The Issue The issues are as follows: (a) whether Respondent's disapproval of Petitioners' terrorism rates for workers' compensation insurance (workers' comp) under the Terrorism Risk Insurance Act of 2002, Public Law 101-297, 116 U.S.C. Section 2322 (TRIA) is based on an invalid agency statement of general applicability, which has not been adopted as a rule pursuant to Section 120.54, Florida Statutes (2003); (b) whether Petitioners, as members or subscribers of the National Council on Compensation Insurance (NCCI) were required to comply with Section 627.211, Florida Statutes (2003), and Florida Administrative Code Rule 69O-189.004; and (c) whether Petitioners' terrorism rate filing for the workers' comp line of business results in rates that are excessive or unfairly discriminatory.
Findings Of Fact AIG's member companies are property and casualty insurance companies that are licensed to write workers' comp in the State of Florida. OIR is the agency that is responsible for regulating the business of insurance in the State of Florida. Following the terrorist events of September 11, 2001, reinsurance capacity in the United States contracted severely and other market disruptions occurred. In response to these events, Congress enacted TRIA, which became effective on November 26, 2002. The purpose of TRIA is to establish a temporary federal program that provides for a system of shared public and private compensation for insured losses resulting from acts of terrorism, in order to accomplish the following: (a) to protect consumers by addressing market disruptions and ensure the continued widespread availability and affordability of property and casualty insurance for terrorism risk; and (b) to allow for a transitional period for the private markets to stabilize, resume pricing of such insurance, and build capacity to absorb any future losses, while preserving state insurance regulation and consumer protections. TRIA provides a federal reinsurance backstop for three years (2003, 2004, and 2005) and gives the federal government authority to recoup federal payments made through policyholder surcharges up to a maximum annual limit in the event of a "certified loss." The premium charged for insured losses covered by TRIA and the federal share of compensation for insured losses under TRIA must be readily identifiable. The government reinsurance is provided at no cost to the insurer and replaces reinsurance that was no longer available after September 11, 2001. TRIA required insurers to immediately notify all commercial insurance policyholders that pre-existing terrorism risk exclusions were void. Pursuant to TRIA, insurers must price terrorism coverage separately from non-terrorism coverage. For most commercial policies, separate pricing gives the customer an opportunity to accept or decline the terrorism coverage. However, workers' comp insurers are not allowed to write exclusions for terrorism coverage. TRIA requires each insurer participant or retention group (insurers who are part of the same insurer group) to pay, without federal reimbursement, losses from terrorism events up to an attachment point or retention level/deductible. That retention is computed based upon the entire direct earned premiums of the insurer group in all commercial lines of insurance covered by TRIA, including workers' comp. TRIA does not affect any state's jurisdiction or regulatory authority over the business of insurance except as specifically provided therein. As to terrorism rate filings made in 2003, TRIA suspended state laws requiring prior approval of insurance rates for the risk of terrorism. TRIA does not affect the ability of a state to invalidate a rate filing that is determined to be excessive, inadequate, or unfairly discriminatory. There is no limit on workers' comp losses that an insurer must pay except for the schedule of benefits adopted into law in each state. The amount of workers' comp loss arising from a terrorist event is affected in large part by the schedule of benefits and the distribution of the various types of injuries that workers may sustain from a terrorist event. AIG had to make terrorism rate filings for all lines of insurance covered by TRIA in 50 states and the District of Columbia. Instead of focusing on each state's schedule of benefits, AIG made its initial rate filings in a fairly uniform manner, allegedly to accommodate TRIA's mandate for immediate implementation. NCCI is a workers' comp rating organization that gathers data from its members or subscribers, compiles the data, and makes rate filings on behalf of its members or subscribers. NCCI makes such filings in 36 states, including Florida. Every insurer writing workers' comp in Florida, including AIG, is either a member or subscriber to NCCI. In Florida, Section 627.211, Florida Statutes (2003), requires NCCI's members or subscribers to adhere to NCCI's rates, unless the insurer makes a deviation filing, seeking a uniform percentage decrease from or increase to NCCI's approved rates. On December 19, 2002, NCCI submitted its Item B 1383 terrorism rate filing for workers' comp coverage. The rate filing included rate provisions for both terrorism and non- terrorism coverage. James Watford, OIR's workers' comp actuary, reviewed NCCI's filing. Mr. Watford has spent the last 19 years reviewing workers' comp rate filings. He is the only who reviews workers' comp rate filings for OIR. Mr. Watford holds the designations of Associate in the Casualty Actuarial Society (ACAS) and Member of the American Academy of Actuaries (MAAA). Mr. Watford's review of NCCI's rate filing was unaided by any other actuary or actuarial analyst. Mr. Watford's office is a part of OIR's Bureau of Property and Casualty Rates and Forms. That bureau is organized to function according to type of insurance business, including but not limited to personal lines, automobile, marine, commercial (property and casualty), medical malpractice, business interruption, and workers' comp. Although workers' comp is a type of commercial insurance sold to employers, Mr. Watford has not participated in meetings involving terrorism rates for other types of commercial insurance. Additionally, Mr. Watford has not been involved in setting any policy for OIR. NCCI's December 19, 2002, terrorism filing applied only to insurance coverage known in the industry as "guaranteed cost plans." It did not apply to "retrospective rating plans," "large risk plans," or "large deductible plans" (referred to collectively as loss sensitive plans). Insurers are free to make their own arrangements with their insureds with respect to loss sensitive plans, provided those arrangements comport with the insurer's previous filings. A "guaranteed cost" workers' comp plan is a policy with a known rate at the inception of the policy period. At the end of the policy period, the insurer audits the employer's actual payroll during the policy period and determines the final premium. The cost is guaranteed because an employer knows its ultimate workers' comp responsibility throughout the policy period. A "retrospective rating plan" is a policy based on actual losses that the employer incurs during a policy period. Typically, the insurer issues the policy with parameters, explaining how the insurer will rate the policy. The ultimate price for a "retrospective rating plan," with preset minimum and maximum amounts, will depend on actual losses. A "large risk plan" and a "large deductible plan" are policies that require the employer to reimburse the carrier for a substantial part of each loss. These plans must comply with an administrative rule that provides for a minimum standard premium and a minimum deductible. The rationale for minimums in these types of policies is that they provide flexibility for very large employers, with unique risks, who assume a substantial portion of the losses. NCCI's terrorism rate filing sought to charge Florida insureds three cents ($.03) per $100 of payroll. The percentage impact of TRIA's terrorism provisions in Florida was eight- tenths of one percent (0.8%) of total premium. The rate filing relied in substantial part on catastrophe modeling conducted by EQECAT. The EQECAT modeling is based on simulated terrorism events in modeled states, including Florida. NCCI's December 19, 2002, terrorism filing states as follows in part:
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That OIR enter a final order dismissing the Consolidated Petitions for Formal Administrative Proceedings in these consolidated cases. DONE AND ENTERED this 21st day of July, 2005, in Tallahassee, Leon County, Florida. S SUZANNE F. HOOD 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 21st day of July, 2005. COPIES FURNISHED: Elenita Gomez, Esquire Department of Financial Services Division of Legal Services 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-4206 Daniel C. Brown, Esquire Kelly A. Cruz-Brown, Esquire Robert W. Pass, Esquire Carlton Fields, P.A. Post Office Box 190 Tallahassee, Florida 32302-0190 S. Marc Herskovitz, Esquire Elenita Gomez, Esquire Department of Financial Services Division of Legal Services 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-4206 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Carlos G. Muniz, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue Whether Respondent failed to remit premiums or submit applications for insurance; misappropriated and converted funds for her own use and benefit or unlawfully withheld monies belonging to insureds as set forth in the Administrative Complaint filed herein signed August 2, 1993.
Findings Of Fact Respondent, Margaret Ann Edwards, is currently eligible for licensure and is licensed in Florida as a health insurance agent, and was so licensed at all times relevant to these proceedings. During times material, Respondent served as a general agent for LHCA. Respondent operated through a corporate entity known as Chartered Financial Advisors, Inc., which served as a clearing house for insurance agents. Insurance agents who operate as general agents are well versed in operating an insurance agency. On or about March 4, 1991, LHCA and Respondent entered into an agency agreement whereby Respondent agreed to solicit insurance products on behalf of LHCA. The agreement provided in relevant part: (2) ACCOUNTING All monies received for the Company by the General Agent for premiums, by reason of this Agreement, shall belong to the Company and shall be received and held by the General Agent in a fiduciary capacity only. The initial premiums shall be forthwith paid and delivered to Chartered Financial Advisors, Inc. All other premiums shall be forthwith paid and delivered to the Company. (5) INDEBTEDNESS If the Company, for any reason, refunds the premium on any Authorized Policy solicited by the General Agent, Representatives or employees, the General Agent shall refund to the Company any monies received by the General Agent, Representatives or employees by reason of the payment of such premiums. To the extent not refunded, said amount shall constitute an indebtedness by the General Agent to the Company. Prior to its agreement with LHCA, Respondent had been involved in the insurance business for an extended period of time and was familiar with the duties and obligations of a general agent. General agents who have good credit histories are granted "netting" authority. Netting authority is a procedure whereby the agent is given the authority to receive gross premiums from applicants for insurance and to withhold their net "commissions" from the gross premiums and remit the balance, or net premiums, to the company (LHCA). Respondent maintained a business bank account with Barnett Bank, and she was the sole signator on that account. The account was used to conduct her insurance business and to implement the netting authority arrangement that she had with LHCA. During August, 1992, LHCA became increasingly concerned about Respondent's failure to timely remit premiums due to LHCA on policies issued by the company, as well as premium refunds not being made by the Respondent to insurance consumers. LHCA made Respondent aware of these concerns by telephonic messages and by written communiques. LHCA's concerns about Respondent were not resolved and during January, 1993, LHCA terminated its agency agreement with Respondent. After termination of the agency agreement, LHCA was contacted by insurance consumers, Austin Jenkins, Bernice Caldwell, Mrs. Robert Bolling, and Robert Stopford about either policies that they had applied for and had never received or about policies which they were desirous of cancelling and/or obtaining a refund. LHCA demanded an explanation from Respondent about the complaints from the referenced consumers. Respondent thereafter sent a check to LHCA in the amount of $9,841.02 which Respondent represented as being owed to LHCA for the premium payments for insurance applications previously solicited and sold to the consumers. Respondent's check, which represented the refund of net premiums which was due and owing to LHCA, did not clear the bank and was returned for insufficient funds. Jonathan Miller of LHCA contacted the Respondent and attempted to amicably resolve the matter. Respondent advised Miller to redeposit the check as the funds were now in her account. Miller followed Respondent's directive and the check failed to clear the bank the second time due to insufficient funds. Miller did not authorize Respondent to cover refunds by using net commissions which were owed to LHCA. During this period, LHCA began receiving numerous inquiries from additional insurance consumers about the status of health insurance policies purchased through Respondent or her subagents, but for which the company had no record and had received no net premiums. The number of policies involved was approximately twelve. LHCA conducted an investigation and instructed the inquiring consumers to provide, among other things, proof of payment and other pertinent evidence to substantiate their claims. As a result, LHCA refunded premium payments to each individual consumer, including consumers Jenkins, Caldwell, Bolling, and Stopford. Austin Jenkins made application for insurance to be issued by LHCA through a subagent of Respondent and tendered a check in the amount of $3,868.00 made payable to LHCA. This check was deposited into Respondent's business account maintained at Barnett Bank. Bernice Caldwell, another consumer, also made application for insurance to be issued by LHCA through a subagent under contract with Respondent, and tendered a check in the amount of $7,072.00 made payable to LHCA. The check was deposited into Respondent's business account with Barnett Bank. Robert Bolling made application for insurance to be issued by LHCA of America, through a subagent under contract with Respondent, and tendered two checks in the amounts of $3,195.68 and $2,525.20, respectively, made payable to LHCA. These two checks were deposited into Respondent's business bank account maintained at Barnett Bank. Robert Stopford made application for insurance to be issued by LHCA through a subagent under contract with Respondent, and tendered a check in the amount of $3,996.20 made payable to LHCA. This check was also deposited into the business bank account maintained by Respondent at Barnett Bank. All of the above mentioned checks were negotiated and cleared their respective banks. The funds were thereafter transferred and credited to Respondent's business bank account maintained at Barnett. Insurance consumers Jenkins, Caldwell, Bolling, and Stopford intended their checks to be the initial premium for insurance policies which they applied for with LHCA. LHCA never received any applications for insurance or premium payments from Respondent on behalf of the above named consumers. The premium refunds made by LHCA to insurance consumers, Jenkins, Caldwell, Bolling, and Stopford were reflected on Respondent's account current statements with LHCA. As of December 31, 1993, Respondent owed LHCA the sum of $53,227.65. This sum represented premiums received by Respondent for insurance policies, but which remained unremitted to LHCA. LHCA has demanded payment from Respondent for the above refunds without success. In an attempt to recover its funds paid on behalf of Respondent, LHCA filed a civil suit in Sarasota County Circuit Court, Case No. 93-003262-CI-018. On March 9, 1994, a Summary Final Judgement was entered in the circuit court case filed against Respondent in the amount of $53,225.43. As of the date of hearing, the judgment remains unsatisfied. Respondent was involved in an automobile accident during April, 1992. The accident was the source of injuries to Respondent and limited her ability to actively engage in the operation of her agency. Under the subagency agreement Respondent utilized to hire subagents, Respondent kept approximately fifty-three percent (53 percent) of the net commission and she paid her agents amounts ranging from forty-seven percent (47 percent) up to, and in some cases, sixty percent (60 percent) of the net commissions that she received. When policies were cancelled and the subagents refused to return the premiums which they had been advanced, Respondent found herself financially unable to remit the payments either to the insureds or to LHCA as demanded. Respondent contends that Miller advised her to pay refunds from other net commissions due LHCA. As noted, Miller denies making any agreement with Respondent to use LHCA's net funds. Respondent's contention that she was told by LHCA's representative, Jonathan Miller, to deduct company net premiums from other policies to pay for refunds that were due to other consumers is not credible. In this regard, the agency agreement between Respondent and LHCA provides the procedure whereby LHCA was entitled to a refund from any premiums advanced on behalf of any authorized policies solicited by any general agent, as Respondent, or Respondent's representatives or employees. This procedure is set forth in subparagraph 5 of the agency agreement in effect between Respondent and LHCA. Additionally, the accounting procedures section of the agreement between Respondent and LHCA clearly states that all monies received for the company, as LHCA, by the general agent (Respondent) for premiums, by reason of their agreement, belong to LHCA and shall be received and held by the general agent in a fiduciary capacity only. Given these clear provisos in the agreement between the parties, Respondent's contention that she had entered into other oral agreements with LHCA for return of the premiums does not withstand scrutiny and is not credible.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that: Respondent's licenses and eligibility for licenses be suspended for nine (9) months, pursuant to Rule 4-231.080, Florida Administrative Code. It is further RECOMMENDED that: Petitioner enter a Final Order requiring that Respondent make satisfactory restitution to Life and Health Insurance Company of America prior to any request for reinstatement of her insurance licenses as authorized pursuant to s. 626.641, Florida Statutes. RECOMMENDED in Tallahassee, Leon County, Florida, this 18th day of October, 1994. JAMES E. BRADWELL 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 18th day of October, 1994. APPENDIX to RECOMMENDED ORDER IN CASE NO. 93-5080 Rulings on Petitioner's proposed findings of fact: Paragraph 20, adopted as modified, paragraph 18, Recommended Order. Paragraph 23, adopted as relevant, paragraphs 22 and 23, Recommended Order. Paragraph 23, adopted as relevant, paragraphs 18 and 22, Recommended Order. Paragraph 24, rejected, legal argument and/or conclusionary. Rulings on Respondent's proposed findings of fact: Paragraph 1, adopted as relevant, paragraph 10-13, Recommended Order. Paragraph 6, adopted as modified, paragraph 3, Recommended Order. Paragraph 9, rejected, as a restatement of testimony. Paragraph 10, adopted as modified, paragraphs 1 and 3, Recommended Order. Paragraph 14, rejected, irrelevant and not probative. Paragraphs 16 and 18, rejected, contrary to the greater weight of evidence, paragraphs 8 and 23, Recommended Order. Paragraph 19, rejected, irrelevant and unnecessary. Paragraphs 21-26, rejected, contrary to the greater weight of evidence, paragraphs 2,5,7, and 23, Recommended Order. Paragraphs 27 and 28, adopted as relevant, paragraphs 19 and 20, Recommended Order. COPIES FURNISHED: James A. Bossart, Esquire Division of Legal Services 412 Larson Building Tallahassee, Florida 32399-0300 John L. Maloney, Esquire 5335 66th Street North, Suite 4 St. Petersburg, Florida 33709 Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Bill O'Neil General Counsel Department of Insurance The Capitol, PL-11 Tallahassee, Florida 32399-0300
The Issue The issues in this case are whether Respondents violated Subsections 626.611(7), 626.611(9), 626.611(10), and 626.611(13), Florida Statutes (2008),1 and, if so, what discipline should be imposed.
Findings Of Fact At all times material to the allegations in the Administrative Complaints, Mr. Holliday, III, was a licensed Florida surplus lines (1-20) agent, a life and health (2-18) agent, a general lines (property and casualty) (2-20) agent, an independent adjuster (5-20), and agent in charge at International Brokerage and Surplus Lines, Inc. (IBSL). Mr. Holliday, III, had been associated with IBSL since its inception in 1993. At all times material to the allegations in the Administrative Complaint, Mr. Holliday, IV, was licensed in Florida as a general lines (2-20) agent. At all times material to the allegations in the Administrative Complaint, Mr. Holliday, III, and Mr. Holliday, IV, were officers and owners of IBSL. Most recently, Mr. Holliday, III, was the secretary of IBSL. He handled the underwriting and risk placement for the agency. From approximately March 1993 to April 2009, Mr. Holliday, IV, was the president of IBSL. As president of IBSL, Mr. Holliday, IV's, duties included signing agreements which established IBSL's business function as that of a general managing agent and signing agreements which empowered IBSL to collect premiums on behalf of insureds. IBSL ceased doing business on May 1, 2009. In the insurance industry, a common method of procuring insurance involves a retail producer, a wholesale broker, and a program manager. A customer desiring insurance contacts its local insurance agent, which is known as a retail producer, and applies for insurance. The retail producer has a producer agreement with a wholesale broker, who has a producer agreement with a program manager. The program manager represents insurance companies. The retail producer sends the customer's application to the wholesale broker, and the wholesale broker contacts the program manager and forwards the application to the program manager. The program manager will provide a quote if the insurance company is willing to insure the customer. The quote is passed back to the customer via the wholesale broker and the retail producer. If the customer decides to take the insurance, the program manager will issue a binder to the wholesale broker, who will submit the binder to the retail producer. The wholesale broker will issue an invoice for the premium to the retail producer. The program manager pays a commission to the wholesale broker pursuant to its producer agreement with the wholesale broker, and the wholesale broker pays a commission to the retail producer pursuant to its producer agreement with the retail producer. When the retail producer sends the premium payment to the wholesale broker, the retail producer will deduct its commission. The wholesale broker sends the premium amount to the program manager less the wholesale broker's commission. If the customer is unable to pay the entire amount of the premium, part of the premium may be financed through a premium finance company. The premium finance company may pay the premium to the retail producer or to the wholesale broker. International Transportation & Marine Agency, Inc. (ITMA), is a program manager and is engaged in the business of selling, brokering, and servicing certain lines of policies of insurance written or issued by insurance companies. ITMA is a program manager for Pennsylvania Manufacturers Insurance Association (Pennsylvania Manufacturers), an insurance company. IBSL, a wholesale broker, entered into a producer's contract with ITMA on January 4, 2008. Wimberly Agency, Incorporated (Wimberly), is a retail producer located in Ringgold, Louisiana. In 2008, Wimberly had a producer's agreement with IBSL. Carla Jinks (Ms. Jinks) is the administrative manager for Wimberly. In October 2008, R.L. Carter Trucking (Carter) was a customer of Wimberly and applied for motor truck cargo insurance with Wimberly. Wimberly submitted an application to IBSL and requested that coverage be bound effective October 28, 2008, for Carter. IBSL contacted ITMA and received a binder for a policy with Pennsylvania Manufacturers. The cost of the policy was $9,500.00 plus a policy fee of $135.00 for a total of $9,635.00. Carter paid Wimberly $2,500.00 as a down payment and financed the remainder of the cost with Southern Premium Finance, LLC, who paid the financed portion directly to Wimberly. Wimberly deducted a ten percent commission of $950.00 and sent the remainder, $8,635.00 to IBSL. The check was deposited to IBSL's clearing account. On January 22, 2009, Carter contacted Ms. Jinks and advised that he had received a notice of cancellation effective January 22, 2009, due to non-payment to Pennsylvania Manufacturers. On the same date, Ms. Jinks received a facsimile transmission from IBSL, attaching the notice of cancellation and stating: "There was some confusion with the payment we send [sic] and we are working on getting it reinstated." There were some e-mails between Wimberly and Mr. Holliday, III, concerning the placement of coverage with another company. IBSL was unable to place coverage for Carter. By e-mail dated January 30, 2009, Ms. Jinks advised Mr. Holliday, III, that she had been able to place coverage for Carter and requested a return of the premium paid on a pro rata basis. She advised Mr. Holliday, III, that the return premium should be $7,651.35. By e-mail dated January 30, 2009, Mr. Holliday, III, stated: We will tender the return as quickly as it is processed by accounting. I do sorely regret the loss of this account, and our inability to get the Travelers quote agreed on a timely basis. By February 19, 2009, Wimberly had not received the return premium from IBSL. Ms. Jinks sent an e-mail to Mr. Holliday, III, on February 19, 2009, asking that the return premium be rushed to Wimberly so that it could be used to pay for the replacement policy. As of the date of Ms. Jinks' deposition on November 16, 2009, neither Mr. Holliday, III; Mr. Holliday, IV; nor IBSL had given the return premium to Wimberly. K.V. Carrier Services, Inc. (K.V.), is a retail producer located in Medley, Florida. In 2007, K.V. and IBSL entered into a business arrangement with IBSL. Under the arrangement, K.V. was the retailer, IBSL was the wholesale broker, ITMA was the program manager, and Pennsylvania Manufacturers was the insurance company. K.V. collected the down payments for the policy premiums from its customers and sent the down payments to IBSL. The remainder of the premiums were financed by financing companies, who sent the remainder of the premiums to IBSL. IBSL was supposed to send the monies paid for the premiums to ITMA. The following customers made down payments to K.V. and financed the remainder of their premiums with a financing company. E & E Trucking Service OD Transport, Inc. Fermin Balzaldua Eduardo Bravo Carlos Ramirez Edwin Bello Janet Rodriguez UTL, Inc. Prestige Transport USA JNL Transportation, Inc. Valdir Santos DJ Express PL Fast Carrier Ysis Transport K.V. sent the down payments for these customers to IBSL. The financing company sent the remainder of the premiums for these customers to IBSL. The total amount of premiums sent to IBSL for these customers was $19,768.45. IBSL did not send the premium payments for these customers to ITMA. The policies for these customers were cancelled for non-payment. K.V. found another company that was willing to insure K.V.'s customers. K.V. paid the down payments for the new policies from its own funds, hoping that IBSL would repay the finance company with any unearned premiums that would be returned to IBSL as a result of the cancellations. ITMA sent an invoice called an Account Current Statement to IBSL for the business conducted in the month of November 2008. The total amount owed to ITMA was listed as $55,116.32. The invoice included the premium for the policy issued for Carter, less IBSL's commission. The premiums for the policies issued to Eduardo Bravo; Fermin Bazaldua; JNL Transportation, Inc.; Janet Rodriguez; OD Transport, Inc.; and Prestige Transport USA were also included in the Account Current Statement for the business that IBSL conducted in November. IBSL was required to pay the $55,116.32 by December 15, 2008, but did not do so. ITMA received a check from IBSL dated December 31, 2008, for $25,000.00. A notation on the check indicated that it was a partial payment for the November business. The check was unallocated, meaning IBSL did not state to which premiums the partial payment should be applied. Mr. Holliday, III, claimed that IBSL had sent a bordereaux along with the check showing to which policies the payment applied. Mr. Holliday, III's, testimony is not credited. Donald Kaitz (Mr. Kaitz), the president of ITMA, communicated with one of the Respondents, who advised Mr. Kaitz that he needed another week or so to collect some premiums from his retail producers. On January 12, 2009, ITMA received a telephone call from IBSL, stating that IBSL could not pay the balance owed to ITMA and that ITMA should take whatever action it felt necessary. As a result of the communication from IBSL, ITMA issued notices of policy cancellation on all applicable policies listed in the Account Current Statement which was to be paid on December 15, 2008. Copies of the cancellation notices were sent to the insureds and IBSL. ITMA issued pro rata return premiums based on the number of days that each policy had been in effect. The return premiums were sent to IBSL by a check for $18,790.06. Additionally, ITMA sent IBSL a list of the policies that had been cancelled, showing the earned premiums which had been deducted from the $25,000.00. IBSL received and retained a net of $30,116.32, which was owed to ITMA. This amount is derived by deducting the $25,000.00, which IBSL sent to ITMA, from the $55,116.32, which was owed to ITMA. By letter dated April 2, 2009, IBSL sent K.V. a check for $524.80, which stated: We have totaled all amounts owing to IBSL by KV Carrier Service, and we have totaled all pro rated commissions owing by IBSL to KV Carrier Services for the benefit of your clients and have included our check # 1025 in the final amount of $524.80 to settle the account. All net unearned premiums for other than unearned commissions which are funded herein you must contact the insurance carriers involved and request payment under the provisions of Florida Statutes #627.7283. Federal Motor Carriers Risk Retention Group, Incorporated (FMC), is an insurance company, which sells commercial auto liability insurance, specifically targeted to intermediate and long-haul trucking companies. CBIP Management, Incorporated (CBIP), is a managing general underwriter for FMC. FMC had an agreement effective June 1, 2008, with IBSL, allowing IBSL to act as a general agent for FMC. As a general agent for FMC, IBSL was given the authority to accept risk on behalf of FMC. IBSL was given a fiduciary responsibility to accept insurance applications, provide quotes, and bind coverage. Once IBSL binds a policy for FMC, FMC issues a policy and is responsible for the risk. IBSL would receive the down payment from the retail agency, and, in most cases, the finance company would pay the balance of the premium directly to IBSL. The agreement between FMC and IBSL provided that IBSL was to provide FMC a monthly report of premiums billed and collected, less the agreed commission. The report was due by the 15th of the month following the reported month. In turn, FMC was to issue a statement for the balance due, and IBSL was required to pay the balance due within 15 days of the mailing of the statement following the month in which the policy was written. In August 2008, FMC began to notice that IBSL was selling premiums lower than FMC's rating guidelines. IBSL owed FMC approximately $186,000.00, which was due on August 15, 2008. IBSL sent FMC a check, which was returned for insufficient funds. FMC contacted IBSL and was assured that the check was returned due to a clerical error and an error by the bank. Assurances were given to FMC that funds would be transferred to FMC the following day; however, FMC did not receive payment until five days later. In September 2008, Joseph Valuntas (Mr. Valuntas), the chief operating officer for FMC, paid a visit to Mr. Holliday, III, and Mr. Holliday, IV. Mr. Valuntas expressed his concerns about the delay in receiving payment in August. He also pointed out that IBSL had taken some risks which were not rated properly and that there were some risks in which IBSL was not following the underwriting guidelines. After his visit with the Hollidays, Mr. Valuntas wrote a letter to IBSL, restricting IBSL to writing in Florida and limiting the amount of gross written premium to no more than $100,000.00 per month. IBSL did not adhere to Mr. Valuntas' instructions. An example of IBSL's conduct involved the writing of a policy for Miami Sunshine Transfer, which is a risk category designated as public delivery. Public delivery was not a standard that FMC insured and, as such, was not covered by FMC's reinsurance. Beginning on or about September 21, 2008, FMC began getting complaints from policyholders and retail agents about cancellations of policies that had been paid timely and in full. Although the retail agents had paid the premiums in full to IBSL, IBSL had not forwarded the premiums to FMC. By October 2008, IBSL owed FMC approximately $120,000.00 in past due premiums. FMC officially terminated the IBSL agreement in October 2008. IBSL sued FMC for breach of contract. On December 22, 2008, FMC received a check from IBSL in the amount of $25,122.80, but IBSL did not specify what premiums were being paid by the check. From February 1, 2006, through November 20, 2008, IBSL had a business relationship with Markel International Insurance Company Limited (Markel), an entity for which IBSL was writing insurance. IBSL was a coverholder for Markel, meaning that IBSL could produce insurance business for Markel and had the authority to collect and process premiums and bind insurance on Markel's behalf. Once the premiums were collected by IBSL, they were to be reported to Markel, and, within a maximum of 45 days, IBSL was to remit to Markel the aggregate gross written premiums less IBSL's commission. T. Scott Garner (Mr. Garner) is an expert auditor and financial analyst who currently works for Northshore International Insurance Services (Northshore), an insurance and reinsurance consulting firm. Markel retained Mr. Garner to determine the amount of money that IBSL should have sent to Markel for business transacted by IBSL for the period between February 1, 2006, and November 20, 2008. In doing his analysis, Mr. Garner used the bordereauxs which IBSL prepared and provided to Markel. Bordereauxs are monthly billing reports or accounts receivable reports. Mr. Garner also used data from Omni, which is a software system that was used by IBSL. Mr. Garner used the following procedure to determine what IBSL owed Markel. He determined how much risk IBSL wrote during the time period, that is, the gross written premium. He identified the amount of money that Markel had received from IBSL for the time period. Next he determined the amount that should have been received from IBSL, the gross written premiums minus IBSL's commissions. He compared what should have been remitted to Markel with the amount that was actually received by Markel. Based on his analysis, Mr. Garner calculated that IBSL owed Markel $1,208,656.61. Mr. Garner's analysis is credited. Respondent submitted a FSLSO Compliance Review Summary, which was done by the Florida Surplus Lines Office. At the final hearing, Mr. Holliday, III, viewed the report to mean that Markel was incorrect in the amount of money that was owed to it by IBSL. The report does not indicate that the policies on which the premium variances were noted were policies issued by Markel. Additionally, in his review, Mr. Garner eliminated duplicate transactions in determining the amount owed to Markel. The report did give a long list of policies, which should have been reported to Florida Surplus Lines Office, but IBSL had failed to report the policies.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered finding that Respondents committed the violations alleged in Counts I through V of the Administrative Complaints, dismissing Count VI of the Administrative Complaints, and revoking the licenses of Respondents. DONE AND ENTERED this 15th day of October, 2010, in Tallahassee, Leon County, Florida. S SUSAN B. HARRELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of October, 2010.
Findings Of Fact On September 8, 1987, the Department of Insurance received a letter dated September 1, 1987, from Joseph F. Kinman, Jr., which stated: Another insurance agent (Daniel Bruce Caughey) from Pensacola, Florida and his incorporated agency (Caughey Insurance Agency, Inc.) are refusing to forward premium payments on to Jordan Roberts & Company, Inc. despite a final judgment for such amounts here in Hillsborough County Circuit Court. Enclosed is a copy of the Final Judgment entered August 13, 1987, as well as a copy of the Complaint. We represent Jordan Roberts & Company, as well as Poe & Associates, Inc. here in Tampa, Florida. In approximately August of 1982, Daniel Bruce Caughey and Caughey Insurance Agency, Inc. entered into a brokerage agreement with Jordan Roberts & Company, Inc. wherein Mr. Caughey and the Agency were to collect premiums on behalf of Jordan Roberts & Company, Inc. and in turn, Mr. Caughey and the Agency were to receive commissions. Mr. Caughey signed an Individual Guarantee Agreement on October 21, 1983, guaranteeing that Brokerage Agreement with Caughey Insurance Agency, Inc. Mr. Caughey and the Agency failed to forward the insurance premiums collected on behalf of Jordan Roberts & Company, Inc. despite repeated demands and inquiries. Finally, a lawsuit was filed against Mr. Caughey and the Agency in the Circuit Court of the Thirteenth Judicial Circuit of the State of Florida, in and for Hillsborough County in December of 1986. Final judgment for Jordan Roberts & Company, Inc. against Mr. Caughey and the Agency was entered on August 13, 1987, for an amount of $6,595.94. Mr. Caughey and his Agency have unlawfully withheld monies belonging to an insurer, Jordan Roberts & Company, Inc. and, accordingly, appear to be in violation of Florida Statutes 626 et seq. Jordan Roberts & Company, Inc. has a judgment for unpaid insurance premiums against Mr. Caughey and the Agency, however, Mr. Caughey and the Agency refuse or fail to pay over to Jordan Roberts & Company, Inc. premium funds rightfully belonging to Jordan Roberts & Company, Inc. Accordingly, we would respectfully request that your office conduct an investigation of Mr. Caughey and the Caughey Insurance Agency, Inc. Enclosed with this letter were copies of the complaint and final judgment in the circuit court case, Case No. 86-21454. As found in the main administrative case, Case No. 89-2651: In Count 1, JORO's complaint [in Case No. 86-21454] alleges the existence of a brokerage agreement between JORO and Caughey Insurance Agency, Inc., entered into "[o]n or about April 27, 1982"; execution and delivery of respondent's guarantee "[o]n or about October 21, 1983"; and the agency's indebtedness "for premiums on policies underwritten by [JORO] for the sum of $20,975.36." Petitioner's Exhibit No. 3. In Count II, the complaint also alleges execution and delivery of a promissory note "[o]n or about October 21, 1983," without, however, explicitly indicating its relationship (if any) with the guarantee executed the same date. Petitioner's Exhibit No. 3. The final judgment does not specify which count(s) JORO recovered on. Petitioner's Exhibit No. 4. Attached to the complaint are copies of the promissory note, executed by "CAUGHEY INSURANCE AGENCY, INC., By: D B Caughey Vice President"; the guarantee, executed in the same way; and the brokerage agreement, executed on behalf of Caughey Insurance Agency by "William C. Caughey, President." Although the Individual Guarantee Agreement names respondent as guarantor in the opening paragraph, the corporation is shown as guarantor on the signature line. The complaint does not allege and the judgment does not recite that respondent personally failed to remit premiums but says he is responsible as an officer of the agency. Without any further investigation, as far as the record shows, the Department of Insurance filed a complaint amended on April 24, 1989, to allege, inter alia, that "[o]n or about August 19, 1982 Caughey Insurance Agency, Inc. entered into a brokerage agreement with Jordan Roberts and Company, Inc. . . . requir[ing] Caughey Insurance Agency, Inc. to remit premiums, unearned commissions and additional premiums to Jordan Roberts and Company, Inc."; and that respondent "personally guaranteed the [agency's] obligation under this agreement in" writing, but "failed to remit five thousand five dollars and forty-four cents due under th[e] agreement" for which sum Jordan Roberts and Company, Inc. obtained judgment. After a formal administrative hearing, a recommended order was entered on April 2, 1990, recommending dismissal of the administrative complaint, because "ambiguities in the court papers do not clearly and convincingly rule out the possibility that the court's judgment rests on the dishonored promissory note . . . [rather than] a breach of respondent's [here petitioner's] fiduciary responsibilities." In its final order, the Department dismissed the administrative complaint; Daniel Bruce Caughey was the prevailing party in that case. The parties have stipulated that "Daniel B. Caughey qualifies as a small business party as defined in Section 57.111(3)(d), Florida Statutes." The parties also stipulated that the "total value of the reasonable attorney's fees and costs at issue is $2,830."
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: At all times relevant hereto, respondent, Ralph Edward Carter, was licensed and eligible for licensure as a life and health insurance agent and general lines agent - property, casualty, surety and miscellaneous lines by petitioner, Department of Insurance and Treasurer (Department). When the events herein occurred, respondent was licensed as a property and casualty insurance agent for Bankers Insurance Company (BIC) and Underwriters Guarantee Insurance Company (UGIC). In March 1987 respondent purchased an insurance franchise and began operating an insurance firm under the corporate name of Mr. Auto of South St. Petersburg, Inc. Records on file with the Department of State reflect that effective June 25, 1988 the name of the corporation was changed to Reliable Insurance of South St. Petersburg, Inc. Since February 1989 the business has been located at 3135 18th Avenue, South, No. C- 3, St. Petersburg, Florida. The corporation was primarily engaged in doing business as a general lines insurance agency. Respondent has been licensed as an agent since 1968, and during his tenure as an agent, has worked in sales with several large insurance companies. In January 1988 Betty Andrews purchased from respondent liability and property damage coverage on her two automobiles, a 979 Ford station wagon and a 1980 Chrysler. The insurance was written through UGIC and was effective for the year beginning January 8, 1988. Shortly after May 16, 1988 Andrews received a notice from UGIC reflecting that she owed an additional $38.90 on her policy. For some undisclosed reason, Andrews did not pay the additional premium owed. On July 6, 1988 Andrews visited respondent's office for the purpose of adding comprehensive and collision coverage on her two automobiles. After respondent quoted a rate, she agreed to purchase the additional coverage, filled out an application, and gave respondent two checks totaling $166. These monies were deposited into respondent's business account. The balance was to be paid in three monthly payments of approximately $55 each month through a finance company. Respondent gave Andrews a document entitled "Receipt and Binder Certificate" reflecting she had comprehensive and collision coverage with "Bankers" effective from July 6, 1988 to January 6, 1989. "Bankers" was in fact Bankers Insurance Company. When Andrews did not receive a policy from BIC, she attempted to contact respondent on several occasions to ascertain its whereabouts. Andrews could not recall when or how many times she telephoned respondent's office but indicated she was never able to reach him. This was probably because respondent operated a one-man office with no clerical help and was frequently absent from his office. In late August 1988 Andrews received a notice from UGIC advising that UGIC intended to cancel her policy effective September 7, 1988 because she failed to pay the $38.90 premium still due. At about this same time Andrews' husband sold the station wagon and purchased a truck. Accordingly, Andrews needed to transfer her insurance to the new vehicle. She went to respondent's office in early September 1988 and asked him why she had never received the new policy. She also asked him to find out why her existing policy was being cancel led and requested him to transfer coverage from the station wagon to the new truck. In Andrews' presence, respondent made a telephone call to UGIC and learned that Andrews' husband had failed to disclose on the insurance application that he had received a traffic ticket. This in turn caused a $38.90 increase in the annual premium, and because that amount had not been paid, the policy was being cancelled. Respondent attempted to persuade UGIC to reinstate the policy but was unsuccessful. Dissatisfied, Andrews told respondent she intended to file a complaint with the Department of Insurance. Respondent then wrote her a check for $166 which represented a full refund of her monies. There is no evidence to establish that respondent intended to defraud Andrews or to evade the requirements of the insurance code. Despite the fact that Andrews did not receive a policy, she was covered until September 1988 by her original policy and respondent's errors and omissions policy. Through testimony by an underwriting manager for BIC, David R. Wardlow, it was established that respondent had entered into a correspondent agreement with an agent of BIC. Wardlow's review of BIC's records reflected that BIC had never received Andrews' application and premium nor was a policy written on her behalf. However, there was no evidence to establish how promptly respondent was required to remit a new application and premium to BIC or whether respondent violated BIC policy by retaining the application and monies for some sixty days until he learned that the existing policy had been cancel led. Respondent readily conceded that he never forwarded the application and premium monies to BIC. He explained his actions by pointing out that after Andrews left his office he decided to secure the coverage from UGIC rather than BIC in order to have the entire coverage with one company at a cheaper rate. When he later learned that UGIC intended to cancel Andrews' policy for nonpayment of premium, he thought he might be able to persuade UGIC to reinstate the policy but was unsuccessful. He offered no excuse except inadvertence as to why he had not promptly followed up on Andrews' application. Petitioner also presented the testimony of Johnnie Ruth Bell who purchased automobile insurance from respondent in October 1988. Although Bell's testimony was often vague and confusing, the following facts were established. On or about October 1, 1988 Bell went to respondent's office to purchase full insurance coverage on her 1987 Toyota Corolla. After discussing various options with respondent, Bell agreed to purchase a policy issued through Redmond-Adams, a Sarasota underwriter for UGIC. Bell gave respondent a check in the amount of $227 as a down payment and agreed to finance the balance through a finance company at a rate of $78 per month for eight months. These monies were deposited into respondent's bank account. Respondent issued a "Receipt and Binder Certificate" reflecting coverage with "Underwriter - Redmond Adams". Because Bell had financed the car with a local bank, it was necessary for respondent to furnish the bank with evidence of insurance. Through inadvertence, but not intentionally or willfully, respondent misplaced the application and never forwarded the application and premium to the insurance company nor did he notify the bank of Bell's insurance coverage. However, Bell was covered during this period of time by respondent's errors and omissions policy. After Bell did not receive a copy of her policy from Redmond-Adams, but received a number of telephone calls and notices from her bank, she met with respondent around December 2, 1988. Respondent accepted an additional $156 in cash from Bell and issued her a new binder effective that date which was identical to the first binder except for the date. It is unknown why the additional money was collected. He then tore up the first binder. When Bell had still not received her policy by April 1989, she filed a complaint with petitioner. After respondent learned that Bell had filed a complaint, he contacted her in May 1989 and refunded all of her monies. There was no evidence to establish how promptly respondent was required to submit applications and premiums to UGIC or how that company construed the term "in the regular course of business" in the context of agents remitting applications and premiums. Respondent blamed his problems on the fact that he is the sole employee of his office and, according to his estimate, services some 500 active clients per year and more than 1,500 accounts. He desires to continue in the insurance profession and points to the fact that, of the many insurance transactions handled by him over the last twenty-two years, the Andrews and Bell transactions are the only two that have spawned any significant problems. Moreover, he has never been disciplined by petitioner during his tenure as an agent. Respondent asks that any penalty be limited to a period of probation during which time he can have the opportunity to improve his management and bookkeeping skills. There was no evidence to establish whether respondent's conduct demonstrated a lack of fitness or trustworthiness to engage in the insurance profession. As to respondent's knowledge and technical competence to engage in the transactions authorized by his licenses, he conceded he lacks training in bookkeeping and management skills, both needed for a general lines agent, but denied that he lacks the necessary skills in the sales part of the business. This was not contradicted. Finally, respondent has taken curative steps to insure that applications are not misplaced and the customer receives the requested insurance.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent be found guilty of violating sections 626.611(8) and 626.734 and that his general lines license be suspended for thirty days. All other charges should be dismissed with prejudice. DONE AND ORDERED this 13 day of March, 1990, in Tallahassee, Leon County, Florida. DONALD R. ALEXANDER 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 13 day of March, 1990. APPENDIX Petitioner: 1-4. Partially adopted in finding of fact 1. 5-7. Partially adopted in finding of fact 3. 8-11. Partially adopted in finding of fact 6. Note - Where a finding has been partially adopted, the remainder has been rejected as being irrelevant, unnecessary, cumulative, subordinate, not supported by the evidence, or a conclusion of law. Respondent: A Partially adopted in findings of fact 5 and 6. Rejected as being irrelevant. Partially adopted in finding of fact 3. Partially adopted in finding of fact 5. Partially adopted in finding of fact 6. Rejected since respondent did not move his office until February 1989. Partially adopted in finding of fact 4. Partially adopted in finding of fact 6. I. Partially adopted in findings of fact 3 and 8. Partially adopted in findings of' fact 7 and 8. Partially adopted in findings of fact 6 and 7. Partially adopted in finding of fact 10. Partially adopted in finding of fact l. Partially adopted in finding of fact 10. Partially adopted in finding of fact 1. Note - Where a finding has been partially used, the remainder has been rejected as being irrelevant, cumulative, unnecessary, subordinate, not supported by the evidence or a conclusion of law. COPIES FURNISHED: Honorable Tom Gallagher Insurance Commissioner Plaza Level, The Capital Tallahassee, FL 32399-0300 Willis F. Melvin, Jr., Esquire 412 Larson Building Tallahassee, FL 32399-0300 Richard J. DaFonte, Esquire O. Box 41750 St. Petersburg, FL 33743-1750 Donald A. Dowdell, Esquire General Counsel Department of Insurance The Capitol, Plaza Level Tallahassee, FL 32399-0300 =================================================================
The Issue The issues are whether Respondent violated provisions of chapter 626, Florida Statutes, regulating insurance agents in Florida, as set forth in the Administrative Complaint, and if so, what sanction is appropriate.
Findings Of Fact At all times relevant to the complaint, Mr. Matthias was licensed in Florida as an insurance agent, including variable annuity and health. Mr. Matthias entered into an agreement with United in March 2011 to collect premiums on debit insurance policies. Mr. Matthias’s job was to visit customers each month to collect the premiums, initial the customer’s receipt book to show proof of payment, and remit the premiums to United. About half of these customers paid in cash. Mr. Matthias reported to Mr. Khalangi Ewers, who supervised five other agents in addition to Mr. Matthias. Every month, Mr. Ewers reviewed the accounts on which the monthly premium had not been paid. In a usual month, this would vary from between five to eight percent. However, in early 2013, Mr. Ewers calculated that United had not received payments from 30 percent of Mr. Matthias’s accounts. Mr. Ewers called Mr. Matthias and asked him why the premiums had not been received by United. When Mr. Matthias responded that the customers had not paid, Mr. Ewers decided to investigate by telephoning a few accounts that normally paid on time. He was told by each of the customers that they had paid Mr. Matthias. Mr. Ewers then conducted a standard audit of Mr. Matthias’s accounts by visiting the homes of each of his customers and reviewing their receipt books. Mr. Ewers compared the amounts Mr. Matthias had indicated that he had received (by initialing that customer’s receipt book) with the amounts actually turned in to United. Over the five-week period beginning on January 14, 2013, and ending February 15, 2013, a total deficiency of $5,304.17 was revealed by the audit. United continued to provide coverage to all of these customers. Mr. Matthias admitted to United that customers had paid him but that he had not remitted these amounts to United. At hearing, Mr. Matthias did not dispute the deficiency, but sought to show that he had made restitution. On January 7, 2013, Mr. Matthias gave Mr. Ewers a money order in the amount of $388.62. On January 24, 2013, he gave him another money order for $215.00 and, on February 11, 2013, gave him a third money order for $800.00. Mr. Ewers testified that the first two of these payments were credited to accounts before the calculation of the deficiency. All parties agree that the $800 payment should be applied to reduce the $5,304.17 deficiency. It is also undisputed that Mr. Matthias paid some additional cash to Mr. Ewers. However, there is a conflict in the testimony as to the amount and purpose of any additional payments. Mr. Ewers testified that he made a personal loan to Mr. Matthias in the amount of $1,200.00 because he was sympathetic to the personal and financial difficulties Mr. Matthias was having. No written evidence of a personal loan was introduced into evidence, however. Mr. Ewers testified that Mr. Matthias gave him a cash payment of $900.00 (less $78.20 credited to a specific United account) in partial repayment of that personal loan. On the other hand, Mr. Matthias testified that he never borrowed any money from Mr. Ewers. He testified that Mr. Ewers went with him on several occasions to cash his pay checks in order to collect amounts due to United and that Mr. Ewers accepted not only the $900.00, but also two additional cash payments of $220.00 and $240.00 on behalf of United, but that these sums were never credited to reduce his deficiency. The Department did not show by clear and convincing evidence that payments made to Mr. Ewers were made to repay a personal loan. However, even if Mr. Matthias is given credit for all payments he claimed to have made, totaling $2,675.42, along with a credit of $2,064.26 for his forfeited bond and interest, he still has not repaid the full $5,304.17 deficit he owed to United, despite its demands that he do so. In collecting payments from United’s customers and failing to timely remit these funds to United, Mr. Matthias demonstrated a lack of fitness or trustworthiness to engage in the business of insurance. It was fraudulent and dishonest for Mr. Matthias to collect money owed to United, not send it to them, and initially claim that the customers had not paid him when United asked him about these accounts. Mr. Matthias engaged in misappropriation, conversion, and unlawful withholding of moneys belonging to United that he had received in the course of his insurance business. Mr. Matthias received premiums belonging to United under his insurance license, but failed to account for these trust funds or pay them to United as required. No information was presented to indicate that Mr. Matthias’s license has ever been subjected to any prior disciplinary orders or that he has received prior warnings from the Department.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services enter a final order finding Respondent in violation of sections 626.561(1), 626.611(7), 626.611(9), and 626.611(10), Florida Statutes, and suspending his license for nine months. DONE AND ENTERED this 17th day of December, 2014, in Tallahassee, Leon County, Florida. S F. SCOTT BOYD 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 December, 2014.
The Issue Whether the workers' compensation insurance rate filing made by Petitioner, as amended on September 21, 2001, should be approved.
Findings Of Fact The Parties NCCI is a rating organization within the meaning of Section 627.041(3), Florida Statutes. NCCI is licensed by the Department pursuant to Section 627.221, Florida Statutes, to make rates for workers' compensation insurance, and has been, for decades, the only rating organization licensed to perform this function in Florida. NCCI also acts as the statistical agent for the State. In that capacity, NCCI collects a variety of workers' compensation insurance data from its (approximately 300) member companies, each of which is authorized to provide workers' compensation insurance in Florida, and reports such data to the Department. The Department is an agency which generally administers Florida's insurance laws. With respect to workers' compensation insurance, the Department reviews rate filings in accordance with the provisions of Part I, Chapter 627, Florida Statutes, (2001), also known as the Rating Law (Rating Law). The Consumer Advocate is appointed by the Insurance Commissioner pursuant to Section 627.0613, Florida Statutes, to represent the general public of the state before the Department. Nature of the Proceedings and Burden of Proof This is a de novo proceeding to review NCCI's Revised Rate Filing. The burden is upon NCCI to show by a preponderance of the evidence that its Revised Rate Filing would result in rates that are not excessive, inadequate, or unfairly discriminatory within the meaning of Section 627.062(1), Florida Statutes (2001). Application of the Rating Law As the issues were refined over the course of the proceedings, there is no dispute as to whether the Revised Rate Filing, if approved, would result in inadequate or unfairly discriminatory rates. It would not. Rather, the dispute concerns whether the Revised Rate Filing would produce rates which are excessive. The Rating Law governs the process by which premiums for all businesses required to maintain workers' compensation insurance are proposed, and thereafter approved or disapproved by the state. This process is often referred to as ratemaking, and relies heavily upon individuals credentialed in actuarial science (actuaries). Unlike other types of mathematics, algebra or arithmetic, for example, actuarial science does not purport to be able to come up with one and only one correct answer. Rather, actuaries are statisticians who seek to estimate on a prospective basis insurance rates which fall within a "range of reasonableness." The range of reasonableness is legally defined to be somewhere between rates that are neither inadequate nor excessive. Put another way, the law recognizes the right of people who invest in the business of providing workers' compensation insurance to receive a fair rate of return on their investments, but the law does not permit a rate of return which is unreasonably high in relation to the risk involved. Actuaries do not contend that there can be only one correct rate at any given time. Instead, there may be a large area of overlap in the range of reasonableness recognized by different actuaries with respect to the same set of facts. There is substantial disagreement among actuaries and others as to the central issue in this case---what constitutes an unreasonably high rate of return---and how to draw the line between a reasonable and an unreasonable rate of return. In part, this is so because actuarial "science" is not science at all: while all practitioners of the science of chemistry agree about the formula by which water is produced, not all actuaries agree about the formula to be applied to various components of the ratemaking process. The ratemaking process is not like the multiplication tables---it cannot be learned by rote. Ratemaking requires the constant exercise of informed professional judgment. Actuaries' jobs involve making educated guesses about things which will happen in the future. To take the most basic element of guessing which is unique to workers' compensation ratemaking, actuaries must guess as to how much money will be received as premiums under policies to be written under any given rate filing, and how much money will be paid out in benefits under claims made on these policies. These and numerous other complex variables are considered in the ratemaking process and have significant impacts upon the range of reasonableness of insurance premiums. Good faith differences of opinion exist, and to a large degree, actuarial judgment is affected by whether, and to what extent, a particular actuary is employed by insurance companies, or by agencies or businesses with a broader or narrower focus. A difference of opinion on even one of the factors involved in ratemaking can yield a substantial difference in the premium of a single business from one year to the next. Across the spectrum of businesses which are required to purchase workers' compensation insurance, the difference can amount to millions of dollars. In its Revised Rate Filing, NCCI sought a premium level increase, made up of individual components which were expressed in the Revised Rate Filing as follows: Experience, Trend & Benefits 5.4% Experience 1.9% Trend 2.8% Benefits 0.7% Total 5.4% Production and General Expenses 0.8% Production 0.7% General 0.1% Total 0.8% Taxes and Assessments 0.1% Profit and Contingencies 1.6%1 The Rating Law specifies factors and standards to be considered by the Department in deciding whether a rate filing should be approved or disapproved. See Sections 627.062 (2)(b); 627.062(2)(e)(1); and 627.072, Florida Statutes. The factors and standards relevant to the Revised Rate Filing were appropriately taken into account by the Department in its review. In entering its Order on Rate Filing, the Department had the benefit of evidence in the form of presentations which analyzed relevant statutory criteria, and which were organized along the same lines for the public hearing and for the final hearing in this case. To the extent possible, the undersigned has organized this Recommended Order in a similar format. The most significant disputes between the parties regarding the factors relevant to the Revised Rate Filing are: Whether the experience and trend adjustment factors proposed by NCCI, which translate into an overall premium level increase of 1.9% and 2.8%, respectively, are reasonable and would not result in excessive rates. Whether an overall premium level increase of 0.8% for the production and general expenses component is reasonable and would not result in excessive rates. Whether an overall premium level increase of 1.6% for the profit and contingencies component is reasonable and would not result in excessive rates. Other issues were less seriously disputed, or not disputed at all. Both disputed and undisputed issues are, to the extent necessary, addressed separately below. NCCI's Revised Rate Filing requests an overall premium level increase of 8.0% for the industrial classifications and a 10% overall premium level increase for the federal classifications.2 The federal classifications constitute about 20 of the approximately 600 total classifications. This translates to roughly $20 million of the approximately $2.7 billion in total workers' compensation premium dollars in Florida, or less than 1% of the market. Although the parties did not explicitly say so, it is apparent that NCCI almost arbitrarily tacked on an additional 2% upon its proposed industrial class increase, which forms the main focus of the Revised Rate Filing, in order to come up with a proposed figure for the federal classifications. The Department did not object to this procedure from an actuarial science standpoint. Rather, it concedes that if the Department were to approve NCCI's industrial class increase as filed, it would be appropriate to approve the federal classifications increase at the proposed 10% level. Federal classifications will be treated separately in this Recommended Order. NCCI's Revised Rate Filing also seeks an increase in the so-called expense constant from $200 to $220. If granted, this translates into an overall premium level offset of 0.1%. In this setting, the expense constant is an amount which NCCI has determined should be collected to cover the expenses of issuing a workers' compensation insurance policy regardless of the type or amount of risk and associated premium collected from employers. The expense constant is essentially an accounting device which arbitrarily assumes that the overhead associated with getting every piece of new workers' compensation business is identical. Because the expense constant is not intended to result in a premium level increase, NCCI offsets the requested increase in the expense constant against the total premium level increase. After taking into account an offset of 0.1% for the proposed change in the expense constant, the overall net rate level increase requested in the Revised Rate Filing for the industrial classifications is 7.9%.3 NCCI's undisputed evidence supports an increase in expense constant from $200 to $250; however, NCCI seeks to raise the expense constant to a lesser amount, $220. The unrebutted evidence in this case supports, by a preponderance of the evidence, a finding that an increase in the expense constant as proposed by NCCI is reasonable and does not result in excessive rates. The manner in which NCCI proposed to spread a premium increase across the hundreds of industrial classifications is not disputed by the Department. Under NCCI's plan, 8% is an overall premium level increase, which means that rates for some types of businesses would go up even higher than 8% over current levels, and rates for other types of businesses would fall. The crux of the dispute is the reasonableness of certain key components which produce the 8% overall premium level increase. Each of these key components of the Revised Rate Filing is therefore separately considered. Experience, Trend and Benefits NCCI filed for an overall premium level increase of 5.4% for the experience, trend and benefits component of the Revised Rate Filing. This is by far the single largest component of the overall 8% increase sought by NCCI in the Revised Rate Filing. Before the Department and in these proceedings, NCCI sought to prove that a 5.4% increase over current rates was required, as of January 1, 2002, to produce enough premiums from policies issued on or after that date to cover the reasonably expected cost of claims arising under those policies. After careful consideration of the testimony of all of the expert actuaries and economists who testified on behalf of the parties, the documents relied upon by these experts, and numerous other documents in the record, including, but not limited to, deposition testimony and interrogatories, documents and exhibits introduced at the final hearing, the undersigned concludes that a preponderance of the evidence does not support a finding that the 5.4% increase sought by NCCI under the category of experience, trend, and benefits is reasonable and would not result in excessive rates. Part of NCCI's failure of proof relates to the method by which the so-called trend adjustment is computed. The ratemaking process seeks to address what is known as loss development, an essential component to forecasting trend.4 The process by which premiums and losses are properly adjusted, in actuarial terms, requires that they first be "brought on-level" with current rates and benefit levels; then the losses are developed to what actuaries call an "ultimate level." The manner in which this calculation was achieved was a disputed issue between the parties. The Department rejected NCCI's methodology in its Order on Rate Filing, principally because NCCI, for the first time in 20 years,5 elected to compute loss development factors by calculating the average change in the loss reports for the most recent three years for which data was available. Previously NCCI had used a two-year average in computing loss development factors in its annual rate filings. By using a three-year average for the nineteenth ultimate loss development factor (also referred to as the tail factor) in the Revised Rate Filing, NCCI achieves a tail factor which drives the rate increase substantially upward, an approach which the Department disapproved. Considering the entire record, including the credentials, professional history, demeanor of the witnesses while testifying on this and other factors of the parties' disputes over various aspects of the rate-making process, together with the exhibits and prior testimony related to this issue, the undersigned is of the view that NCCI has failed to sustain its burden to prove by a preponderance of the evidence that its methodology in calculating the tail factor, as applied to this Revised Rate Filing, has been adequately justified so as to prove by a preponderance of the evidence that it is reasonable and will not produce rates which are excessive. Trend Adjustment After adjusting the 1999 and 2000 calendar-accident year data to the current level of premiums and benefits, and then developing those losses to an ultimate level, the final adjustment which NCCI made to the loss experience data was to apply a trend analysis to account for expected changes in premiums and benefits from the experience period to the forecast period, which begins January 1, 2002. In so doing, NCCI argues for a trend factor of 1% in the experience, trend and benefits component of the Revised Rate Filing. The trend factor which has been approved by the Department for rates currently in effect is 0.5%, so the Revised Rate Filing seeks an additional 0.5% for the trend factor. At a trend factor of 1%, the Revised Rate Filing produces an overall premium level increase of 2.8%. The purpose of trending analysis is described in the Revised Rate Filing as follows: As noted above, the filing relies primarily on the experience from calendar- accident years 2000 and 1999. However, the proposed rates are intended for use with policies with effective dates starting on January 1, 2002. It is necessary to use trend factors that forecast how much the future of Florida workers' compensation experience will differ from the past. These trend factors measure anticipated changes in the amount of indemnity and medical benefits as compared to anticipated changes in the amount of workers' wages. For example, if benefit costs are expected to grow faster than wages, then a trend factor greater than zero should be applied. Conversely, if wages are expected to grow faster than benefit costs, then a trend factor less than zero is indicated. (Petitioner's Exhibit 1, p. 4). Upon consideration of the entire record as it relates to trend, which includes, but is not limited to, consideration of the expert testimony on same, including the credentials and demeanor of the experts who testified concerning these matters, (including their expectations with respect to inflationary pressures; changes in the frequency of claims; changes in the severity of claims; availability of indemnity awards; and types of medical services being provided and expected to be provided in the future) as well as the numerous exhibits relating to trend, and in particular Petitioner's evidence and arguments concerning "Florida Total Loss Ratio,"6 the undersigned is of the view that these elements of the record, singly or in combination, are insufficient to tilt the balance in favor of the 1% trend factor NCCI seeks. They do, however, establish by a preponderance of the evidence that the current trend factor of .5% is justified. While the Department presented some evidence that a flat trend, or even a slightly negative trend, could be actuarially supported, the Department's evidence was insufficient to overcome NCCI's proof that the current trend factor is reasonable given the currently verifiable measures of claim frequency and claim severity. Change in the Medical Fee Schedule (Benefits) The Revised Rate Filing seeks an overall premium level increase of 0.7% as the result of a change in the Medical Fee Schedule. In general, the Medical Fee Schedule provides limits upon the amounts at which physicians and medical providers may be reimbursed for specific procedures and services performed for workers' compensation insurance claimants. Following the original Rate Filing, a statutorily- created entity known as the Three Member Panel7 voted in favor of changes in the Medical Fee Schedule. NCCI was aware of the exact nature of the proposed changes, which had been under consideration for some period of time prior to the Revised Rate Filing. Similarly, the Three Member Panel was aware, at the time the changes were approved, that NCCI had reasonably concluded that the impact of adopting such changes upon workers' compensation insurance rates would be an overall increase of 0.7%. In its Order on Rate Filing, the Department disapproved NCCI's request for the 0.7% premium level increase for the change in the Medical Fee Schedule, citing a report by the Workers' Compensation Research Institute (WCRI) entitled Benchmarking Florida Workers' Compensation Medical Fee Schedules. The WCRI report estimated that the impact of the change in the fee schedule will be a decrease of 2% in the provider fees, a decrease which should yield a decrease in rates of 0.6%. However, by the time of the final hearing in this case, WCRI had retracted its report as follows: The Flash Report [initial WCRI report] concluded that the proposed new Florida fee schedule would have little impact on overall costs estimated to be a reduction of 2 percent. This finding remains that the new fee schedule would have little impact on overall costs, but the estimate is revised to be an increase of 2.9 percent. There was unrebutted evidence that the WCRI's revised estimate would in fact support an overall premium level increase of 0.8%, as opposed to the 0.7% increase requested by NCCI in the Revised Rate Filing. However, the WCRI report was not relied upon by NCCI in the Revised Rate Filing and it is not an appropriate subject for fact-finding in this forum. Instead, the undersigned finds that NCCI has demonstrated that its request for a 0.7% increase based solely upon the change in the Medical Fee Schedule is justified by a preponderance of the evidence and will not result in excessive rates. Production and General Expenses NCCI has requested an overall premium level increase of 0.8% for the production and general expenses component of the Revised Rate Filing, of which .7% is allocated to production and 0.1% to general expenses. The Department disapproved the method by which NCCI calculated these proposed increases for the production and general expense factors--averaging the countrywide expenses over the three most recent years for which fully analyzed data is available: 1997, 1998, and 1999. Taking into account the experience, background and demeanor of the expert witnesses who testified regarding this issue, the undersigned is unable to say that NCCI's case is more persuasive. Therefore, NCCI has failed to show, by a preponderance of the evidence, that its requested increase for production and general expenses is justified, and will not result in excessive rates. Taxes and Assessments NCCI has requested an overall premium level increase of 0.1% for the taxes and assessments component of the Revised Rate Filing. The Department does not dispute that this figure reflects an expected increase in the Workers' Compensation Guaranty Association assessment from 1.75% to 2.00% and a reduction in the General Administration assessment from 2.75% to 2.56% and the evidence establishes the validity of these figures. Therefore, NCCI has shown by a preponderance of the evidence that the 0.1% proposed overall premium level increase allocated to taxes and assessments is reasonable and does not result in a excessive rates. Profit and Contingencies NCCI has requested an overall premium level increase of 1.6% for the profit and contingencies component of the Revised Rate Filing. The requested 1.6% overall premium level increase results from the use of a profit factor of negative 3.0% in the Revised Rate Filing. The profit and contingencies factor underlying the currently approved rates is negative 4.1%, and has been for the past six years. The resolution of the dispute regarding this component of the Revised Rate Filing centers around one's view of how to best determine the cost of capital, also known as rate of return, for policies to be written during the term of the Revised Rate Filing. The undersigned has carefully considered the exhibits and testimony reflecting the views of NCCI's experts, Dr. Martin Wolf and Dr. David Appel, and the testimony of the Department's expert, Dr. Richard Cohn, all well-credentialed economists who devote a substantial portion of their practices to the study of cost of capital in the context of workers' compensation rate making. The arguments in favor of the parties' respective positions are fairly summarized at pages 34-52 of Petitioner's Proposed Recommended Order and at pages 27-55 of the Department's Proposed Recommended Order. The undersigned is of the view that NCCI has not carried its burden of proof by a preponderance of the evidence to show that its proposed profit factor is reasonable and does not result in excessive rates. In rejecting the methodology employed by NCCI's experts, the Department has chosen to credit methodology used by Cohn and recently adopted by insurance regulators in the state of Massachusetts. NCCI has not made a persuasive legal or factual case for its argument that Florida regulators, in so doing, are acting outside their statutory authority. Policyholder Dividends One factor in the determination of the profit component, policyholder dividends, requires separate mention. The Department has historically required NCCI to exclude policyholder dividends from its profit calculation, at least on paper in its annual rate filing. At the final hearing, the Department claimed to not know why NCCI makes such an exclusion, a claim which the undersigned rejects in light of the fact that Florida law specifically provides for the use of policyholder dividends in calculating the profit factor, and doing so would work to NCCI's advantage in terms of justifying this or any other premium level increase sought. Section 627.072(1)(d), Florida Statutes, provides, in pertinent part: As to workers' compensation and employer's liability insurance, the following factors shall be used in the determination and fixing of rates: * * * (d) Dividends, savings or unabsorbed premium deposits allowed or returned by insurers to their policyholders, members, or subscribers; . . . The statute is consistent with Actuarial Standard of Practice No. 30, "Treatment of Profit and Contingency Provisions and the Cost of Capital in Property/Casualty Insurance Ratemaking" ("ASOP 30") which is an authoritative source in the field of actuarial science, and which explicitly includes policyholder dividends as a valid consideration in determining the profit factor. The Department's contention at the Final Hearing, through its chief actuary, that he still did not understand why NCCI excluded policyholder dividends from its calculation of the profit factor included in the Revised Rate Filing, while disingenuous, does not affect the Findings of Fact as to profit, because NCCI did not prove, by a preponderance of evidence, that NCCI "had adequately reflect[ed] investment income on unearned premium and loss reserves."8 Without such proof by a preponderance of evidence, it is impossible to tell what, if any, impact the Department's requirement that dividends be excluded had on the profit number used in the Revised Rate Filing. Thus, NCCI has failed to carry its burden to show, by a preponderance of evidence, that its proposed profit factor is reasonable and would not result in excessive rates. Federal Classifications NCCI has requested an overall premium level increase of 10% for the federal classifications. Based upon a review of the Order on Rate Filing and the record as a whole, it is apparent that the Department has disapproved the requested overall premium level increase for the federal classifications based upon the same grounds that it disapproved the requested overall premium level increase of 8% for the industrial classifications. For the reasons set forth above, the evidence establishes that NCCI has failed to prove by a preponderance of the evidence that its proposed components for experience and trend, production and general expenses, and profit and contingencies as set forth in the Revised Rate Filing are actuarially reasonable and would not result in excessive rates for the federal classifications; thus, NCCI has similarly failed to establish by a preponderance of the evidence that its requested overall premium level increase of 10% should be approved. However, NCCI has established by a preponderance of the evidence the validity of its proposed increases in medical benefits and taxes and assessments.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is recommended that: The Department enter a final order disapproving the Revised Rate Filing of an overall premium level increase of 8% for the industrial classifications and 10% for the federal classifications. DONE AND ENTERED this 12th day of April, 2002, in Tallahassee, Leon County, Florida. FLORENCE SNYDER RIVAS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 12th day of April, 2002.
The Issue Whether Respondent committed the violations alleged in the First Amended Administrative Complaint; and If so, what disciplinary action should be taken against him.
Findings Of Fact Based upon the evidence adduced at hearing, and the record as a whole, the following findings of fact are made: Respondent's Licensure Status Respondent is now, and has been at all times material to the instant case, a Florida-licensed life and health insurance agent. Counts I through VI At all times material to the instant case, Peter DeBello, Inc., d/b/a Emery Richardson Insurance (Corporation), a Florida corporation owned by Respondent's father, operated a general lines insurance agency (Emery Richardson Insurance) located in the state of Florida. The Corporation was formed to manage the assets of Emery Richardson, Inc., which assets Respondent's father had obtained through litigation. Respondent's father delegated to Respondent the authority to manage the affairs of the Corporation. The same day (in 1992) that the Corporation took possession of Emery Richardson, Inc.'s assets, it so notified the Department of Insurance (Department) by telephone. Shortly thereafter, Leo Joy, a Florida-licensed property and casualty insurance agent since 1961, was designated on a Department- provided form as the primary agent for Emery Richardson Insurance at its 240 Commercial Boulevard location in Lauderdale By The Sea, Florida, and the completed form was provided to the Department.3 At no time prior to the commencement of the instant administrative proceeding did Respondent himself personally notify the Department of the identity of Emery Richardson Insurance's primary agent. It was Mr. Joy who (in 1992) filled out the primary agent designation form and submitted it to the Department. Mr. Joy, however, did so on behalf of Respondent, who had verbally designated Mr. Joy as Emery Richardson Insurance's primary agent. Neither Respondent, Mr. Joy, nor any one else, has subsequently used the Department's primary agent designation form to advise the Department of Mr. Joy's continuing status as Emery Richardson Insurance's primary agent. In his capacity as president of the Corporation, Respondent, on behalf of the Corporation, in April of 1994, entered into an agreement (Agreement) with Ulico Casualty Company of Washington, D.C. (Ulico), which provided as follows: WHEREAS, the Applicant (Corporation), a licensed insurance agent and/or insurance broker, has heretofore obtained from the COMPANY (Ulico) or is desirous of obtaining from the COMPANY the placement of insurance for the Applicant's customers or principals, and WHEREAS, the COMPANY, using its facilities, has placed insurance for the Applicant or with whom Applicant has requested the placement of such insurance, NOW, THEREFORE, in consideration of the mutual promises herein contained, and for other good and valuable consideration, the receipt whereof is hereby acknowledged. It is mutually AGREED as follows: With reference to the placement of new insurance, Applicant shall submit to the COMPANY a separate application containing the name of each prospective insured, describing the risk to be considered for underwriting and binding. Applicant specifically understands and agrees that Applicant shall have no authority to authorize or write any insurance or bind any risk on behalf of the COMPANY without the prior written approval by a duly authorized representative of the COMPANY. With respect to any insurance heretofore placed with the COMPANY by the Applicant, and with respect to any insurance hereinafter placed by the Applicant, all premiums shall be payable to the COMPANY and such Applicant assumes and agrees to pay the COMPANY premiums on all the policies of insurance heretofore or hereinafter placed by Applicant with the COMPANY in accordance with the current statements rendered to the Applicant by the COMPANY, such payment to be made no later than 30 days after the month of issue of the insurance policy, or due date of any installment if issued on an installment basis, less any credits due to the Applicant for return premium, provided an appropriate credit memorandum therefor has previously been issued by the COMPANY to Applicant. In the absence of such credit memorandum, Applicant shall have no right of counterclaim or setoff with respect to any claimed credits due, but shall be required to establish entitlement to the same in a separate action. Applicant shall have the right, so long as Applicant is not indebted to the COMPANY, to deduct agreed upon commissions on each policy of insurance prior to remitting the remaining premium to the COMPANY. In the event that premiums on behalf of any insured party shall have been financed and refund of financed premiums are required from the COMPANY to the financing institution, Applicant shall forthwith refund and pay to the COMPANY all unearned commissions heretofore received with respect to such financed premiums. In the event that Applicant shall fail to make any payment to the COMPANY which is required to be made pursuant to this Agreement, within the time specified, the COMPANY shall have the right, at any time subsequent to the due date of payment, to cancel any policy on which the premium payments have not been remitted to the COMPANY, without prior notice to the Applicant, by sending notice of cancellation directly to the insured, except that Applicant shall continue to remain liable to the COMPANY for the payment of all premiums earned as of the date of cancellation which are collected by Applicant. Applicant represents that they are duly licensed as an insurance broker or agent for Casualty and Property Insurance as indicated in the States set forth below, and agrees that in the event that any license shall cease, terminate or be cancelled, that the Applicant will promptly notify the COMPANY accordingly. Applicant agrees, where required, to file at Applicant's expense, all necessary affidavits and collect all State or local premium taxes and to pay the same promptly to the respective taxing authorities on all insurance placed with the COMPANY, in accordance with the laws applicable in the State of licensing. No changes or modification of this Agreement shall be valid unless such change or modification is subscribed, in writing, by the COMPANY and Applicant. Ulico is one of approximately 47 insurance companies that Emery Richardson Insurance represents. In the past five years, Emery Richardson Insurance has received from clients in excess of seven or eight million dollars in premium payments, which it has deposited in its various checking accounts and then paid over to these insurance companies. Ulico is the only one of these 47 insurance companies to have experienced "problems" in receiving from Emery Richardson Insurance monies due. These "problems" are detailed below. On June 13, 1994, the Corporation opened a checking account (account no. 458-902279-9, hereinafter referred to as the "Account") with Savings of America at the bank's Hollywood, Florida, branch. The Peter Debello described on the signature card for the Account was Respondent's father. Respondent's father, however, through execution of a power of attorney, had authorized Respondent to act on his behalf in connection with the Account. On August 20, 1996, Respondent drafted and signed four checks drawn on the Account, which were made payable to Ulico: check no. 804, in the amount of $1,729.15, for "Teamsters #769, Policy #BOU 907"; check no. 805, in the amount of $1,071.65, for "Sheet Metal Appr. #32, Policy #CLU 668"; check no. 806, in the amount of $700.00, for "Sheet Metal #32, Policy #CLU 682"; and check no. 807, in the amount of $96.05, for "Painters L.U. 160, Policy #CLU 451." (These policies will hereinafter be referred to as the "Subject Policies.") On January 24, 1997, Respondent drafted and signed a check (check no. 882) drawn on the Account, in the amount of $7,500.00, which was also made payable to Ulico. Check nos. 804, 805, 806, 807,4 and 882 were sent to Ulico as payment for monies the Corporation owed Ulico (pursuant to the Agreement) for insurance coverage obtained from Ulico by the Corporation for its clients (as reflected in invoices Ulico sent the Corporation, which hereinafter will be referred to as the "Subject Invoices").5 At the time that he drafted and signed these checks and submitted them to Ulico, Respondent assumed that there were sufficient funds in the Account to cover the amounts of the checks. In drafting and signing these checks and submitting them to Ulico, Respondent did not make any statements or representations that he knew to be false or misleading. All five checks were returned by Savings of America unpaid, with the explanation, "insufficient funds," stamped on each check.6 (These checks will hereinafter be referred to as the "Dishonored Checks.") Ulico's premium collection manager, Gayle Shuler, spoke with Respondent, as well as with Mr. Joy, "many times" concerning the monies the Corporation owed Ulico. At no time did either Respondent or Mr. Joy indicate that they disputed the Subject Invoices7 (although Respondent and Mr. Joy did contest other invoices that they received from Ulico). Although aware that the Dishonored Checks had been returned due to insufficient funds8 and knowing that Ulico desired payment, Respondent failed to act promptly to remedy the situation. It was not until early 1998, after the commencement of the instant administrative proceeding, that Respondent, on behalf of the Corporation, took steps to address the matter. At that time, using Fidelity Express money orders purchased between February 26, 1998, and March 1, 1998, (which Respondent dated August 26, 1996), Respondent paid Ulico a portion ($1,867.70) of the total amount of the Dishonored Checks. The money orders were sent to Ulico by certified mail, along with a cover letter from Respondent. Respondent "backdated" the money orders to reflect "when [the monies owed Ulico] should have been" paid. He did so without any intent to mislead or deceive. There is no clear and convincing evidence that anyone other than Ulico was injured by Respondent's failure to timely pay over to Ulico the monies Emery Richardson Insurance had received from its clients for the Subject Policies (which monies belonged to Ulico). Respondent's failure to timely make such payments, it appears, was the product of isolated instances of carelessness, neglect and inattention on Respondent's part,9 which, when considered in light of the totality of circumstances, including his problem-free dealings with the other insurance companies Emery Richardson Insurance represents, were not so serious as to demonstrate a lack of fitness, trustworthiness or competency to engage in transactions authorized by his license. Count VII In August of 1986, Respondent visited Gary Faske, Esquire, at Mr. Faske's office in Dade County, Florida. The purpose of the visit was to have Mr. Faske complete the paperwork necessary to add Mr. Faske to his new employer's group major medical insurance policy with Union Bankers Insurance Company. After the paperwork was completed, Respondent left Mr. Faske's office with the completed paperwork, as well as a check from Mr. Faske's employer to cover the cost of adding Mr. Faske to the group policy.10 It is unclear what Respondent did with the paperwork and check after he left Mr. Faske's office. In October of that same year (1986), Mr. Faske took ill and had to be hospitalized on an emergency basis. He assumed that he was covered by his employer's group major medical insurance policy, but he subsequently learned that he was wrong and had to pay between $50,000.00 to $60,000.00 in medical bills. The evidence does not clearly and convincingly establish that Respondent (as opposed to Union Bankers Insurance Company or some other party) was responsible for Mr. Faske not having such coverage. Mr. Faske thereafter filed suit against Respondent and Union Bankers Insurance Company in Dade County Circuit Court. He settled his claim against the insurance company, but was unable to reach an agreement with Respondent. Respondent's case therefore went to trial, following which, on August 12, 1997, a Final Judgment11 was entered against Respondent in the amount of $40,271.00.12 Count VIII By filing an Address Correction Request, dated January 29, 1992, Respondent notified the Department that his new mailing address was 40 Hendricks Isle, Fort Lauderdale, Florida. The Department subsequently sent a letter, dated April 14, 1995, to Respondent at this 40 Hendricks Isle address. Respondent, however, "had just moved from that address," and the letter was returned to the Department stamped, "forward expired." In May of 1995, Respondent advised the Department in writing of his new mailing address. It is unclear whether such written notification was given more than, or within, 30 days from the date Respondent had moved to his new address.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department issue a final order: (1) finding Respondent guilty of the violations noted in the Conclusions of Law of this Recommended Order; (2) penalizing Respondent for having committed these violations by suspending his license for 18 months; and (3) dismissing the remaining allegations of misconduct advanced in the First Amended Administrative Complaint. DONE AND ENTERED this 12th day of February, 1999, 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 12th day of February, 1999.
Findings Of Fact Respondent, Roma Roberts Caffey, is currently licensed and eligible for licensure and appointment in this state as an insurance agent. She has been so licensed since 1988. On December 2, 1988, Respondent was employed as a debit agent for American General Life and Accident Insurance Company and Gulf Life Insurance Company. Pursuant to her employment, Respondent entered into a field representative employment agreement with American General Life and Accident Insurance Company/Gulf Life Insurance Company. The agreement required Respondent "to hold all monies collected or received on behalf of the company in a fiduciary capacity, and to pay over all said monies to the company at the times designated by its authorized officers and employees, or immediately upon request." Part of Respondent's responsibilities as a debit agent was to collect premium monies from insureds on a periodic basis. At the time she collected a premium from an insured, Respondent would indicate the payment in that insured's premium/receipt book. The premium receipt book is kept by the insured. Respondent was assigned to service the Perry district and proceeded to collect premiums from insureds in that district. During her tenure as a debit agent, Respondent would use one insured's premium to pay for another insured's insurance. Respondent utilized these funds without the knowledge or consent of the insured who had paid his or her premium for his or her policy. Respondent admitted her handling of the premiums she collected, but felt compelled to use those funds in such a manner in order to keep her lapse ratio down. The lapse ratio was important to the company. Additionally, Respondent did not keep any records of the premiums she used on another insured's account. This conduct demonstrated that Respondent did not understand the very fundamentals of her relationship and duty to the insured and her employer and was generally not fit to engage in the business of insurance for which she was licensed and lacked a reasonable level of knowledge and skill about the area of insurance for which she was licensed. Respondent's conduct also demonstrated she misappropriated several insureds' money and otherwise acted dishonestly in the debit insurance business. All of the above are very serious violations of Chapter 626, Florida Statutes. On May 7, 1990, Respondent's employment with American General Life and Accident Insurance Company/Gulf Life Insurance Company was terminated. After Respondent's termination, an audit of Respondent's debit accounts was conducted by American General Life and Accident Insurance Company/Gulf Life Insurance Company. The audit of Respondent's debit accounts consisted of a review of records submitted to the company by the agent and a comparison of those records with premium receipt books which were maintained by the individual policyholders. The audit of Respondent's activities confirmed that Respondent had improperly used premiums paid to her by numerous insureds and that she had failed to hold those monies in a fiduciary capacity and forward those premium monies to American General Life and Accident Insurance Company/Gulf Life Insurance Company as required. At that time the amount of money which Respondent was short was approximately $2,421.22. The shortage has since been reduced to $1,137.71 by application of Respondent's cash bond and final paychecks. Again, Respondent's failure to account for these premiums constituted very serious violations of Chapter 626, Florida Statutes. The amount due the company was not reimbursed by Respondent and on April 24, 1991, was reduced to a final judgment against Respondent in the County Court in and for Taylor County. As of the date of the hearing, Respondent had not paid the judgment primarily because she does not have the money.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is, RECOMMENDED that the Department enter a Final Order finding that Respondent's licenses and eligibility for licensure and appointment be revoked. DONE AND ENTERED this 20th day of September, 1991, in Tallahassee, Leon County, Florida. DIANE CLEAVINGER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 20th day of September, 1991. APPENDIX TO RECOMMENDED ORDER The facts contained in paragraphs 1, 3, 4, 5, 6, 7 and 8 of Petitioner's Proposed Findings of Fact are adopted . The facts contained in paragraphs 2, 9 and 10 of Petitioner's Proposed Finding of Fact are subordinate. COPIES FURNISHED: David D. Hershel, Esquire Department of Legal Services 412 Larson Building Tallahassee, Florida 32399-0300 Roma Roberts Caffey Route 3, Box 59 Perry, Florida 32347 Tom Gallagher State Treasurer and Insurance Commissioner Department of Insurance The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Bill O'Neil, Esquire General Counsel Department of Insurance The Capitol, Plaza Level Tallahassee, Florida 32399-0300
