The Issue Whether Neuma, Inc. (Petitioner), should be granted licensure as a "viatical settlement provider" as defined by Section 626.9911(6), Florida Statutes.
Findings Of Fact Petitioner applied to Respondent for licensure as a viatical settlement provider on or about August 20, 2001. After denial of the first application, Petitioner submitted a second application on February 4, 2002, for licensure as a viatical settlement provider. On March 28, 2002, Respondent denied that application. At all times relevant to these proceedings, David Irwin Binter was the sole owner and President of Petitioner. Further, Binter was also the sole owner and President of AMG, Inc. (AMG), incorporated by Binter in the State of Delaware in December of 1996. In other states the direct affiliation of the two corporations has led to the acquisition by Petitioner of viatical settlements directly from insured individuals for Petitioner's own account with money raised by AMG from investors. Consequently, purchase of a viatical settlement from Petitioner by AMG cannot be considered an "arms length transaction" in view of the close relationship and common ownership of the two corporations. Petitioner not only has previously purchased interests in certain viators life insurance policies using investor monies solicited by AMG, but if licensed in Florida, Petitioner would raise investor money through AMG. Petitioner's representations in its "Viatical Settlement Disclosure Document," given to each AMG investor, and Petitioner's Florida application correspondence stating that if granted a Florida viatical settlement provider license, Petitioner intended to use AMG to solicit investors monies, also corroborate the finding that Petitioner would raise investor money through AMG, if licensed in Florida. In his initial application on behalf of Petitioner for licensure as a viatical settlement provider, Binter did not reveal his involvement with AMG. In response to Question 8 of the Biographical Statement and Affidavit portion of the application, requesting the listing of all current business activity, Binter responded with the notation "N/A." Binter did this although he was the owner of AMG, the entity otherwise represented in Petitioner's application correspondence as the affiliate through which Petitioner intends to sell to investors interests in life insurance policies purchased by Petitioner. Binter's answer to Question 8 of the Biographical Statement and Affidavit portion of the first application was false. Binter's answer to Question 20(b)9 of the Biographical Statement and Affidavit required that he reveal any entity with which he was associated, or had been associated within the previous 12 months, that had been enjoined temporarily or permanently by any judicial, administrative, regulatory or disciplinary action from violating any federal or state law regulating the business of insurance, securities, or banking. Binter answered "No" to the question despite the existence of such actions against AMG by the states of Kansas, Illinois, and Alabama within the stated time frame. Petitioner's website, open to the general public, made material misrepresentations relative to the existence of a contingency insurance program between AMG and Lloyd’s of London, stating that the program was in existence and would insure investors against the contingency of viators living past the death dates projected by physicians designated by Lloyds to render those projections. Those representations are untrue because Lloyds actually provided no such coverage at the time the website was open to the public, and has not actually provided any to this date. Petitioner's website contained terminology that was specifically prohibited by Florida law. An examination of the website shows that it uses the words, "A no-risk investment," and "insured safe shelter," both of which are prohibited by Section 626.99277(6), Florida Statutes, which specifically bans the use of the words "no-risk" and "safe" relative to investments in viatical settlement purchase agreements. Petitioner’s Admission 11 confirms the usage of those terms. Petitioner, at the time of its first application, had no viatical settlement provider application on file with the State of Connecticut, although Petitioner's application represented that it did. Petitioner's employee at the time, Denise Randall, testified that while she thought that she had filed such an application with Connecticut on behalf of Petitioner, she may have inadvertently mailed the Connecticut application to Mississippi and that when informed by Respondent's personnel that no Petitioner application was on file with Connecticut, she did not bother to check with Connecticut but merely sent Respondent's office a copy of the application she thought she had mailed to Connecticut and continued to represent that the same was on file with Connecticut. Petitioner/AMG made demands on their investors for monies in addition to the stated purchase price of their viatical interests in violation of express representations in the contracts between Petitioner/AMG and those investors that additional premiums, due to an underestimation of life span, would be paid out of the share of Petitioner/AMG. An examination of the contracts at issue fails to reveal any provision authorizing demands on investors. Despite Respondent's repeated requests for the same, Petitioner never produced a trust or escrow agreement between Petitioner and its purported trustee, Larry Silver. The presence and use of an independent third party trustee or escrow agent is expressly required for the completion of any viatical settlement transaction in the State of Florida. Section 626.9924(3), Florida Statutes. All that was done in response to Respondent's repeated requests was to re-submit the same unsigned, three-party contract form. No document establishing the actual existence of an independent third-party trustee or escrow agent required by Florida law for any viatical settlement transaction was ever produced by Petitioner. Randall exclusively prepared the first application submitted on Petitioner's behalf. Binter signed the application without reading any of it, even though his signature verified under oath and penalty of perjury that the had carefully examined each question in the biographical statement and affidavit and answered each truthfully. Randall’s prior employment was in office administration in banks and mortgage companies. She had never worked in the viatical industry before, had never worked for Binter before, and had no independent knowledge of his business affairs. Her primary job function with Petitioner was completing and filing viatical settlement provider applications with state regulators. Binter provided no advice, assistance, or guidance. All that Randall had for guidance was a 1996 biographical statement that she found among other office files. Binter did not provide her with any information updating that statement and he specifically did not tell her about the securities actions in Alabama, Kansas, and Illinois. Binter did not have the first application reviewed by his attorney, who had actual knowledge of the securities actions. The attorney, however, did review the second application submitted after the securities actions omissions were discovered and the first application withdrawn. Binter had actual knowledge of all three securities actions at the time of the first application. He did not share that knowledge with Randall nor did he seek his attorney's review of the application.
Recommendation In view of the foregoing, it is RECOMMENDED that a final order be entered by the Florida Department of Insurance denying Petitioner's application for licensure as a viatical settlement provider. DONE AND ENTERED this 13th day of November, 2002, in Tallahassee, Leon County, Florida. DON W. 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 13th day of November, 2002. COPIES FURNISHED: Michael H. Davidson, Esquire Department of Insurance 200 East Gaines Street 612 Larson Building Tallahassee, Florida 32399-0333 Jeffrey L. Frehn, Esquire Katz, Kutter, Haigler, Alderman, Bryant & Yon, P.A. 106 East College Avenue, Suite 1200 Post Office Box 1877 Tallahassee, Florida 32302-1877 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 Petitioner is entitled to the amounts claimed in the challenges to the IRR determinations as set forth in the cost settlement documents.
Findings Of Fact Petitioner, Sunrise Community, Inc., is a non-profit organization that offers assistance and support to people with developmental disabilities. It specializes in residential services but also provides day programs, supported living services, and other programs to assist people in the lower functioning ranges of mental retardation. Respondent, Agency for Health Care Administration, is the state agency charged with the responsibility of administering and supervising Medicaid reimbursements. At all times material to this cause, Petitioner was an authorized Medicaid provider. The quality of care provided by Petitioner and its facilities has never been disputed in this cause. The disputes in this matter arose due to challenges to the rates of reimbursement to Petitioner and its facilities. In Florida, Medicaid providers such as Petitioner are reimbursed on a prospective basis. Each provider gets a rate for reimbursement that is established based upon the actual allowable costs from a prior, fixed period of time which is then utilized to pay for a subsequent time period. For convenience of review this rate is sometimes thought of as the "budgeted rate" in this record. It assumes costs from past experience will be incurred in the future and provides for a known, fixed amount of compensation to hopefully cover such expenses. All Medicaid providers are required to disclose their actual costs for an entire reporting period. A cost report must be prepared using the accrual basis of accounting in accordance with generally accepted accounting principles as set forth in the rules governing Medicare reimbursement. After the fact, providers then "settle up" with the Agency by comparing the actual allowable costs incurred in the rate period with the rate. Providers cannot make a profit or excess revenue on the rate. Where a rate for a given period proves to be too low or inadequate, the cost settlement procedure is designed to adjust the amounts owed to cover the deficit funding. Thus each Medicaid facility receives a rate which must be "cost settled" separately based upon its actual allowable expenses. Petitioner and its related facilities are entitled to rates that will cover the actual allowable costs of doing business. Petitioner is not entitled to a profit nor is it required to operate at a loss. Should a provider be overpaid, that is, if it is established during cost settlement that the rate received by the provider was more than the actual allowable costs incurred for the rate period, then the provider "repays" the overage to the Agency. Otherwise, the rate is fixed for the time period it relates to unless an IRR is approved to increase the rate. IRRs are submitted to the Agency when a provider’s rate does not provide adequate compensation. An approved interim rate is to give assurance that the original rate can be adjusted to accommodate the new costs incurred by the provider. Approved interim rates are also cost settled after the rate period as with budgeted rates. In 1995 Petitioner sought approval of interim rate increases from the Agency. Such requests were denied by the Agency but successfully appealed by Petitioner. Thereafter, because the period governed by the rates had passed, the Agency sought to cost settle the amounts owed to Petitioner. When the Agency refused to remit the court-ordered interim rate Petitioner lost the amount of the rate increase as well as an opportunity for use of those funds during the pending cases. The parties attempted to resolve the amounts claimed by Petitioner through the cost settlement process. As to each denied claim, Petitioner sought an administrative review and the matter was forwarded to the Division of Administrative Hearings. IRRs are designed to give providers relief so that unanticipated costs can be reimbursed. This is important since laws may change which require providers to offer additional programs or services the costs of which are not encompassed in the budgeted rate in effect at the time of the change in law. At the time of settlement, if there is an overpayment of the difference between the approved interim rate and the actual allowable costs, the provider refunds the overpayment. Similarly, if there is an underpayment as a result of the actual allowable cost being greater than the interim rate, the provider is entitled to receive additional payment. Petitioner is entitled to additional payments. The amount of the payments is the center of the disputes in this cause. First, the Agency has refused to remit monies associated with interest payments on a bond issue. The Agency refused to include payment for the bond interest because it maintains that, while bond interest expense is an actual allowable cost incurred by Petitioner, it was reported twice in the cost reports. The bond interest disallowed is itemized in Petitioner's Exhibit 17. Such exhibit accurately lists the amounts that the Agency should have approved for the IRR cost settlements for the facilities listed. The bond interest is appropriately allocated to the facilities listed and was not claimed or duplicated by another entity for the periods noted. Thus each of the listed facilities should have received an adjusted rate with the bond interest cost included in the calculation. Secondly, Petitioner claims that had the Agency timely remitted the funds associated with the IRR, it would have had the benefit of those monies for the interim period of time. As such, it maintains it should be paid interest on the monies not paid. The basis for the lost interest claim arguably stems from the Medicare rule that allows interest in some situations. Florida historically has not remitted interest on underpayment amounts. In calculating the amounts owed to Petitioner, interest lost on the IRR was therefore disallowed. There is no provision governing the Florida Medicaid plan that specifies the payment of interest on a rate. A provider’s rate can be broken down into four cost components: operating, resident care, property, and return on equity. Had Petitioner received the full IRR it might have been given a "return of equity" or "use allowance." It might have resulted in a positive average equity. Petitioner has not established through credible evidence that factually this "return of equity" would have been applicable to the situations of the facilities affected by the IRRs. Speculation as to the financial posture of the facilities has not been deemed persuasive. The third dispute in this cause relates to the computation of the amounts owed for the Pablo facility. The Pablo facility incurred expenses over a 140-day period which were annualized over a 366-day period to compute the interim rate amount. In so doing, the Agency abandoned the methodology previously utilized to compute the rate owed and determined that the actual allowable costs in the subsequent period (which were known) had to be considered. Had the Agency used the established methodology it claims it would have overpaid the provider in the subsequent period. While mathematically accurate in this single example, such methodology has not been used except in this instance (when it benefited the Agency). The abandonment of the methodology also ignores the cost settlement process that is designed to reconcile amounts after the fact. The plan used by these parties recognizes the settlement process as the procedure by which all actual allowable costs are reconciled. If after having received an inflated rate the Pablo facility had owed monies back, such funds would have been remitted through the cost settlement process. Of course in this case, the Agency did not remit an increased rate so the crux of the problem is to resolve the dispute artificially as if from one point in time to another the rate had been appropriately increased. The settlement should have utilized the 140-day period to calculate the rate. That is, the per diem should have used the expense amount divided by 140 not 366 to compute the daily expense. The fourth disputed amount is the IRR for Country Meadows. The Agency has conceded that this IRR could have been granted with an accounting clarification. The final disputed amount relates to attorney's fees. Petitioner maintains it is entitled to include an amount of attorney's fees that is based upon a contingency fee agreement. Although the Agency does not dispute that providers may include attorney's fees as an allowable cost, it argues that such costs are not reported until incurred. Moreover, such costs must be what a prudent buyer would pay and relate to the IRR. In this instance the plan provides that: Implicit in any definition of allowable costs is that those costs do not exceed what a prudent and cost-conscious buyer pays for a given service or item. If costs are determined by AHCA, utilizing the Title XVIII principles of reimbursement, HCFA PUB 15-1 (1993), and this plan to exceed what a prudent buyer would pay, then the excess costs shall not be reimbursable under this plan. Attorney's fees are considered part of the operating component of the rate calculation. It is an administrative cost and is reported on a provider’s cost report as such. In selecting the attorneys to represent it, Petitioner did not interview applicants, solicit proposals, or inquire of other attorneys as to a reasonable fee for this type of representation. Petitioner presented no credible evidence of the reasonable fee for representation in this type of proceeding. Petitioner’s lead counsel served on its Board of Directors at the time the contingency fee agreement was entered into. The contingency fee agreement provided for an alternative method of payment in the amount of $250.00 per hour. The attorney's fee agreement provided, in pertinent part: The attorney’s fee shall be 40% of the total of all funds received as a result of the reversal of the wrongful denial of the interim rate request covering the period from the date of filing the interim rate request through the date of final settlement. The lawyer shall have no claim on the future value of the interim rate request past the date of settlement. If an appeal is required the fee shall be 50% instead of 40%. If, due to circumstances beyond the control of the parties to this fee agreement, such as changes in law, or constructions of law inconsistent with this agreement, including constructions of law that would not permit the reimbursement of attorney's fees to Sunrise Community, Inc., the parties agree that in no event shall the fee be less than a reasonable fee based on the hours of work multiplied by the rate of $250.00 per hour. The attorney's fee agreement was executed on October 25, 1995 on behalf of Sunrise Community, Inc. Such agreement did not name the facilities whose IRRs were governed by the agreement. The agreement did not specify how the attorney fee would be allocated among the providers who would be affected by the successful challenge to the IRR denials. The opinion of the First District Court of Appeal that upheld the IRRs and directed the Agency to grant them was entered on January 27, 1998.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a Final Order that grants the bond interest as claimed by Petitioner; denies the interest on unpaid IRR amounts; grants the amounts claimed by Petitioner for Pablo; grants the Country Meadows IRR; and denies the attorney's fees. DONE AND ENTERED this 30th day of December, 1999, in Tallahassee, Leon County, Florida. J. D. PARRISH Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of December, 1999. COPIES FURNISHED: Steven M. Weinger, Esquire Kurzban, Kurzban, Weinger & Tetzeli, P.A. 2650 Southwest 27th Avenue Second Floor Miami, Florida 33133 Steven A. Grigas, Esquire Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308-5403 Ruben J. King-Shaw, Director Agency for Health Care Administration 2727 Mahan Drive, Suite 3116 Tallahassee, Florida 32308 Julie Gallagher, General Counsel Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308
The Issue Whether Respondent committed the violations alleged in the Administrative Complaint issued against him and, if so, what penalty should be imposed.
Findings Of Fact Based on the evidence adduced at the "formal hearing," and the record as a whole, the following findings of fact are made: Respondent is now, and has been since October of 2000, a licensed real estate sales associate in the State of Florida, holding license number 695252. He is currently associated with AAA Realty, Inc., a broker corporation doing business in Broward County, Florida. From March 1, 2001, through June 26, 2001, Respondent was an active real estate sales associate with Allen Real Estate, Inc. (Allen), a broker corporation doing business in St. Lucie County, Florida. From June 27, 2001, through August 13, 2001, Respondent was an active real estate sales associate with Realty Unlimited, Inc. (Unlimited), a broker corporation (affiliated with GMAC Real Estate) with offices in Port St. Lucie and Stuart, Florida. Unlimited is now, and has been at all times material to the instant case, owned by Kevin Schevers, a Florida-licensed real estate broker. Gary Sprauer is a Florida-licensed real estate sales associate. He is currently associated with Unlimited. Like Respondent, Mr. Sprauer began his association with Unlimited on June 27, 2001, immediately after having worked for Allen. Respondent and Mr. Sprauer worked as "partners" at both Allen and Unlimited. They had an understanding that the commissions they each earned would be "split 50-50" between them. On February 7, 2001, Allen, through the efforts of Respondent and Mr. Sprauer, obtained an exclusive listing contract (Listing Contract) giving it, for the period of a year, the "exclusive right to sell," in a representative capacity, commercial property located at 3800 South Federal Highway that was owned by Vincent and Renee Piazza (Piazza Property). Paragraphs 6 and 7 of the Listing Contract addressed the subjects of "compensation," "cooperation with other brokers," and "dispute resolution," respectively, and provided, in pertinent part as follows as follows: COMPENSATION: Seller will compensate Broker as specified below for procuring a buyer who is ready, willing, and able to purchase the Property or any interest in the Property on the terms of this Agreement or on any other terms acceptable to Seller. Seller will pay Broker as follows (plus applicable sales tax): 8% of the total purchase price or $15,000 maximum, no later than the date of closing specified in the sales contract. However closing is not a prerequisite for Broker's fee being earned. * * * (d) Broker's fee is due in the following circumstances: (1) If any interest in the Property is transferred . . . , regardless of whether the buyer is secured by Broker, Seller or any other person. * * * COOPERATION WITH OTHER BROKERS: Broker's office policy is to cooperate with all other brokers except when not in the Seller's best interest, and to offer compensation to: Buyer's agents, who represent the interest of the buyer and not the interest of Seller in a transaction, even if compensated by Seller or Broker Nonrepresentatives Transaction brokers. None of the above (if this box is checked, the Property cannot be placed in the MLS). * * * 10. DISPUTE RESOLUTION: This Agreement will be construed under Florida law. All controversies, claim and other matters in question between the parties arising out of or relating to this Agreement or the breach thereof will be settled by first attempting mediation under the rules of the American Arbitration Association or other mediator agreed upon by the parties. . . . Shortly after they left the employ of Allen and began working for Unlimited, Respondent and Mr. Sprauer showed Nicholas Damiano the Piazza Property. Mr. Damiano thereafter made a written offer to purchase the Piazza Property, which the Piazzas accepted, in writing, on July 4, 2001. The sales price was $165,000.00. Mr. Damiano put down a $10,000.00 deposit, which, in accordance with paragraph 2(a) of the contract between Mr. Damiano and the Piazzas (Sales Contract), was "held in escrow by [Unlimited]." The obligations of Unlimited, as escrow agent, were described in paragraph 6 of the Sales Contract, which provided as follows: ESCROW. Buyer and Seller authorize GMAC, Realty Unlimited Telephone: . . . Facsimile: . . . Address: . . . to receive funds and other items and, subject to clearance, disburse them in accordance with the terms of this Contract. Escrow Agent will deposit all funds received in a non- interest bearing account. If Escrow Agent receives conflicting demands or has a good faith doubt as to Escrow Agent's duties or liabilities under this Contract, he/she may hold the subject matter of the escrow until the parties mutually agree to its disbursement or until issuance of a court order or decision of arbitrator determining the parties' rights regarding the escrow or deposit the subject matter of the escrow with the clerk of the circuit court having jurisdiction over the dispute. Upon notifying the parties of such action, Escrow Agent will be released from all liability except for the duty to account for items previously delivered out of escrow. If a licensed real estate broker, Escrow Agent will comply with applicable provisions of Chapter 475, Florida Statutes. In any suit or arbitration in which Escrow Agent is made a party because of acting as agent hereunder or interpleads the subject matter of the escrow, Escrow Agent will recover reasonable attorneys' fees and costs at all levels, with such fees and costs to be paid from the escrowed funds or equivalent and charged and awarded as court or other costs in favor of the prevailing party. The parties agree that Escrow Agent will not be liable to any person for misdelivery to Buyer or Seller of escrowed items, unless the misdelivery is due to Escrow Agent's willful breach of this Contract or gross negligence. Paragraph 12 of the Sales Contract addressed the subject of "brokers" and provided as follows: BROKERS. Neither Buyer nor Seller has utilized the services of, or for any other reason owes compensation to, a licensed real estate broker other than: Listing Broker: Allen Real Estate, Inc. who is a transaction broker and who will be compensated by x Seller _ Buyer _ both parties pursuant to x a listing agreement _ other (specify) Cooperating Broker: GMAC Realty Unlimited who is a transaction broker who will compensated by _ Buyer x Seller _ both parties pursuant to _ an MLS or other offer of compensation to a cooperating broker _ other (specify) (collectively referred to as "Broker") in connection with any act relating to the Property, included but not limited to, inquiries, introductions, consultations and negotiations resulting in this transaction. Seller and Buyer agree to indemnify and hold Broker harmless from and against losses, damages, costs and expenses of any kind, including reasonable attorneys' fees at all levels, and from liability to any person, arising from (1) compensation claimed which is inconsistent with the representation in this Paragraph, (2) enforcement action to collect a brokerage fee pursuant to Paragraph 10, (3) any duty accepted by Broker at the request of Buyer or Seller, which duty is beyond the scope of services regulated by Chapter 475, F.S., as amended, or (4) recommendations of or services provided and expenses incurred by any third party whom Broker refers, recommends or retains for or on behalf of Buyer or Seller. The Damiano/Piazza transaction was originally scheduled to close on July 25, 2001. At the request of the Piazzas, the closing was rescheduled for August 7, 2001. A few days before August 7, 2001, Mr. Sprauer asked Respondent "where the closing was going to take place" and "what title company" would be handling the matter. Respondent replied that the closing was "going to be delayed again because Mr. Damiano . . . was going to have to have some type of cancer surgery." It turned out that the closing was not "delayed again." It took place on August 7, 2001. At the closing were Mr. Damiano, the Piazzas, Respondent, and the closing agent from the title company, First American Title Insurance Company (First American).3 Neither Mr. Schevers, nor Mr. Sprauer, was in attendance. Mr. Sprauer did not even know that the closing was taking place. He was under the impression, based on what Respondent had told him, that the closing had been postponed. Had he not been misinformed, he would have attended the closing. Respondent did not contact Mr. Sprauer following the closing to let him know that, in fact, the closing had occurred. Mr. Schevers, on the other hand, was made aware that closing would be held on August 7, 2001. He was unable to attend because he had "prior commitments." It was Respondent who informed Mr. Schevers of the August 7, 2001, closing date. The morning of August 7, 2001, Respondent went to Unlimited's Stuart office and asked Mr. Schevers for the $10,000.00 Unlimited was holding in escrow in connection with the Damiano/Piazza transaction, explaining that he needed it for the closing that was going to be held later that day. Before complying with Respondent's request, Mr. Schevers contacted First American and asked that he be faxed a copy of the United States Department of Housing and Urban Development Settlement Statement (HUD Statement) that First American had prepared for the closing. As requested, First American faxed a copy of the HUD Statement to Mr. Schevers. Upon reviewing the document, Mr. Schevers "immediately noticed that [it indicated that] the entire commission [of $7,000.00] was going to Allen." Mr. Schevers "then proceeded to call First American" and asked why Unlimited was not "reflected on this settlement statement." Mr. Schevers was told that a First American representative "would get right on it and get back to [him]." Mr. Schevers did not wait to hear back from First American before handing an "escrow check" in the amount of $10,000.00 to Respondent. He instructed Respondent, however, to "not give anybody this check unless that statement [the HUD Statement] [was] changed and reflect[ed] [Unlimited's]" share of the commission earned from the sale of the Piazza Property. He further directed Respondent to telephone him if this change was not made. Respondent did not follow the instructions Mr. Schevers had given him. He delivered the $10,000.00 "escrow check" to the closing agent at the closing, even though the HUD Statement had not been changed to reflect Unlimited's sharing of the commission. At no time during the closing did Mr. Schevers receive a telephone call from Respondent. According to the HUD Statement that Mr. Damiano, the Piazzas, and the closing agent signed at the closing, Allen received a commission of $7,000.00 "from seller's funds at settlement." The document makes no mention of any other commission having been paid as part of the closing. On or about August 9, 2001, Respondent received a "commission check" from Allen. The check was made payable to Respondent and was in the amount of $3,000.00. Under the "DOLLARS" line on the check, the following was typed: 4200 Total Comm[4] 1200 ADVANCE[5] Typed next to "MEMO" on the bottom left hand corner of the check was "DAMIANO-PIAZZA 165,000 S&L." It has not been shown that the "commission check" Respondent received from Allen was for anything other than the commission Allen owed Respondent for services performed when Respondent was still employed by Allen. Mr. Schevers' consent to Respondent's receiving this $3,000.00 "commission check" was neither sought nor given. Less than a week after the closing, having spotted Mr. Damiano mowing grass on a vacant lot that Mr. Damiano owned, Mr. Sprauer walked up to him and asked "how his surgery [had gone]." Mr. Damiano "acted very surprised [like] he didn't know what [Mr. Sprauer] was talking about." Mr. Damiano's reaction to his inquiry led Mr. Sprauer to believe "that the closing had probably taken place." He "immediately contacted [Mr. Schevers] and asked him to check into it." Mr. Schevers subsequently learned from First American that Allen "had gotten all of the [commission] check" at the closing. Mr. Schevers then telephoned Respondent. This was the first communication he had had with Respondent since before the closing. Respondent told Mr. Schevers that "he got the check" and "he would be right over with it." Respondent, however, did not keep his promise. After his telephone conversation with Respondent, Mr. Schevers discovered that Allen "had cut [Respondent] a check and [Respondent] had gone immediately and deposited it." This discovery prompted Mr. Schevers to place another telephone call to Respondent. This telephone conversation ended with Mr. Schevers telling Respondent "he was terminated." Mr. Schevers thereafter notified Petitioner in writing that Respondent was no longer associated with Unlimited. He also filed with Petitioner a complaint against Respondent alleging that Respondent had "acted inappropriately" in connection with the Damiano/Piazza transaction. Mr. Schevers had expected Unlimited to receive, for the role it played in the Damiano/Piazza transaction, "50 percent of the total commission," or $3,500.00, in accordance with the provisions of the "multiple listing service for St. Lucie County."6 He holds Respondent responsible, at least in part, for Unlimited's not receiving these monies.7 At the time of the Damiano/Piazza transaction, Unlimited had contracts with its sales associates which provided that the associates would receive "70 percent of the net" of any commission Unlimited earned as a result of the associates' efforts. Had Unlimited received a commission as a result of the Damiano/Piazza transaction, it would have "split" it with Respondent and Mr. Sprauer as required by the contracts it had with them.8
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Commission issue a final order dismissing the Administrative Complaint issued against Respondent in the instant case in its entirety. DONE AND ENTERED this 7th day of July, 2004, in Tallahassee, Leon County, Florida. STUART M. LERNER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 7th day of July, 2004.
The Issue The issue is whether Proposed Rule 69O-204.040 is an invalid exercise of delegated legislative authority.
Findings Of Fact The Viatical Settlement Act codified in Part X of Chapter 626, Florida Statutes, is one of several statutes that provide for the regulation of viatical settlements in Florida. A viatical settlement is the sale of a life insurance policy by its owner on the secondary market.3/ The parties involved in the transaction are the viator, the viatical settlement broker, the viatical settlement provider, and the investor who purchases the policy. The viator is the owner of the policy being sold. The viator is typically, but not always, the insured under the policy. The viatical settlement broker is the person who solicits bids and negotiates the sale of the policy on behalf of the viator. In order to perform the services of a viatical settlement broker in Florida, a person must be a licensed life insurance agent, self-appoint him/herself with the Department of Financial Services (DFS), and pay the applicable fees to DFS. The viatical settlement provider is the intermediary between the viatical settlement broker and the investor who purchases the policy. The viatical settlement provider presents the policy to potential investors; conveys the investors’ bids to the viatical settlement broker; and, after a bid is accepted by the viator, performs the administrative functions necessary to complete the transaction. Viatical settlement providers are licensed and regulated by OIR. Viatical settlement brokers are licensed and regulated by DFS, not OIR. Petitioner ILS-Florida is a Delaware limited liability company owned by NFP Life Services, LLC (45.5 percent), Genworth Institutional Life Services, Inc. (45.5 percent), and GS Re Holdings, Inc. (nine percent). NFP Life Services, LLC, is a wholly-owned subsidiary of National Financial Partners Corporation (NFP). NFP Brokerage Agency is also a wholly-owned subsidiary of NFP. NFP Brokerage Agency employs licensed viatical settlement brokers in a number of states, including Florida. The viatical settlement brokers working for NFP Brokerage Agency are considered to be “affiliated brokers” of ILS-Florida by virtue of NFP’s ownership interest in both companies. ILS-Florida was formed on September 8, 2008, “specifically for the purpose of doing business as a viatical settlement provider . . . in the State of Florida.” On or about October 29, 2008, ILS-Florida submitted to OIR an application for licensure as a viatical settlement provider. The application was still “pending” as of the date of the final hearing, but on March 20, 2009, OIR approved the application, and ILS-Florida is now a licensed viatical settlement provider, No. 09-800257957. ILS-Florida’s parent companies have another subsidiary -- ILS-Florida’s “sister company” -- that is currently licensed as a viatical settlement provider in a number of states. ILS-Florida intends to use a similar business plan in Florida that its sister company uses in the states where it is licensed. The business plan contemplates using only brokers working for NFP Brokerage Agency for at least the first year of operation, although it is possible that ILS-Florida may use both affiliated and non-affiliated brokers from the outset. ILS-Florida wants to be able to use brokers working for NFP Brokerage Agency because it considers them to be “higher-quality brokers” because they “have already agreed to a higher standard of compliance than is generally seen . . . in the industry.” Also, because NFP Brokerage Agency already has a number of brokers involved in the viatical settlement business in Florida, its brokers represent a significant source of potential business for ILS-Florida. The proposed rule will more likely than not preclude ILS-Florida from using affiliated brokers working for NFP Brokerage Agency because NFP has significant ownership interests in both companies. Petitioner David Matthew Janecek is a resident of Texas. He works for a brokerage in Texas that is owned by NFP Brokerage Agency. Mr. Janecek is licensed in Florida as a non-resident life insurance agent. His license, No. P161957, was issued on September 9, 2008. Mr. Janecek is not, and never has been, a licensed viatical settlement broker in any state. He has not self- appointed himself as a viatical settlement broker with DFS, and he has no present intention of acting as a viatical settlement broker in Florida.4/ Respondent Financial Services Commission (Commission) is the agency head responsible for the promulgation of the proposed rule. The Commission, which is comprised of the Governor and Cabinet, was created within DFS, but it is not subject to the control of DFS and it is effectively a separate agency from DFS. Respondent OIR is an office under the Commission. OIR developed the proposed rule and will be responsible for implementing the rule. Respondents published the proposed rule in the Florida Administrative Weekly (FAW) on September 26, 2008. A notice of change to the proposed rule was published in the FAW on December 24, 2008. The parties stipulated that Respondents met all applicable rulemaking publication and notice requirements, and that the petition challenging the proposed rule was timely filed. The proposed rule is titled “Prohibited Practices and Conflicts of Interest,” and states: With respect to any viatical settlement contract or insurance policy, no viatical settlement provider knowingly may enter into a viatical settlement contract with a viator, if, in connection with such viatical settlement contract, anything of value will be paid to a viatical settlement broker that is controlling, controlled by, or under common control with such viatical settlement provider, financing entity or related provider trust that is involved in such viatical settlement contract. The “specific authority” listed in the FAW notice for the proposed rule is Section 626.9925, Florida Statutes. That statute authorizes the Commission to: adopt rules to administer this act, including rules establishing standards for evaluating advertising by licensees; rules providing for the collection of data, for disclosures to viators, for the reporting of life expectancies, and for the registration of life expectancy providers; and rules defining terms used in this act and prescribing recordkeeping requirements relating to executed viatical settlement contracts. (Emphasis supplied). The only language in the statute that Respondents are relying on as authorization for the proposed rule is the underlined language. The FAW notice states that the “law implemented” by the proposed rule is Sections 626.9911(9), 626.9916(1), and 626.9916(5), Florida Statutes. Section 626.9911(9), Florida Statutes, defines “viatical settlement broker” for purposes of the Viatical Settlement Act. The definition includes the following language, which is also contained in Section 626.9916(5), Florida Statutes: Notwithstanding the manner in which the viatical settlement broker is compensated, a viatical settlement broker is deemed to represent only the viator and owes a fiduciary duty to the viator to act according to the viator's instructions and in the best interest of the viator. Section 626.9916(1), Florida Statutes, prohibits any person other than a licensed life agent from performing the functions of a viatical settlement broker. The text of the proposed rule was derived almost verbatim from Section 12.B. of the Viatical Settlements Model Act developed by the National Association of Insurance Commissioners (NAIC). The “model acts” developed by NAIC are intended to be used by state legislatures in drafting statutes. NAIC also develops “model regulations” that are intended to be used by state regulatory agencies in drafting rules to implement the statutes. The proposed rule prohibits a viatical settlement provider from entering into a viatical settlement contract involving a viatical settlement broker over which the provider has direct or indirect control. The determination as to whether the viatical settlement provider has control over a viatical settlement broker will be made on a case-by-case basis applying the definition of “control” contained in Proposed Rule 69O- 204.020(1). According to OIR, the proposed rule is intended to protect the viator by preventing the viatical settlement provider from using its control over the viatical settlement broker to induce or encourage the broker to breach his or her fiduciary duty to the viator. It is undisputed that Florida law does not currently prohibit the practice prescribed by the proposed rule so long as the broker satisfies his or her fiduciary duty to the viator. The proposed rule will prohibit transactions between affiliated viatical settlement providers and brokers, irrespective of whether the broker’s fiduciary duty to the viator has been breached. For example, if a broker recommends that a viator accept a bid for the policy from an affiliated provider that was not the highest bid, such action would constitute both a breach of the broker’s fiduciary duty and a violation of the proposed rule; however, if the bid from the affiliated broker was the highest bid for the policy, the broker’s recommendation to accept the bid would not constitute a violation of the broker’s fiduciary duty, but it would violate the proposed rule. During the rulemaking process, OIR staff considered adding language to the proposed rule that would have allowed affiliated providers and brokers to enter into viatical settlement contracts so long as certain disclosure requirements and other safeguards were met. The record does not reflect why this language was not included in the proposed rule published in the FAW, although it can be inferred from the e-mails received into evidence on this issue that OIR and/or the Commission did not feel compelled to add the language suggested by staff.
The Issue Whether there is probable cause for Petitioner to bring an action against Respondents for violation of the Florida Deceptive and Unfair Trade Practices Act?
Findings Of Fact Respondents sell used cars in Pensacola, about 500 a year. On or about June 19, 1981, when Fannie Mae Tunstall bought a '76 Buick LeSabre from Fairfield Motors, Inc. (Fairfield), she dealt with Elaine Owens Atkins, who is Fairfield's general manager, secretary-treasurer and a six-year employee. The installment sales contract specified an annual percentage rate of 29.64 percent, and was stamped with the legend, "MINIMUM $25 REPO OR COLLECTION FEE." Respondent's Exhibit No. 1. Ms. Tunstall told Ms. Atkins the payments were too much but signed the papers anyway, and did so without reading them, although Ms. Atkins had told her to read them. The payments did indeed prove too much and Ms. Tunstall fell behind. She was 13 days late with a payment in November of 1981, but Ms. Tunstall and Ms. Atkins had discussed the matter and Fairfield agreed to accept the payment late. Fairfield accepted other payments late, but arranged to have Willie Easley (formerly a singer and now a minister as well as a repossessor of cars) take possession of the Quick early in the morning of January 10, 1983, and drive it away. Ms. Tunstall had failed to make the monthly payment due December 30, 1982. Ms. Atkins had telephoned her once and gotten no answer. Later on January 10, 1983, Fairfield agreed to return the car in exchange for December's payment, another payment in advance, a six dollar late fee and a $100 repossession fee. Ms. Tunstall paid the entire balance Fairfield claimed to be owed and retrieved the car. Linda Louise LaCoste and her husband Ronnie have bought several cars from Fairfield, including a 1976 Chevrolet Suburban Mr. LaCoste bought on February 7, 1983, under an installment agreement calling for interest at an annual percentage rate in excess of 30 percent. The "cash price" was $3,459.75, and the "total sale price" was $4,613.15. Respondent's Exhibit No. 3. The LaCostes understood from prior dealings that their agreement required Mr. LaCoste to maintain insurance on the vehicle, and Mr. LaCoste contracted with Allstate Insurance Company (Allstate) for appropriate coverage. Allstate sent Fairfield a notice of cancellation for nonpayment of premium effective 12:01 A.M. April 4, 1983. Petitioner's Exhibit No. 4. At 11:25 A.M. on April 4, 1983, Allstate accepted the premium Ronnie LaCoste offered in order to reinstate the policy, No. 441361747, and Allstate's Chirstine Smith also wrote a new policy to be sure there would be coverage. Ms. Smith told Fairfield that insurance was in force on April 4, 1983. On April 20, 1983, Allstate issued another notice of cancellation for nonpayment of premium on policy No. 441361747, effective 12:01 A.M. May 4, 1983. At ten minutes past three o'clock on the afternoon of May 4, 1983, Mr. LaCoste's Chevrolet Suburban was repossessed at Fairfield's instance on account of the apparent lapse of insurance. Mrs. LaCoste and here sister appeared promptly at Fairfield's place of business and tendered payment due that day. All prior payments to Fairfield were current. When Mrs. Atkins refused payment, Mrs. LaCoste and here sister protested with such vehemence that a Fairfield employee called the sheriff's office. According to Fairfield's contemporaneous records, Fairfield employees ("we") tried to give Mrs. LaCoste a letter "advising vehichle [sic] would be held for 10 days" (i.e., that it would be sold thereafter) but "she refused to accept a copy." Respondent's Exhibit No. 3. At hearing, Ms. Atkins conceded that she had not mailed a copy of the letter to Mr. LaCoste but testified that Mrs. LaCoste accepted a copy after refusing to take it initially. Mrs. LaCoste denied that she ever received the letter, and her version has been credited. On May 7, 1983, Fairfield received another communication from Allstate. Whether insurance coverage in fact lapsed on May 4, 1983 was not clear from the record. On May 17, 1983, Fairfield sold the Chevrolet Suburban for $2,050.00. Carolyn V. Kosmas purchased a 1978 Ford LTD II from Fairfield and made a downpayment of $550.00 on June 2, 1983. Under the terms of the installment sale contract, which called for an annual percentage rate in excess of 29 percent, she was to begin seventy dollar ($70.00) biweekly payments on June 22, 1983. At the time of the sales of the Ford to Ms. Kosmas on June 2, 1983, Fairfield asked for credit information about her fiance as well as about herself. On June 24, 1983, she appeared at Fairfield's place of business and tendered not only the payment due June 22 but also the payment due July 6, a total of $140.00 in cash. Ms. Atkins refused to accept the money, telling her that her references had not panned out, and asked her to surrender the keys to the car and gather up her personal effects. Ms. Kosmas made no secret of her opinion that she was not being treated fairly, but, crying and afraid, eventually agreed to treat the transaction as a rental and accepted a refund of $104.39 on that basis. Ms. Atkins "advised if she gave me another background sheet, that I could verify, I would renegotiate with her," Respondent's Exhibit No. 5, but Ms. Kosmas told Ms. Atkins that she had lost her job at West Florida Hospital and the renegotiation eventuated in the retroactive lease. Respondent Pearl Allen was present on June 24, 1983, and took the car keys from her. It was also he who wrote her on June 27, 1983 that the 1978 Ford LTD II would be privately sold on July 6, 1983. She did not appear when and where she was told the sale would occur. The Ford was in fact sold at auction in Montgomery, Alabama, on July 19, 1983. Respondent's Exhibit No. 5. Mary Lee Hobbs' husband Forace paid Fairfield $800.00 down on a 1977 Oldsmobile 98 on February 27, 1982, agreeing to maintain insurance on the car until paid for, and to pay the unpaid principal balance of $4134.25 over a two and a half year period together with interest at an annual percentage rate of 29.79. Stamped on the contract was the legend, "MINIMUM $25 REPO OR COLLECTION FEE." In part, the installment sale contract read: * NOTE: DISCLOSURES REQUIRED BY FEDERAL LAW, Respondent's Exhibit No. 6 (reduced in size), has been omitted from this ACCESS Document. For review, contact the Division's Clerk's Office. All payments were current when, at about half past five o'clock on the morning of November 1, 1983, Fairfield's agents used a wrecker to remove the Oldsmobile, damaging the Hobbses' porch in the process. Fairfield acted because it received notice of cancellation or nonrenewal of the insurance policy that Hobbs maintained on the car. Typed on the form notice as the effective date of cancellation was November 29, 1983. Someone has written in ink "should be 10-29." In fact the insurance policy never lapsed. According to Fairfield's records, they received conflicting information, on October 29, 1983, about whether an insurance premium had been paid. The Hobbses' 27-year old "daughter said they p[ai]d--Conway Spence said they did not pay." Respondent's Exhibit No. 6. This was the same day Mr. Spence, an insurance agent, erroneously informed Fairfield that the effective date of expiration "should be 10-29." Respondent's Exhibit No. 6. Even after Mr. Spence's error was known to it, Fairfield refused to return the car without payment of a $75.00 "repossession fee," and also refused to let the Hobbs children return with the laundry they were sent to fetch from the trunk of the car. It was the refusal to give up the dirty laundry that sent Mrs. Hobbs to the authorities. Karel Jerome Bell bought a 1977 Delta 88 Oldsmobile from Fair field on July 22, 1982, under an installment sale contract calling for two "pick up notes" to be paid in August of 1982 and biweekly payments of $125.00 thereafter until payments reached a total of $4161.212. Respondent's Exhibit No. 7. The "pick up notes," each for $220.00 were due August 7 and 21, 1982, and were not treated as down payments on the installment sale form. After reducing his indebtedness to $1221.21, Mr. Bell fell two payments behind, and Fairfield repossessed the Oldsmobile on July 7, 1983. The same day Fairfield wrote Mr. Bell that it intended to sell his car, but not time or date was specified. On July 8, 1983, Mr. Bell called and asked whether he could continue making payments while the car on the lot. Respondent's Exhibit No. 7. Fairfield's Ms. Gilstrap accepted $100.00 from Mr. Bell on July 12, 1983, which she applied to satisfy a reposession fee of $100.00. On the Bell contract, too, had been stamped, "MINIMUM $25 REPO OR COLLECTION FEE." Ms. Gilstrap "told him as long as he paid something something regularly on the account, I felt sure we would hold it for him." Mr. Bell indicated he would pay an additional $125.00 the following Friday and Ms. Gilstrap made a notation to this effect in his file, where she also wrote, "Pls. don't sell he intends to pay for." Respondent's Exhibit No. 7. Mr. Bell had not made any further payment when, on July 30, 1983, without notice to Mr. Bell, Fairfield sold the car for $1,000.00 to a wholesaler. Respondents use form installment sale contracts. A blank form like the one in use at the time of the hearing was received as Respondent's Exhibit No. This was the form used in the Kosmas and LaCoste transactions. The predecessor form used in the Bell, Hobbs and Tunstall transactions was similar in many respects. The earlier form provided, "LATE CHARGES: Buyer(s) hereby agrees to pay a late charge on each installment in default for 10 days or more in an amount of 5 percent of each installment or $5.00 whichever is less." On the reverse, the form provided: ACCELERATION AND REPOSSESSION. In the event any Buyer(s) or Guarantor of this Contract fails to pay any of said installments, including any delinquency charges when due or defaults in the performance of any of the other provisions of this Contract or (c) in case Buyer(s) or Guarantor becomes insolvent or (d) institutes any type of insolvency proceedings or (e) has any thereof instituted against him, or (f) has entered against him any judgment or filed against him any notice of lien in case of any Federal tax or has issued against him any distraint warrant for taxes, or writ of garnishment, or other legal process, or (g) in case of death, adjudged incompetency, or incarceration of the Buyer(s) or Guarantor or (h) in case the seller or the holder of this Contract, upon reasonable cause, determines that the prospect of payment of said sums or the performance by the Buyer(s) or his assigns of this Contract is impaired, then, or in such event, the unpaid portion of the balance hereunder shall, without notice, become forthwith due and payable and the holder, in person or by agent, may immediately take possession of said property, together with all accessions thereto, or may, at first, repossess a part and later, if necessary, the whole thereof with such accessions, and for neither or both of these purposes may enter upon any premises where said property, may be and remove the same with or without process of law. Buyer(s) agrees in any such case to pay said amount to the holder, upon demand, or, at the election of the holder, to deliver said property to the holder. If, in repossessing said property, the holder inadvertently takes possession of any other goods therein, consent is hereby given to such taking of possession, and holder may hold such goods temporarily for Buyer(s), without responsibility of liability therefor, providing holder returns the same upon demand. There shall be no liability upon any such demand unless the same be made in writing within 48 hours after such inadvertent taking of possession. Should this contract mature by its term or by acceleration, as hereinabove provided, then, and in either such event, the total principal amount due hereunder at that time shall bear interest at the rate of 10 percent per annum, which principal and interest, together with all costs and expenses incurred in the collection hereof, including attorneys fees (to be not less than 15 percent of the amount involved), plus appellate fees, if any, and all advances made by Seller to protect the security hereof, including advances made for or on account of levies, insurance, repairs, taxes, and for maintenance or recovery of property shall be due the Holder hereof and which sums Buyer(s) hereby agrees to pay. * * * LIABILITIES AFTER POSSESSION. Seller, upon obtaining possession of the property upon default, may sell the same or any part thereof at public or private sale either with or without having the property at the place of sale, and so far as may be lawful. Seller may be a purchaser at such sale. Seller shall have the remedies of a secured party under the Uniform Commercial Code (Florida) and any and all rights and remedies available to secured party under any applicable law, and upon request or demand of Seller, Buyer(s) shall, at his expense, assemble the property and make it available to the Seller at the Seller's address which is designated as being reasonably convenient to Buyer(s). Unless the property is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, Seller will give Buyer(s) reasonable notice of the time and place of any public or private sale thereof. (The requirement of reasonable notice shall be met if such notice is mailed, postage prepaid, to Buyer(s) at address shown on records of Seller at least five (5) days before the time of the sale or disposition) Expenses of retaking, holding, preparing for the sale, selling, attorneys' fees, supra, incurred or paid by Seller shall be paid out of the proceeds of the sale and the balance applied on the Buyer(s) obligation hereunder. Upon disposition of the property after default, Buyer(s) shall be and remain liable for any deficiency and Seller shall account to Buyer(s) for any surplus, but Seller shall have the right to apply all or any part of such surplus against (or to hold the same as a reverse against) any and all other liabilities of Buyer(s) to Seller. Similarly, the more recent form provides, on the obverse, Late Charge: If a payment is received more than ten (10) days after the due date, you will be charged $5.00 or five (5 percent) of the payment, whichever is less. and on the reverse, has identical provisions on "Acceleration and Repossession" and "Liabilities After Repossession."
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That Petitioner find probable cause to initiate judicial proceedings against Respondents pursuant to Section 501.207(1), Florida Statutes (1981). DONE and ENTERED this 26th day of April, 1985, in Tallahassee, Florida. ROBERT T. BENTON, II 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 26th day of April, 1985. COPIES FURNISHED: William P. White, Jr., Esquire Assistant State Attorney Post Office Box 12726 Pensacola, Florida 32501 Paul A. Rasmussen, Esquire Eggen, Bowden, Rasmussen & Arnold 4300 Bayou Boulevard, Suite 13 Pensacola, Florida 32503 Curtis A. Golden, State Attorney First Judicial Circuit of Florida Post Office Box 12726 190 Governmental Center Pensacola, Florida 32501
The Issue The issue for determination is whether Proposed Rule 69O-204.101 is an invalid exercise of delegated legislative authority.
Findings Of Fact Respondent, Office of Insurance Regulation (hereinafter referred to as "OIR"), is an agency of the State of Florida, created within the Financial Services Commission (hereinafter referred to as "Commission"). § 20.121(3)(a)1., Fla. Stat. (2007).2 Pursuant to Subsection 21.121(3)(a), the OIR is responsible for all activities concerning insurers and other risk-bearing entities, including licensing, rates, policy forms, market conduct, claims, issuance of certificates of authority, solvency, viatical settlements, premium financing, and administrative supervision, as provided under the Florida Insurance Code or Chapter 636. The Florida Insurance Code includes Chapters 624 through 632. The Commissioner of Insurance Regulation is the agency head of the OIR. However, the Commission is the agency head for purposes of rulemaking. § 20.121(3)(c). The matter at issue in this proceeding is Respondent's Proposed Rule 69O-204.101 entitled, "Disclosures to Viator of Disbursement" (the "Proposed Rule"). The Commission advertised the text of the Proposed Rule on November 30, 2007, in Volume 33, Number 48, of the Florida Administrative Weekly, and, subsequently, filed a Notice of Change to the Proposed Rule on February 15, 2008, and, again, on February 22, 2008. A final public hearing regarding the Proposed Rule was conducted by the Commission on March 25, 2008, at which time the Commission approved the Proposed Rule for final adoption. According to the published notice, the purpose and effect of Proposed Rule 69O-204.101 is "to establish disclosures to viators of reconciliation of funds." The text of the Proposed Rule, as noticed for final adoption, reads as follows: 69O-204.101 Disclosures to Viator of Disbursement. Prior to or concurrently with a viator's execution of a viatical settlement contract, the viatical settlement provider shall provide to the viator, in duplicate, a disclosure statement in legible written form disclosing: The name of each viatical settlement broker who receives or is to receive compensation and the amount of each broker's compensation related to that transaction. For the purpose of this rule, compensation includes anything of value paid or given by or at the direction of a viatical settlement provider or person acquiring an interest in one or more life insurance policies to a viatical settlement broker in connection with the viatical settlement contract; and A complete reconciliation of the gross offer or bid by the viatical settlement provider to the net amount of proceeds or value to be received by the viator related to that transaction. For the purpose of this rule, gross offer or bid shall mean the total amount or value offered by the viatical settlement provider for the purchase of an interest in one or more life insurance policies, inclusive of commissions, compensation, or other proceeds or value being deducted from the gross offer or bid. The disclosure statement shall be signed and dated by the viator prior to or concurrently with the viator's execution of a viatical settlement contract with the duplicate copy of the disclosure statement to be retained by the viator. If a viatical settlement contract has been entered into and the contract is subsequently amended or if there is any change in the viatical settlement provider's gross offer or bid amount or change in the net amount of proceeds or value to be received by the viator or change in the information provided in the disclosure statement to the viator the viatical settlement provider shall provide, in duplicate, an amended disclosure statement to the viator, containing the information in paragraphs (1)(a) and (b). The amended disclosure statement shall be signed and dated by the viator with the duplicate copy of the amended disclosure statement to be retained by the viator. The viatical settlement provider shall obtain the signed and dated amended disclosure statement. Prior to a viatical settlement provider's execution of a viatical settlement contract, the viatical settlement provider must have obtained the signed and dated disclosure statement and any amended disclosure statement required by this rule. In transactions where no broker is used the viatical settlement provider must have obtained the signed and dated disclosure statement from the viator. The documentation required in this rule shall be maintained by the viatical settlement provider pursuant to the provisions set forth in Subsection 626.9922(2), Florida Statutes, and shall be available to the office at any time for copying and inspection upon reasonable notice to the viatical settlement provider. The Proposed Rule cites Subsection 624.308(1) and Section 626.9925 as specific authority for the Proposed Rule. The Proposed Rule cites Sections 626.9923, 626.9924, and 626.9925 as the law implemented by the Proposed Rule. The Proposed Rule involves regulation of viatical settlement providers pursuant to Florida's Viatical Settlement Act, Part X, Chapter 626 (hereinafter referred to as the "Act"). The Act regulates both viatical settlements and life settlements. The Act does not define "viatical settlement" or "life settlement." However, both types of transactions involve the sale of the ownership interest in life insurance policies. A "viatical settlement" involves the sale of an ownership interest in a life insurance policy by a person who is expected to live for less than two years. A "life settlement" involves the sale of the ownership interest in a life insurance policy by a person who is expected to live longer than two years after the date of the sale. Viatical settlements and life settlements are regulated in essentially the same manner and each of the foregoing transactions are included in the definition of "viatical settlement contract" as defined in the Act. Therefore, references to "viatical settlements" under Florida law refer to both life settlements and viatical settlements. Subsection 626.9911(10) defines "viatical settlement contract" as follows: (10) "Viatical settlement contract" means a written agreement entered into between a viatical settlement provider, or its related provider trust, and a viator. The viatical settlement contract includes an agreement to transfer ownership or change the beneficiary designation of a life insurance policy at a later date, regardless of the date that compensation is paid to the viator. The agreement must establish the terms under which the viatical settlement provider will pay compensation or anything of value, which compensation or value is less than the expected death benefit of the insurance policy or certificate, in return for the viator's assignment, transfer, sale, devise, or bequest of the death benefit or ownership of all or a portion of the insurance policy or certificate of insurance to the viatical settlement provider. A viatical settlement contract also includes a contract for a loan or other financial transaction secured primarily by an individual or group life insurance policy, other than a loan by a life insurance company pursuant to the terms of the life insurance contract, or a loan secured by the cash value of a policy. In a viatical settlement transaction, the "viatical settlement provider" is the purchaser of the ownership interest in a life insurance policy, including the right to receive the policy proceeds upon the death of the insured. Also see § 626.9911(12).3 The "viator" is the owner of an insurance policy who sells the ownership interest in the policy. Also see § 626.9911(14).4 The term "viatical settlement broker" is defined in Subsection 626.9911(9), as follows: (9) "Viatical settlement broker" means a person who, on behalf of a viator and for a fee, commission, or other valuable consideration, offers or attempts to negotiate viatical settlement contracts between a viator resident in this state and one or more viatical settlement providers. Notwithstanding the manner in which the viatical settlement broker is compensated, a viatical settlement broker is deemed to represent only the viator and owes a fiduciary duty to the viator to act according to the viator's instructions and in the best interest of the viator. The term does not include an attorney, licensed Certified Public Accountant, or investment adviser lawfully registered under chapter 517, who is retained to represent the viator and whose compensation is paid directly by or at the direction and on behalf of the viator. Pursuant to Subsection 626.9911(9), the "viatical settlement broker" is an agent of the viator and, as such, owes a fiduciary duty to the viator to obtain the best price for the insurance policy. Thus, typically, the viatical settlement broker solicits bids from multiple viatical settlement providers on behalf of the viator. The Proposed Rule requires viatical settlement providers to furnish viators with a detailed accounting of all funds involved in viatical settlement transactions and to ensure that viators are aware of the accounting. The issues of disclosures required for viatical settlement contracts and transactions are addressed in two provisions of the Act, Sections 626.99181 and 626.9923. Section 626.99181, Florida Statutes, requires a viatical settlement broker to disclose its compensation and states, "[a] viatical settlement broker shall disclose to a prospective viator the amount and method of calculating the broker's compensation." That provision states the "compensation" includes "anything of value paid or given to a viatical settlement broker for the placement of a policy." Section 626.9923 addresses viatical settlement contracts and required disclosures to viators and states that: Viatical settlement contracts; required disclosures.--The viatical settlement broker, or the viatical settlement provider in transactions in which no broker is used, must inform the viator by the date of application for a viatical settlement contract: That there are possible alternatives to viatical settlement contracts for persons who have a catastrophic or life-threatening illness, including, but not limited to, accelerated benefits offered by the issuer of a life insurance policy. That proceeds of the viatical settlement could be taxable, and assistance should be sought from a personal tax advisor. That viatical settlement proceeds could be subject to the claims of creditors. That receipt of viatical settlement proceeds could adversely affect the recipient's eligibility for Medicaid or other government benefits or entitlements, and advice should be obtained from the appropriate agencies. That all viatical settlement contracts entered into in this state must contain an unconditional rescission provision which allows the viator to rescind the contract within 15 days after the viator receives the viatical settlement proceeds, conditioned on the return of such proceeds. The name, business address, and telephone number of the independent third- party escrow agent, and the fact that the viator may inspect or receive copies of the relevant escrow or trust agreements or documents. Petitioner is an established trade association in the life settlement industry and is comprised of over 175 member companies, some of which include Florida-licensed viatical settlement providers who would be subject to the Proposed Rule. Petitioner's members would be substantially affected by the Proposed Rule because it would require them to make disclosures to viators in addition to the disclosures required by the Act.
The Issue Whether Petitioner has settled this matter and the proceeding should therefore be dismissed.
Findings Of Fact Both parties to the action voluntarily submitted the case to mediation before Jonathan Kroner, a Florida Supreme Court Mediator certified pursuant to Rule 1.760 of the Florida Rules of Civil Procedure. The mediation began around 9:00 a.m. on December 18, 1991, at the office of the Petitioner's former attorney, Mr. Rick Kolodinsky. Both parties and their counsel were present at the mediation. Mr. Kolodinsky's paralegal was also present, as well as Ms. Weaver's daughter. Both parties received an explanation of the purpose of the mediation from the mediator and then gave a brief synopsis of their case. The parties were then placed in separate rooms and the mediator shuttled back and forth between the two rooms reporting and discussing the relative merits and weaknesses of each party's offer as it was made. The parties remained separated throughout the mediation except for a mutual viewing of a video tape which demonstrated that Ms. Weaver was not being completely honest about the extent of the injury to her arm. Additionally, the parties came together at the end of the mediation after settlement had been reached in order to sign the settlement agreement and work out some minor details. The mediation lasted until approximately 5:00 p.m. The first offer of settlement was made by Ms. Weaver and her attorney. The first offer was over $100,000.00. Thereafter, a series of offers and counteroffers were made throughout the day. There is no doubt that each offer made by Ms. Weaver was made with her consent. Eventually, one of the parties offered $35,000.00 dollars. Ms. Weaver agreed to the figure. There was no credible evidence that either the mediator, Southern Bell, Mr. Kolodinsky or his paralegal unduly influenced or coerced Ms. Weaver into agreeing to the $35,000.00 figure during the time of the offer and counteroffer phase of the mediation. After the figure of $35,000.00 was accepted by both parties, the mediator called all of the people present at the mediation into the same room so that the settlement could be reduced to writing utilizing a standard form settlement agreement. The form settlement agreement contained the style of the DOAH case as well as the DOAH case number. The agreement stated in relevant part: Defendant agrees to pay to Plaintiff as full and complete settlement of all matters arising in this cause of action the sum of $35,000. Plaintiff agrees to execute any Release form generally required to be executed in settlements of disputes of this nature. Each party shall bear their respective attorney fees and costs. The figure of $35,000.00 was handwritten in the blank provided in the form. Following the $35,000.00 figure the words "and see attached" were added. The attachment being referred to in the agreement consisted of a legal size paper containing three additional handwritten settlement terms. Page two of the Settlement Agreement states: Attachment to Weaver She will not reapply to S. Bell for employment. S. Bell & K. Weaver will not disclose the terms of this settlement to anyone including Social Security except as required by court order. This is a release/settlement of all claims arising out of any issue involved in case #89-1661 of any handicap/sex or other discrimination or tort claim of Weaver v. S. Bell or any S. Bell employee(s). The attachment was prepared by Mr. Kolodinsky while all parties were present in the same room. Some of the terms were added at the request of Southern Bell and some were added at the request of Ms. Weaver. Prior to signing either page of the settlement agreement, Ms. Weaver's daughter tried to get Ms. Weaver to leave the negotiations and not finalize the agreement being prepared. Ms. Weaver declined to leave and there is no doubt that she signed both pages of the two-page Settlement Agreement and agreed to settle this case. As with the other phases of the mediation, there was no credible evidence that either Southern Bell, the mediator, Mr. Kolodinsky or his paralegal unduly influenced or coerced Ms. Weaver into signing the settlement agreement or settling this case. After all the parties had signed the settlement agreement, Ms. Weaver left Mr. Kolodinsky's office. She indicated to her daughter that she regretted settling the case. Clearly, Ms. Weaver was aware and understood that she had settled her case. On December 20, 1991, two days after the mediation, Ms. Weaver wrote Mr. Kolodinsky, her attorney, and explained to him that she wanted to "repudiate" the agreement because she claimed that she was under "duress", thus providing at her own initiative a rationale for such repudiation. Ms. Weaver's letter stated: I signed those papers under pressure and duress and did not know what I was doing. I want to repudiate the agreement. I will not accept the agreement. One week later, on December 27, 1992, Ms. Weaver continued to demonstrate that she possessed intelligence capacity and, in particular, knowledge of the legal system when she wrote another letter to Mr. Kolodinsky threatening him with legal action: Please let Southern Bell know my intention immediately otherwise I will have no choice but to file a grievance with the Florida Bar Association. On January 6, 1992, Petitioner's attorney, Mr. Kolodinsky, informed the Respondent that the Petitioner had repudiated the Settlement Agreement and that a conflict existed between Petitioner and her attorney. In this case, Ms. Weaver clearly possessed the intelligence and mental capacity to settle her case. Over the years, prior to settlement, Ms. Weaver had hired attorney Edward Hurtz to represent her in a workers' compensation case against Southern Bell. Additionally, Ms. Weaver had represented herself at a fact finding proceeding in 1987 and, in 1988, she hired attorney Cristina Favis to represent her in this FCHR action. Moreover, in 1990, Ms. Weaver hired another attorney, Mr. Briggs, to file a petition for divorce against her husband. In that proceeding she signed an affidavit affirming that the divorce petition was true, and that Mr. Briggs was still representing. Ms. Weaver also testified that in January 1990, she signed a financial affidavit for her divorce and on September 4, 1991, she signed a settlement agreement for her divorce. Furthermore, in the Fall of 1990, Ms. Weaver instigated a lawsuit against William Brittain. The lawsuit involved an automobile accident in Volusia County. In order to pursue the lawsuit, Ms. Weaver hired another attorney, Paul Bernadini, to represent her. Finally, in April, 1991, the Petitioner hired attorney Michael B. Wingo to represent her in a workers' compensation matter. Indeed, as indicated in the pleadings, Ms. Weaver again demonstrated her capacity by employing her current attorney and by signing the Amended Memorandum on February 18, 1992. Such actions are simply inconsistent with the Petitioner's claim that she lacked capacity and did not knowingly sign or settle her case. In fact, the decisions made by Ms. Weaver before the mediation, on the day of the mediation, and after the mediation, are not the type of decisions and reasoning made by a person who is lacking in capacity, or is not sui juris. Moreover, Ms. Weaver clearly possessed sufficient mental capacity and intelligence particularly regarding legal issues. Unlike a person who is subject to undue influence, her mind had not deteriorated to the point where she was completely dependent on Mr. Kolodinsky or anybody else. Although the Petitioner's attorney claimed during the opening statement that Ms. Weaver was taking "psychotropic medications" on the day of the mediation, there was no evidence presented at the hearing that substantiated this claim. Indeed, the Petitioner failed to present at the hearing a scintilla of medical evidence supporting her claim that she lacked capacity. Thus, there was no evidence presented at the hearing showing that Ms. Weaver's mind was weak because of medication or that Mr. Kolodinsky knew she was on medication or even "under extreme duress" and used this knowledge to wrongfully coerce Ms. Weaver to sign the Settlement Agreement. Even Ms. Weaver's own testimony demonstrated that she is not the type of person who is easily subjected to the influences of others including her various attorneys. Ms. Weaver testified that she makes the major decisions in her life. These decisions included hiring numerous attorneys and obtaining a divorce from her husband. The fact that she acknowledged that she "[came] to a decision" is contrary to her allegation that Mr. Kolodinsky used duress to force her to sign against her will. Thus, it is clear, from Ms. Weaver's letter and her conversation with Mr. Kolodinsky, that she knew she was making a "decision" and acted intelligently, understandingly, and voluntarily. At the hearing, Ms. Weaver's reason for why she signed the Settlement Agreement was that at some point prior to time she decided to settle, Mr. Kolodinsky silently "mouthed" the words: "You will take it, or I will leave you." The reason given at the hearing was different than the reason given for repudiating the Settlement Agreement contained in Ms. Weaver's earlier letter. According to Mr. Kolodinsky, Ms. Weaver had a past reputation for authorizing settlement offers one day and repudiating the offers the next day. Mr. Kolodinsky's explanation for Ms. Weaver's action of signing the Settlement Agreement on December 18, 1991, and repudiating the agreement shortly thereafter is supported by the evidence and is the most believable reason for her actions. Such a motivation of regret or remorse by Ms. Weaver, however, is not a motivation caused by undue influence. Nor is it a reason for setting aside a settlement agreement. Furthermore, evidence that Ms. Weaver did not protest when signing the Settlement Agreement strongly supports the position that Ms. Weaver signed the agreement of her own volition and free will. It is clear that at the time Ms. Weaver signed the Settlement Agreement that she made no indication, verbal or non-verbal, that she was forced, coerced, "browbeaten" or under undue influence by Mr. Kolodinsky or anyone else. All the witnesses that attended the mediation testified that Ms. Weaver signed the Settlement Agreement without protest. Most persuasive was the testimony of the mediator, Mr. Jonathan Kroner, who testified that Ms. Weaver verbally agreed to Southern Bell's offer: Q [Mr. Keener] Did Ms. Weaver agree to that offer or demand? A [Mr. Kroner] Yes, she did. Q Did she do that verbally or nonverbally? A Verbally. Q What did she say? A We discussed it for a while, and we were back and forth and back and forth. We discussed it and she said yes. I don't recall her very exact words to say what it was, but it was a clear ascent. I do a lot of mediations where, either because of a language difficulty or capacity problem or something, it's important to be clear. I don't like mistakes happening. The mediator also testified that he saw Ms. Weaver execute the Settlement Agreement and that he had no reason to believe that she was coerced to sign the agreement: Q [Mr. Keener] Did you see her execute the agreement? A [Mr. Kroner] I am just trying to picture what she was wearing and everything that day. Yes, I did because I remember where we were sitting at the table and everything. Q Was she physically forced to sign the agreement? A No, absolutely not. Q Was she coerced to sign the agreement? A Absolutely not. Ms. Weaver's daughter had tried to get her to leave the mediation before signing the agreement. However, Ms. Weaver stayed and signed. Thus, the evidence presented at the hearing shows that Ms. Weaver signed the Settlement Agreement of her own volition and that Mr. Kolodinsky did not apply any undue influence thereby destroying Ms. Weaver's free agency. Rather, it simply appears that the day after signing the Settlement Agreement, Ms. Weaver regretted her decision to settle and came up with different reasons at different times in an attempt to blame Mr. Kolodinsky for allegedly causing her to sign the agreement. Likewise, the evidence presented during the hearing demonstrates that the free agency of Ms. Weaver was not destroyed on the day of the mediation and that the Settlement Agreement was executed of the Petitioner's own volition. Moreover, as noted above, at the hearing Ms. Weaver's story changed when she claimed that the reason she signed the Settlement Agreement was because Mr. Kolodinsky silently told her "You will take it." Such a statement is not sufficient to demonstrate that Ms. Weaver's free agency was destroyed and that she did not sign the Settlement Agreement on her "own volition." Regardless of whether Mr. Kolodinsky made such a statement, Ms. Weaver, in her own letter, admitted that she "[came] to a decision". She did not state in the letter that Mr. Kolodinsky forced or coerced her to enter into the Settlement Agreement. Moreover, even if the statement was made, testimony regarding Ms. Weaver's behavior and lack of protest during the time she was signing the Settlement Agreement provides firm evidence that she was not being forced or coerced into signing the Settlement Agreement. Finally, Ms. Weaver does not dispute that she signed page one of the Settlement Agreement and that all the terms and conditions were included on page one when she signed it. Page one of the Settlement Agreement provides: Defendant agrees to pay to Plaintiff as full and complete settlement of all matters arising in this cause of action the sum of $35,000 and see attached. Plaintiff agrees to execute any Release form generally required to be executed in settlements of disputes of this nature. The case number on page one of the settlement agreement is the Division of Administrative Hearings case number for this matter. Thus, it is clear that all the terms on page one were on the page when Ms. Weaver signed it. With regard to page two of the Settlement Agreement, Ms. Weaver alleges that it was not reduced to writing when she signed it. Contrary to Ms. Weaver's testimony, Southern Bell's EEO manager, Mr. Brown, testified that he signed the Settlement Agreement immediately after Ms. Weaver and that when he signed the Settlement Agreement all the terms and conditions set forth on the page two, as shown in Respondent's Exhibit No. 1, were contained in the document. Mr. Kolodinsky also testified that all the parties signed page two of the Settlement Agreement after the three paragraphs were added. Ms. Weaver's daughter confirmed Mr. Kolodinsky's testimony when she testified that Mr. Kolodinsky was "writing stuff down" on a yellow pad before her mother signed the document. The testimony of Mr. Brown and Mr. Kolodinsky that all three paragraphs on page two of the Settlement Agreement were reduced to writing when Ms. Weaver signed the Agreement and the conflicting statements provided by Ms. Weaver during her deposition and the hearing, prove that when Ms. Weaver signed page two of the Settlement Agreement all the terms and conditions were reduced to writing. Along the same line, during the hearing there was considerable testimony regarding whether the Settlement Agreement was read to Ms. Weaver or whether Ms. Weaver read the Settlement Agreement. In either event, Ms. Weaver had the opportunity to read the agreement or have it explained to her and just as with any other agreement or contract the contract is binding if it is signed. 11 Fla. Jur. Section 14, Merrill Lynch v. Benton, 467 So. 311, 313 (Fla. 5th DCA 1985) (contract held enforceable where customer claimed that although she signed the contract she could not read it because she did not know English) Therefore, Ms. Weaver signed the contract and should be bound by the terms and conditions regardless of whether she read or did not read the contract or whether or not the contract was read to her. Moreover, the evidence was clear that Ms. Weaver understood the terms of the settlement agreement and even suggested a clause which was incorporated in the agreement. In summary, regardless of whether the terms and conditions on page two of the Settlement Agreement were read to Ms. Weaver, whether she read them herself, or whether she just signed the document without reading the conditions, the terms and conditions of the Settlement Agreement are binding. 11 Fla. Jur. Section 14; Merrill, Lynch v. Benton, 467 So. 311, 313 (Fla. 5th DCA 1985).
