was covered from December 4, 2003, until December 4, 2004. The forged certificate was presented to Hernandez, Inc., upon the expiration of the policy addressed above. It was accepted by Hernandez, Inc., and considered to be a valid certificate. Both of the experts pointed out that with their practiced eye they could easily determine that the certificate was a forgery. However, there was no evidence that Mr. Hernandez, or his employees, had training in forgery detection. Accordingly, it was reasonable for them to accept the certificate as valid. U&M presented Hernandez, Inc., with an ACORD certificate which indicated insurance coverage from October 24, 2003, until October 24, 2004. The producer was Insur-A-Car Commercial Division of Charlotte, North Carolina. The insurer was The St. Paul, an admitted carrier in Florida. The insured was U &M. The certificate holder was Hernandez Enterprises, Inc. William D. Hager reviewed the certificate of insurance and the policy supporting the certificate. He noted that The St. Paul policy upon which the certificate was based did not apply in Florida because U&M was not working temporarily in Florida and because it included a policy endorsement that stated: "The policy does not cover work conducted at or from 3952 Atlantic BLVD #D-12 Jacksonville, FL 32207." U&M's mailing address in Jacksonville was 3952 Atlantic Boulevard, Suite D-12. The information page of the policy, at Part 3.A. states that Part One applies to North Carolina. Part 3.C., Other States Insurance states that Part 3 of the policy applies to the states listed, and then refers to the "residual market limited other states insurance." Mr. Hager testified that the policy did not indicate compliance with Chapter 440, because the policy is North Carolina based, applies only North Carolina rates, and does not provide Florida coverage. Mr. Sapourn, on the other hand, opined that the policy provided workers' compensation that complied with Chapter 440. Although it is possible that a worker who was injured during times pertinent may have received benefits, it is clear that the policy did not comply with the requirements of Chapter 440. The Division instituted a Stop Work Order against U&M and sought to impose penalties upon it for failure to comply with Chapter 440 for offenses committed at the exact times and places alleged in this case. U&M demanded a hearing and was provided one. In a Recommended Order entered April 7, 2005, an Administrative Law Judge recommended that the Division enter a final order affirming the Stop Work Order and assessing a penalty in the amount of $51,779.50. See Department of Financial Services, Division of Workers' Compensation vs. U and M Contractors, Inc., Case No. 04-3041 (DOAH April 7, 2005). The recommendation was adopted in toto by the Department of Financial Services on April 27, 2005. See In the Matter of: U and M Contractors, Inc., Case No. 75537-05 WC (DFS April 27, 2005). The evidence taken as a whole demonstrates that U&M did not have workers' compensation coverage in Florida that complied with the requirements of Chapter 440, during times pertinent. Mr. Sapourn testified that the theory behind ACORD certificates of insurance is that they provide a uniform document upon which business people may rely. This testimony is accepted as credible. In order to continue working on a project not addressed by the Stop Work Order, Hernandez, Inc., entered into and agreement with the Division which provided for partial payments of the penalty in the amount of $46,694.03. This payment was made with the understanding of both parties that payment was not an admission of liability.
Recommendation Based upon the Findings of Fact and Conclusions of Law, it is
The Issue At issue in this proceeding is whether the Respondent, Brevard Management, LLC, (Brevard Management) failed to abide by the coverage requirements of the Workers' Compensation Law, Chapter 440, Florida Statutes, by not obtaining workers' compensation insurance for its employees; and whether Petitioner properly assessed a penalty against Respondent pursuant to Section 440.107, Florida Statutes.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing, and the entire record in this proceeding, the following findings of fact are made: The Department is the state agency responsible for enforcing the requirement of the Workers' Compensation Law that employers secure the payment of workers' compensation coverage for their employees and corporate officers. § 440.107, Fla. Stat. On July 31, 2008, Eugene Wyatt, an insurance analyst working for the Department, visited the River Palm Motel in Melbourne to investigate the workers' compensation insurance status of several contractors performing renovations on the property. The River Palm Motel is owned by Brevard Management, whose principal owner is Albert Segev. During his visit, Mr. Wyatt spoke to Michael Cole, the hotel's manager, regarding the workers' compensation coverage of the hotel itself. Mr. Cole told Mr. Wyatt that the hotel used Automatic Data Processing, Inc. (ADP), a third-party payroll services provider, to provide workers' compensation insurance coverage. Brevard Management began operating the River Palm Motel on June 18, 2008. On June 19, 2008, Brevard Management entered into an agreement with ADP for the provision of payroll services, including the filing of payroll taxes, using Easy Pay, ADP's proprietary payroll management service. On August 25, 2008, Mr. Wyatt received an anonymous referral alleging that the River Palm Motel was not carrying workers' compensation insurance for its employees. Later that day, Mr. Wyatt returned to the River Palm Motel, this time to investigate the workers' compensation status of the motel itself. Upon his arrival at the motel, Mr. Wyatt spoke with Mr. Cole, who disclosed that Brevard Management owned the motel. Mr. Wyatt conducted a search of the Division of Corporation's website and learned that Mr. Segev was the principal owner of Brevard Management. Mr. Cole provided Mr. Wyatt with invoices for the last payroll period for the River Palm Motel. The invoices indicated that the company had more than ten employees, which led Mr. Wyatt to conclude that the company was required to secure workers' compensation insurance. At his deposition, Mr. Cole confirmed that River Palm Motel had between ten and twelve employees on August 25, 2008. Mr. Cole believed that Brevard Management had secured workers' compensation insurance coverage through ADP. However, the payroll invoices that Mr. Cole provided to Mr. Wyatt showed no deductions for any insurance. Mr. Wyatt consulted the Department's Coverage and Compliance Automated System (CCAS) database, which lists the workers' compensation insurance policy information for each business as provided by the insurance companies, as well as any workers' compensation exemptions for corporate officers. CCAS indicated that Brevard Management had no workers' compensation insurance policy in place and no current, valid exemptions. Mr. Cole provided Mr. Wyatt with a copy of the June 19, 2008, payroll agreement between Brevard Management and ADP, which gave no indication that workers' compensation insurance was included. The evidence at the hearing established that ADP does not automatically provide workers' compensation insurance coverage to entities that enroll for its payroll services. ADP provides such insurance coverage, but only as part of a separate transaction. After receiving authorization from the acting supervisor in the Department's Orlando office, Mr. Wyatt issued the SWO to Brevard Management on August 25, 2008, and personally served it on Mr. Segev on August 26, 2008. On August 25, 2008, Mr. Wyatt gave Mr. Cole a request to produce business records, for the purpose of making a penalty assessment calculation. In response, Mr. Cole provided an employee roster from ADP showing the payroll entries for every Brevard Management employee from the opening of the motel in June 2008 through August 25, 2008. After Mr. Wyatt's visit, Mr. Cole contacted ADP and spoke to Elizabeth Bowen, a workers' compensation sales agent with ADP Insurance Services. Ms. Bowen faxed forms to Mr. Cole to complete in order to obtain a workers' compensation insurance policy. Mr. Cole completed the paperwork and obtained a workers' compensation insurance policy through NorGUARD Insurance Company, effective August 25, 2008. Mr. Cole testified that he believed in good faith that he had obtained workers' compensation insurance at the time he signed up for payroll services with ADP sales representative Clinton Stanley in June 2008. It was only Mr. Wyatt's investigation that alerted Mr. Cole to the fact that Brevard Management did not have the required coverage. Mr. Stanley recalled that Mr. Cole had requested workers' compensation insurance, recalled telling Mr. Cole that his request had to be routed to ADP's separate insurance division, and recalled having forwarded the request to the insurance division. Mr. Stanley had no explanation for why the insurance division did not follow up with Mr. Cole in June 2008. Because he never heard from Mr. Cole again, he assumed that Brevard Management had obtained the requested workers' compensation coverage. It is accepted that Mr. Cole believed that he had purchased the workers' compensation coverage as part of the ADP payroll services; however, the evidence established that Mr. Cole should reasonably have known that this was not the case. Nothing in the June 2008 contractual documentation with ADP indicated that Brevard Management had obtained workers' compensation insurance coverage, and the subsequent ADP payroll registers showed no deductions for workers' compensation insurance. Using the proprietary Scopes Manual developed by the National Council on Compensation Insurance, Inc. (NCCI), Mr. Wyatt assigned Brevard Management's employees the occupation classification code 9052, "Hotel: All Other Employees & Sales Persons, Drivers." This was the same code assigned by Ms. Bowen when she completed the policy paperwork for Brevard Management. Ms. Bowen described this classification as "all inclusive" with respect to hotel employees. Mr. Wyatt calculated an amended penalty based on the payroll records provided by Mr. Cole, from the date Brevard Management became an active limited liability company, June 3, 2008, to the date the SWO was issued, August 25, 2008. Mr. Wyatt divided the total payroll by 100, then multiplied that figure by NCCI's approved manual rate for insurance coverage in 2008 for classification code 9052. That product was then multiplied by 1.5 to arrive at the penalty for the stated period. The total penalty for all employees was $2,112.03. The Amended Order was served on Brevard Management on August 26, 2008, along with the SWO. On August 26, 2008, Mr. Wyatt met with Mr. Cole and Mr. Segev, who produced a copy of the application for workers' compensation insurance placed through NorGUARD Insurance Company and tendered a cashier's check for the full amount of the penalty. The SWO was released on the same day.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is, therefore, RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers' Compensation, assessing a penalty of $2,112.03 against Brevard Management, LLC. DONE AND ENTERED this 17th day of April, 2009, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 17th day of April, 2009. COPIES FURNISHED: Tracy Beal, Agency Clerk Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Ben Diamond, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307 Justin H. Faulkner, Esquire Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399 Albert Segev Brevard Management, LLC, d/b/a River Palm Hotel 420 South Harbor City Boulevard Melbourne, Florida 32901
