The Issue Whether the Petitioner's application for licensure as a nonresident general lines insurance agent and a nonresident surplus lines insurance agent should be approved or denied.
Findings Of Fact On August 4, 2006, the Petitioner filed an application for licensure as a "09-20" nonresident general lines insurance agent and a "91-20" nonresident surplus lines insurance agent. By Notice of Denial dated December 11, 2006, the Respondent denied the Petitioner's application for licensure. The Notice of Denial, in material part, sets forth the factual basis for the denial as follows: You, Brian D. Boneck, at all times pertinent to the facts set below, were licensed in this state as a resident general lines insurance agent. You, Brian D. Boneck, at all times pertinent to the facts set forth below, were the owner of Brooke Agency Services of Bradenton, Florida. You, Brian D. Boneck, at all times pertinent to the facts set forth below, were the President and owner of Sierra Insurance Underwriters, Inc. On or about the last week of December, 2005, Christopher Waters of Port Charlotte, Florida, called the Brooke Agency in Bradenton, Florida, and spoke to you, Brian D. Boneck, regarding the renewal of a commercial general liability insurance policy for Waters Developers, LLC. On or about, January 4, 2006, Mr. Waters delivered a check to you in the amount of $809.30, payable to Sierra Underwriters. This check was to pay the down payment on the premium for renewal of Mr. Waters' general liability policy. Sometime in April 2006, Mr. Waters was notified by Mid-Continental [sic] Casualty Company that the policy was cancelled for non-payment of premium. You, Brian D. Boneck, failed to submit the money paid to you by Mr. Waters to the insurer, Mid-Continental [sic] Casualty Company, or to the insurer's general agent, Florida Homebuilders Insurance Agency, Inc. You, Brian D. Boneck, misappropriated the down payment made to you by Mr. Waters. To this date, you have not returned the money to Mr. Waters or paid the money to Mid- Continental [sic] Casualty Company, or to the Florida Homebuilders Insurance Agency, Inc. Your ownership of Brooke Agency Services of Bradenton, Florida, was through a franchise agreement with Brooke Franchise Corporation. Brook Insurance and Financial Services is a subsidiary corporation that manages business for Brooke Franchise Corporation. Pursuant to this relationship, you, Brian D. Boneck, were required to pay a share of the commissions received by Brooke Agency Service of Bradenton to Brooke Insurance and Financial Services and were required to provide information on insurance sales to Brooke Insurance and Financial Services. According to a sworn affidavit by Marian Ann Eupizi, who was formerly employed by you at Brooke Agency Services, you, Brian D. Boneck, also misappropriated premium payments made to you by other customers whose insurance was written by you or other agents of Brooke Agency Services of Bradenton, Florida, through the Florida Homebuilders Insurance Agency. You, Brian D. Boneck, did this by having customers write premium checks payable to your other company, Sierra Insurance Underwriters, Inc. By doing so, Brooke Insurance and Financial Services was unaware of your actions and you also misappropriated commissions owed to them. Also according to Ms. Eupizi, you, Brian D. Boneck, in mid- 2005, misappropriated a refund check issued for a policy on Callis Construction in the amount of approximately $1200. The Respondent offered no reliable evidence at the hearing to support the allegations which served as the factual basis for the denial. As to the allegation that Christopher Waters delivered the check to the Petitioner, the Respondent offered only the sworn affidavit of Mr. Waters and various attachments in support of the allegation. At the hearing, the Petitioner testified that he did not accept premium checks from customers and that the office staff accepted and processed premium checks. The Respondent offered no credible evidence to the contrary, and, for purposes of this Order, the Petitioner's testimony is credited. The Petitioner testified that the Waters account was one of 35 transferred to the corporate franchisor when the Petitioner sold the agency back to the Brooke Agency Services. Negotiations for the sale occurred over a period of time and concluded with a bill of sale executed in August 2006. Although the Petitioner's testimony regarding the chronology of the sale was poorly defined, there was no evidence that the Waters account was not included within those transferred. As to the allegation that the premium was misappropriated and not forwarded to Mid-Continent Casualty Insurance Company, the Respondent offered a copy of a sworn statement wherein a Mid-Continent Casualty representative alleged that the company's investigation indicated that the Waters premium was never forwarded through the Brook Agency to the Florida Homebuilders Insurance Agency, which initially issued and then ultimately cancelled the policy. Additionally, the Respondent offered a copy of an email to the Respondent's investigator from a representative of Florida Home Builders Insurance, Inc., wherein the representative restates information provided to the email writer from unidentified representatives of the Brooke Agency and AmGro Premium Finance Company (with whom the remaining premium due from Mr. Waters had been financed). The Respondent also offered banking records apparently provided in response to a subpoena that indicate the Waters check was deposited into the Sierra Insurance Underwriters Account, to whom the check was made payable. The Respondent offered no credible evidence that the deposit of the Waters check into the Sierra account was improper. As to the allegation that no money had been refunded to Mr. Waters as of the December 11, 2006, Notice of Denial, the Petitioner testified that the money was refunded by a check to Mr. Waters and had a check to Waters Developers from Sierra Underwriters, Inc., dated July 24, 2006, for $1,471 admitted into evidence. It is unclear why the refund amount exceeded the initial premium amount, but there is no evidence contrary to the Petitioner's testimony that the check was issued as a premium refund. As to the allegations related to the ownership structure of the Petitioner's agency, the Respondent offered no credible evidence regarding the interrelationship between the Brooke entities or how the Brooke entities operated with the Petitioner’s Sierra Underwriters, Inc. Regarding the allegations attributed to sworn affidavit of Marian Ann Eupizi, the Petitioner testified that Ms. Eupizi was a customer service representative who was not involved in the fiscal operation of the agency and whom he had fired for falsification of documents. There was no credible evidence contrary to the Petitioner's testimony, and it is credited. Ms. Eupizi’s affidavit has been disregarded in its entirety. There was no credible evidence to support the assertion in the affidavit that the Petitioner misappropriated premium payments from other customers, misappropriated commissions due to Brooke Insurance and Financial Services, or misappropriated a refund check to an entity identified as Callis Construction.
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 granting the application of Brian D. Boneck for licensure as a nonresident general lines insurance agent and a nonresident surplus lines insurance agent. DONE AND ENTERED this 18th day of September, 2007, in Tallahassee, Leon County, Florida. S WILLIAM F. QUATTLEBAUM 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 18th day of September, 2007. COPIES FURNISHED: Brian D. Boneck 70 East Horizon Ridge Parkway, No. 140 Henderson, Nevada 89002 William Gautier Kitchen, Esquire Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399-0333 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Daniel Sumner, General Counsel Department of Financial Services The Capitol Plaza Level 11 Tallahassee, Florida 32399-0307
The Issue Whether the Petitioner application for licensure as a resident life, variable annuity and health agent should be granted or denied.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: The Department is the state agency responsible for issuing licenses "authorizing a person to be appointed to transact insurance or adjust claims for the kind, line, or class of insurance identified in the document." §§ 626.015(9) and 626.112(1)(a), Fla. Stat. Prior to December 4, 2002, Mr. Porras was licensed in Florida as an insurance agent. He was also part-owner of The Garpo Group, Inc. ("Garpo Group"), an insurance agency. On October 18, 2002, the Department (formerly the Department of Insurance) and Mr. Porras entered into a Settlement Stipulation for Consent Order ("Settlement Stipulation") as a result of an investigation by the Department that resulted in allegations of wrongdoing on the part of Mr. Porras. In the Settlement Stipulation, Mr. Porras agreed to surrender his agent's licenses to the Department. Mr. Porras did not admit in the Settlement Stipulation that he committed the acts alleged by the Department. A Consent Order was entered on December 4, 2002. The Consent Order incorporated the terms of the Settlement Stipulation and provided that the surrender of Mr. Porras's licenses "shall have the same force and effect as a revocation pursuant to Section 626.641, Florida Statutes"; that Mr. Porras "shall not engage or attempt or profess to engage in any transaction or business for which a license or appointment is required under the insurance code or directly or indirectly own, control, or be employed in any manner by any insurance agent or agency . . . ."; and that Mr. Porras "shall not have the right to apply to the Department for another license under the Insurance Code within two (2) years of the effective date of revocation." Neither the Settlement Stipulation nor the Consent Order included a deadline by which Mr. Porras was required to divest himself of his ownership interest in the Garpo Group. On April 24, 2003, a Purchase and Sale Agreement ("Agreement") was executed whereby Mr. Porras, Eduardo Garcia, Mayda Garcia, and Luis Garcia, who were identified as the principals of the Garpo Group, agreed to sell the Garpo Group to Jose Peña and Peter Rivero. The Agreement included a purchase price of $50,000.00, payable in an initial deposit of $20,000.00, with the remaining balance to be paid "in monthly installments of no less than $500.00 (Five Hundred Dollars), and no more than $2,500.00 (Two Thousand Five Hundred Dollars)." A Special Condition of the Agreement provided that Mayda Garcia, "Shareholder/Registered Agent/General Agent/Director," and Luis Garcia, "Shareholder/Director," would "remain in Corporation in their current capacity until final payment for sale of business is paid." Mr. Porras retained an interest in the monthly payments to be made by Mr. Peña and Mr. Rivero for the purchase of the business. In accordance with the terms of the Consent Order, Mr. Porras surrendered his license and did not subsequently engage in the transaction or solicitation of insurance. Mr. Porras did not exercise any control over the Garpo Group after entry of the Consent Order. Mr. Porras worked for the Garpo Group as a bookkeeper from May 2004 through October 2004.3 He was paid $175.00 per week, and his duties included reconciling the Garpo Group's bank accounts, entering deposits in the system, and cutting checks on the Garpo Group accounts.4 It can be reasonably inferred from the evidence presented by Mr. Porras regarding his understanding of the terms of the Consent Order that Mr. Porras was aware when he accepted employment with the Garpo Group that the terms of the Settlement Stipulation and of the Consent Order prohibited him from any involvement in the business of the Garpo Group, including employment "in any manner."
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED the Department of Financial Services enter a final order finding that Lorenzo Alejandro Porras violated the terms of a Consent Order entered by the Department of Financial Services and denying his application for licensure as a resident life, variable annuity, and health agent, pursuant to Section 626.611(13), Florida Statutes. DONE AND ENTERED this 29th day of March, 2006, in Tallahassee, Leon County, Florida. S PATRICIA M. HART 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 29th day of March, 2006.
The Issue This is a license discipline proceeding in which the Respondent has been charged in a two-count administrative complaint with violation of the following statutory provisions: Sections 626.561(1), 626.611(4), 626.611(5), 626.611(7), 626.611(9), 626.611(10), 626.611(13), 626.621(2), 626.621(6), 626.9521, and 626.9541(1)(o)1., Florida Statutes.
Findings Of Fact Background facts The Respondent, Carlos Fumagali, is currently licensed in this state as a life and health agent, as a general lines agency, as a health agent, and as a general lines public adjuster, and the Respondent has been so licensed at all times relevant and material to the issues in this case. At all times relevant and material to the issues in this case, the Respondent was the corporate president, vice president, director, and resident agent of FMC Insurance Consultants, Inc., located in Miami, Florida. At all times relevant and material to the issues in this case, FMC Insurance Consultants, Inc., was a general lines insurance agency incorporated under and existing by virtue of the laws of the State of Florida. At all times relevant and material to the issues in this case, the Respondent maintained signatory authority over account number 0112527769-06 at Terrabank, N.A., in Miami, Florida, with said account being held in the name of FMC Insurance Consultants, Inc. At all times relevant and material to the issues in this case, FMC Insurance Consultants, Inc., was operating under and was a party to a producer's agreement with Southern Underwriters, Inc. (hereinafter referred to as "Southern"), a managing general agent. That producer's agreement required FMC Insurance Consultants, Inc., to remit all net premiums to Southern by monthly statement issued by Southern, with payment to be made by no later than forty- five days following the month to which the statement was applicable. The Respondent was, and continues to be, a personal guarantor for all obligations arising under the aforementioned agreement. FMC Insurance Consultants, Inc., was incorporated in 1984 by the Respondent and a Mr. Julio Moreno. By agreement between the Respondent and Moreno, the Respondent was primarily responsible for soliciting and procuring new business, and Moreno was primarily responsible for the internal operations of the business, including such matters as accounting and collecting and depositing funds. In 1988 FMC Insurance Consultants, Inc., entered into some business agreements that resulted in large increases in FMC's overhead, but in only small increases in FMC's revenues. In January of 1989, Oscar Fumagali, Respondent's brother, was brought into FMC Insurance Consultants, Inc., in the expectation that Oscar would handle the internal operations of the business and that Moreno would devote his primary efforts to business solicitation and procurement. Following some internal disagreements and struggles for control of the company operations, the Respondent and his brother bought out Moreno's interest in FMC Insurance Consultants, Inc. Thereafter, the Respondent continued to be primarily involved in soliciting and procuring new business and his brother, Oscar Fumagali, was primarily involved in the internal operations of the business that had previously been the primary responsibility of Moreno. In January of 1990, Oscar Fumagali first discovered that the financial problems at FMC Insurance Consultants were so severe that the business would be unable to make February accounts current. Upon discovering that the business would be unable to make February accounts current, Oscar Fumagali advised the Respondent of the business's financial circumstances. In January of 1990, both the Respondent and Oscar Fumagali began negotiations with the concerned insurance companies in an effort to work out all of the financial problems of FMC Insurance Consultants, Inc., and to arrange payment to all creditors. FMC Insurance Consultants, Inc., retained an attorney to assist in the negotiations and to attempt to negotiate a payment plan. Initially, a settlement was reached with Southern. However, Southern cancelled the settlement, collected customer files, and notified customers not to continue doing business with FMC Insurance Consultants, Inc. Ultimately, FMC Insurance Consultants, Inc., collapsed financially and ceased doing business. Neither the Respondent nor Oscar Fumagali personally utilized any of the funds from the transactions involving either Operations South or My Chosen Delight. Neither the Respondent nor Oscar Fumagali made any willful misrepresentations or attempts to deceive creditors. As a result of the financial collapse of FMC Insurance Consultants, Inc., both the Respondent and Oscar Fumagali suffered severe personal financial difficulties and eventually both filed for personal bankruptcy. Facts regarding the "Operations South" transactions On or about January 4, 1990, Paul Chase, an agent employed at FMC Insurance Consultants, Inc., solicited and procured from Operations South, Inc., d/b/a Sundays On The Bay At Haulover (hereinafter referred to as "Operations"), a business concern located at Key Biscayne, Florida, applications for a general liability policy to be issued by Colony Insurance Company, a fire insurance policy to be issued by Lloyds of London, and a criminal liability policy to be issued by Fidelity and Deposit Company of Maryland. Southern was operating in its capacity as managing general agent for Colony Insurance Company and Florida Risk Managers, Inc., was operating in its capacity as brokering agent for Lloyds of London. In conjunction with the procurement of the aforementioned policy applications, Operations issued its premium down payment check in the amount of $11,775.20 to FMC Insurance Consultants, Inc. On or about January 8, 1990, that check was deposited into the agency bank account of FMC Insurance Consultants, Inc. The total annual premiums for the aforementioned policies was $62,220.75. The remainder of the total premiums for the aforementioned policies was financed through AFCO, a premium finance company. On or about January 5, 1990, and pursuant to the aforementioned policy application, Colony Insurance Company issued policy number CGL007530 to Operations. On or about January 5, 1990, and pursuant to the aforementioned policy application, Lloyds of London issued policy number G8310 to Operations. On or about January 12, 1990, AFCO issued its premium payment draft in the amount of $49,776.75 made payable to FMC Insurance Consultants, Inc., which represented the financed premium for the aforementioned policies. That draft was deposited into the agency bank account of FMC Insurance Consultants, Inc., on or about January 12, 1990. FMC Insurance Consultants, Inc., has failed to remit to Southern or to Colony Insurance Company the owed net premium in the amount of $30,074.50 as required for policy number CGL007530. FMC Insurance Consultants, Inc., has failed to remit to Florida Risk Managers, Inc., or to Lloyds of London, the entire owed net premium in the amount of $21,937.50 as required for policy number G8310. FMC Insurance Consultants, Inc., did remit to Florida Risk Managers, Inc., approximately half of the owed net premium. FMC Insurance Consultants, Inc., has failed to return the abovementioned $49,776.75 in premium payments to AFCO. Although the net premiums described above were not remitted by FMC Insurance Consultants, Inc., the insurance policies remained in force. The Respondent, Carlos Fumagali, has not individually made payment of any of the amounts described above as remaining unpaid by FMC Insurance Consultants, Inc. Facts regarding the "My Chosen Delight" transactions On or about February 2, 1990, the Respondent solicited and procured from My Chosen Delight, a business concern located in Miami, Florida, an application for a general liability insurance policy to be issued by Cardinal Casualty Company, as well as a workers compensation insurance policy to be issued by First Alliance Insurance Company. With regard to these insurance transactions, Southern was operating in its capacity as a managing general agent for Cardinal Casualty Company. In conjunction with the procurement of the policy applications, My Chosen Delight issued its premium down payment check in the amount of $4,630.00 to FMC Insurance Consultants, Inc. That check was deposited into the agency bank account of FMC Insurance Consultants, Inc., on or about February 7, 1990. The total annual premiums for the aforementioned policies was $11,580.00. The remainder of the total premiums for those policies was financed through Plymouth, Inc., a premium finance company. On or about February 5, 1990, pursuant to the aforementioned policy application, Cardinal Casualty Company issued policy number MPP 0009641 to My Chosen Delight. On or about February 12, 1990, Plymouth, Inc., issued its premium payment draft number 16805 in the amount of $6,950.00 made payable to FMC Insurance Consultants, Inc., which represented the financed portion of the premium for the aforementioned policies. That draft was deposited in the agency bank account of FMC Insurance Consultants, Inc., on or about February 27, 1990. FMC Insurance Consultants, Inc., has failed to remit to Southern or to Cardinal Casualty Company the owed net premium in the amount of $5,770.80 as required for policy number MPP 0009641. FMC Insurance Consultants, Inc., has failed to return the $6,950.00 premium payment to Plymouth, Inc. The Respondent Carlos Fumagali, has not individually made payment of either of the amounts described earlier in this paragraph. Although the net premiums described above were not remitted by FMC Insurance Consultants, Inc., the insurance policies remained in force.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Respondent should be found guilty of violating Section 626.621(2), Florida Statutes (1989), as alleged in Count I(h) and Count II(h) of the Administrative Complaint. That an administrative penalty should be imposed for the foregoing violation, as follows: (a) An administrative fine in the amount of $500.00, and (b) a one-year period of probation during which period the Respondent should be required to take one or more courses on the subject of the financial aspects of the insurance business. That all other violations alleged in the Administrative Complaint should be dismissed. DONE AND ENTERED this 24th day of June, 1993, in Tallahassee, Leon County, Florida. MICHAEL M. PARRISH 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 24th day of June, 1993. APPENDIX The following are the Hearing Officer's specific rulings on all proposed findings of fact submitted by all parties. Proposed findings of fact submitted by Petitioner: Except as specifically noted below, all of the proposed findings of fact submitted by the Petitioner have been accepted. Paragraph 5: Rejected as constituting conclusions of law, rather than findings of fact. (The referenced statute is quoted in the conclusions of law portion of this Recommended Order.) Paragraphs 13, 19, 20, and 21: In the interest of clarity, the failures of Carlos Fumagali described in these paragraphs should also be described as failures of FMC Insurance Consultants, Inc. Paragraph 21: In the interest of clarity, it should be noted that about half of the amount referred to in this paragraph was repaid by FMC Insurance Consultants, Inc. Proposed findings of fact submitted by Respondent: The Respondent's submission of a tardy proposed recommended order constitutes a waiver of the Respondent's right to a specific ruling on each proposed finding of fact submitted by the Respondent. Accordingly, no such rulings have been made. As noted in the Preliminary Statement, the Respondent's proposed recommended order has been considered by the Hearing Officer even though it was submitted late. COPIES FURNISHED: Harold A. Braxton, Esquire Suite 400, One Datran Center 9100 S. Dadeland Boulevard Miami, Florida 33156-7815 David D. Hershel, Esquire Division of Legal Services 412 Larson Building Tallahassee, Florida 32399-0300 Honorable 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, Plaza Level 11 Tallahassee, Florida 32399-0300
Findings Of Fact The Respondent, Teresa Jean Watson, at all times material to this proceeding was licensed as an ordinary life agent, a disability insurance agent and a general lines insurance agent. She was the only general lines agent licensed to sell insurance at the T. J. Watson Insurance Agency, Inc. and all insurance sold by that firm at times pertinent hereto was sold and issued under authority of her license. During times material to this proceeding, Teresa Jean Watson sold insurance coverage under authority of her general lines license either as direct agent for various insurance companies for whom she was general agent or, on behalf of MacNeill and Son, Inc. (MacNeill), her managing agency, which represented various insurance companies for whom the Respondent wrote coverage. Between February 1st and February 15, 1982, a homeowner's insurance policy was sold to Tony and Martha Williams by the Respondent's agency under the authority of the Respondent's general lines insurance agent's license. That homeowner's policy required a premium of $211.00. The policyholder, Tony Williams, wrote two checks to the T. J. Watson Agency dated January 22, 1982 and February 12, 1982. Those two checks totalled $174.00. The checks were cashed by the Respondent's agency on January 26, 1982 and on February 6, 1982. The Independent Fire Insurance Company issued the policy to Tony and Martha Williams and on August 4, 1982 a representative of the Independent Fire Insurance Company wrote the Respondent to advise her that she owed that company a balance of $179.35, as of May 1982. Petitioner asserts that the $179.35 represents the amount of Tony Williams' premium owed to the insurer, less the Respondent's commission, which if added together would equal the $211.00 premium on the Williams' policy. Although it was established that $179.35 was owed by the Respondent to the Independent Fire Insurance Company, and never paid, it was not established that it represented the premium due specifically for the Williams' policy as was charged in count 1 of the Administrative Complaint. For instance, the checks paid by the Williamses to the Watson Agency total $174.00 and therefore there is a discrepancy between the total of those checks and the $179.35 amount Independent Fire Insurance company was owed by the Respondent. This fact coupled with the fact that the dates on the checks from the Williamses (January and February) substantially predate the May 1982 billing date to Respondent from Independent Fire, renders it unproven that the checks written to the Watson Agency which Respondent negotiated and retained the benefit of, related to the amount of unremitted premium owed by Respondent to the Independent Fire Insurance Company. In short, it was established that $174.00 was paid the Respondent and her agency by the Williamses. But, it was not established that the premium paid by the Williamses became misappropriated fiduciary funds converted by the Respondent to her own use and benefit. It was merely established that as of May 1982 the Respondent owed the Independent Fire Insurance Company $179.35 as a past-due account It was not established that the Williamses ever suffered a lapse of insurance coverage or were otherwise harmed by the Respondent's failure to pay Independent Fire the $179.35. Indeed, the $179.35 figure was not proven to be more than a mere debt owed by Respondent to Independent Fire Insurance Company. The figure was not shown to have been related to any particular policy. The Respondent and her insurance agency in the regular course of business wrote insurance coverage for companies represented by MacNeill and Son, Inc., the Respondent's managing agency. The regular business practice between the Respondent and MacNeill was for the Respondent to write coverage on behalf of insurers represented by MacNeill and to remit on a regular open account" basis insurance premiums due MacNeill on behalf of its insurance company principals on a monthly basis. The Respondent became delinquent in submitting premiums to MacNeill and Son in November 1981. After unsuccessful efforts to collect the delinquent premium funds from the Respondent, MacNeill and Son, Inc. suspended T. J. Watson Insurance Agency and the Respondent from writing further coverage for companies they represented in January 1982. The Respondent purportedly sold her agency to one Thomas Zinnbauer in December 1981, but had already fallen into a pattern of failing to remit insurance premiums over to MacNeill before that time. In any event, the purported sale to Thomas Zinnbauer was a subterfuge to avoid collection of delinquent premiums inasmuch as the Respondent held herself out, in correspondence with MacNeill, (See Petitioner's Exhibit 4) to be the president of the agency at least as late as April 1982 and, at that time and thereafter, the agency continued to sell insurance under the aegis of the Respondent's license. After the Respondent made up the delinquency in premium remissions to the MacNeill Agency that agency restored her underwriting authority in January 1982. Shortly thereafter however, the Respondent and the T. J. Watson Agency again became delinquent in remitting insurance premiums to the MacNeill Agency and followed a quite consistent pattern of failing to forward these fiduciary funds to MacNeill for some months. Ultimately the Respondent and her agency failed to forward more than $6500.00 in premium payment funds to MacNeill and Son, Inc. as was required in the regular course of business. MacNeill and Son, Inc. made repeated futile attempts to secure the misappropriated premium payments from the Respondent and her agency. MacNeill made several accountings of the amount of the acknowledged debt to the Respondent. The Respondent communicated with MacNeill concerning the delinquent premium payments and acknowledged the fact of the debt, but sought to reach an amicable arrangement for a repayment schedule. Re- payment was never made, however, and ultimately the Petitioner agency was informed of the deficiencies and prosecution resulted. The Respondent knew that the premiums had been collected by herself and her agency and had not been forwarded to those entitled to them. She knew of and actively participated in the improper withholding of the premium payments. This withholding and diversion of premium payments from the agency and companies entitled to them was a continuing pattern of conduct and Respondent failed to take action to halt the misappropriation of the premium payments. Further, it is established by the testimony of Matthew Brewer, who investigated the delinquent premium accounts for MacNeill, that Ms. Watson failed to advise MacNeill of the purported sale of her agency until November of 1982, almost a year after it is supposed to have occurred and then only in response to Brewer's investigation. When confronted by Mr. Brewer concerning the ownership of her agency Ms. Watson refused to tell him to whom she had sold the agency. When Mr. Brewer learned that Thomas Zinnbauer had apparently bought the agency from the Respondent Mr. Brewer conferred with him and he refused to release the agency records unless Ms. Watson gave her permission. This fact, together with the fact that Ms. Watson held herself out as president of the agency some four months after she had purportedly sold the agency to Zinnbauer, establishes that Respondent, by representing to Brewer and other personnel of MacNeill and Sons, Inc. that she had sold her agency, was attempting to evade liability for failure to forward the fiduciary premium funds obtained under the authority of her agent's license. As a result of the failure to forward the above- mentioned premium payments some of the insureds who had paid those premiums suffered lapses in coverage and cancellations of policies because MacNeill and Company and the insurers they represented believed that no premiums had ever been paid. Ultimately, MacNeill and Company learned that the premiums had been paid by the policyholders, but not remitted by the Respondent and her agency and undertook steps to reinstate coverage, but those policyholders in some instances had substantial periods of time when their coverage was lapsed due to the Respondent's failure to remit the premium funds to the managing agency and the insurance companies involved. MacNeill and Company ultimately reimbursed the appropriate insurers and insureds at its own expense, incurring substantial financial detriment as a result of the Respondent's failure to have premium payments obtained under her licensed authority properly forwarded. Had the insureds who had their policies cancelled suffered losses for which claims could have been filed during the period of the lapses of coverage, they could have encountered substantial financial difficulty.
Recommendation Having considered the foregoing Findings of Fact and Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses and the pleadings and arguments of the parties, it is therefore recommended that the General Lines Insurance Agent's license of Respondent Teresa Jean Watson be revoked. DONE and ORDERED this 27th day of December, 1985, in Tallahassee, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway Tallahassee, Florida 32301 (904)488-9675 FILED with the Clerk of the Division of Administrative Hearings this 27th day of December, 1985. APPENDIX RULING OF PETITIONER'S PROPOSED FINDINGS OF FACT: Accepted. Accepted, although the amount represented by the two subject checks totalled $174.00 instead of $175.00. Accepted. Rejected as not comporting with the competent, substantial credible evidence adduced. Rejected inasmuch as it was not established that the amount of $179.35 owed the Independent Fire Insurance Company represented the premium on the Williamses' insurance policy. Accepted. Accepted. Accepted. Accepted, although the last sentence in that Proposed Finding constitutes, in reality, mere argument of counsel. Accepted. Rejected as not comporting with the competent, substantial credible testimony and evidence actually before the Hearing Officer. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. RULINGS ON RESPONDENT'S PROPOSED FINDINGS OF FACT: Respondent submitted a post-hearing document entitled "Proposed Findings of Fact." There are few actual Proposed Facts in that one-and-a-half page pleading which is interlaced throughout with argument of counsel. However, to the extent the six paragraphs of that document contain Proposed Findings of Fact they are ruled on as follows: This Proposed Finding is rejected, but for reasons delineated in the above Conclusions of Law, Count 1 has been recommended to be dismissed anyway. This Finding is accepted but is immaterial and irrelevant to, and not necessary to, the Findings of Fact reached herein and the Conclusions of Law based thereon. Paragraph Number 3 does not really constitute a Proposed Finding of Fact or even multiple Proposed Findings of Fact in the same paragraph. In reality, it constitutes argument of Respondent's counsel concerning admissibility of certain documents into evidence which have already been ruled to be admissible by the Hearing Officer during the course of the hearing. To the extent that the last two sentences in the third paragraph of the Respondent's Proposed Findings of Fact are proposed findings of fact, they are accepted, but are immaterial, irrelevant and unnecessary to the findings of fact made herein and the conclusions predicated thereon and recommendation made herein. Rejected as not being in accordance with the competent, substantial credible testimony and evidence adduced. Rejected as constituting mere argument of counsel and not being in accordance with the competent, substantial, credible evidence adduced. Rejected as not in accordance with the competent, substantial, credible evidence presented as to Count 2. In reality, counsel obviously intended to refer to the two checks referenced in Count 1 of the complaint which has been recommended to be dismissed anyway. COPIES FURNISHED: Dennis Silverman, Esquire Department of Insurance 413-B Larson Building Tallahassee, Florida 32301 Mark A. Steinberg, Esquire Post Office Box 2366 Ft. Myers, Florida 33902 Bill Gunter Insurance Commissioner and Treasurer The Capitol Tallahassee, Florida 32301
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.
The Issue The issue for determination is whether Respondent committed the offenses set forth in the administrative complaint and, if so, what action should be taken.
Findings Of Fact At all times material hereto, Maria Amelia Pou (Respondent) was licensed as a general lines insurance agent. Pursuant to Chapter 626, Florida Statutes, the Department of Insurance (Petitioner) has jurisdiction over Respondent’s insurance license and appointments. At all times material hereto, Respondent was an officer of General Insurance Group, Inc. (GIG), located in Hialeah, Florida. GIG is a Florida incorporated general lines insurance agency. At all times material hereto, Respondent was an officer of Victoria Insurance Agency, later changed to General Insurance Group II, both hereinafter referred to as GIG II, located at 4583 NW 7th Street, Miami, Florida 33126. GIG II is a Florida incorporated general lines insurance agency. Respondent was, and is, personally and fully liable and accountable for the wrongful acts, misconduct, or violations of any provision of the Florida Insurance Code that she knew or should have known were committed by any person, over whom she had direct supervision and control, acting on behalf of GIG II. Respondent was, and is, personally and fully liable and accountable for wrongful acts, misconduct, or violations of any provision of the Florida Insurance Code that she committed. At all times material hereto, Respondent maintained an escrow account, with account no. 008-1027286, at Republic National Bank of Miami in Miami, Florida. Respondent had joint signatory authority over the escrow account. Premiums, returned premiums, and other funds belonging to insureds, insurers, and others received in transactions under Respondent's license are trust funds held by Respondent in a fiduciary capacity. On November 22, 1994, Carlos Vidal and his wife, Teresa Vidal, purchased a new vehicle from Ocean Mazda, a Mazda dealership located on Lejeune Road, Miami, Florida. Before leaving the dealership with his new vehicle, Mr. Vidal attempted to obtain insurance coverage for the vehicle from his insurance company, State Farm. However, when he went to State Farm's office, no one was present and it appeared to be closed. Mr. Vidal returned to the dealership and informed the dealer's salesperson, Mr. Munoz, of his problem. The salesperson called several insurance companies without success before reaching GIG II. Mr. Munoz engaged in all communication over the telephone with GIG II. Neither Mr. Vidal nor Mrs. Vidal spoke with GIG II. Mr. Munoz obtained a quote of $997 from GIG II for the annual premium for the insurance coverage on the vehicle and informed Mr. Vidal of the cost. Mr. Vidal requested his wife to complete a check to GIG in the quoted amount. She complied. The check was given to and accepted by Mr. Munoz. GIG II faxed an insurance binder to Mr. Munoz. He gave the binder to Mr. Vidal. The binder indicated that the insurance was to be issued by Clarendon National Insurance Company. Having obtained the insurance binder, Mr. and Mrs. Vidal left the dealership with their new vehicle. Although the premium was paid in full, GIG II completed an insurance premium finance contract (finance contract) to finance the premium with World Premium Finance Company (WPF), dated November 22, 1994, for Mr. Vidal. Ninety-five percent of Respondent's premiums are premium financed. The finance contract reflects the alleged signatures of Mr. and Mrs. Vidal. However, neither Mr. Vidal nor Mrs. Vidal signed the finance contract. An inference is drawn and a finding is made that GIG II signed the names of Mr. and Mrs. Vidal on the finance contract. Respondent signed the finance contract as the broker or agent. Also, the finance contract reflects GIG II as the agent and the insured as both GIG II and Mr. and Mrs. Vidal, with only GIG II's address as the address for both GIG II and the Vidals. Further, the finance contract reflects a premium of $907, cash down payment of $273, and three monthly payments of $225.18. The monies totaled $948.54 for the finance contract price. The $997 check was deposited into GIG II's escrow account. At all times material hereto, the money remained in the escrow account. GIG II completed an application for the insurance coverage, dated November 22, 1994, with Associated Insurance Brokers, Inc. (AIB) to be issued by Clarendon National Insurance Company. The application reflected a total policy premium of $907. Respondent signed the application as brokering agent. Also, the application reflects the alleged signatures of Mr. and Mrs. Vidal. However, neither Mr. Vidal nor Mrs. Vidal signed the application. An inference is drawn and a finding is made that GIG II signed Mr. and Mrs. Vidal's names to the application. Approximately, two to three days after November 22, 1994, Mr. Vidal brought the vehicle to GIG II for pictures to be taken of it for insurance purposes. A Florida Motor Vehicle Preinsurance Inspection Report, dated November 22, 1994, reflects the alleged signature of Mr. Vidal. To the contrary, Mr. Vidal did not sign the Report. Regarding the premium for the insurance, Respondent utilized computer software to compute the premium. The software requires a vehicle's VIN number. Respondent's software was not current due to her not having received, at the time of the transaction, the updated software which would reflect a recent rate increase. The total premium by the software was lower than the premium should have been. It is customary in the insurance industry to use the computer software used by Respondent for the insurance premiums. Also, it is not unusual for a delay to occur for the updated software to be received by an insurance company after a rate increase is approved and effective. In the insurance industry, it is not unusual for a miscalculation of a premium to occur. No gross miscalculation occurred in this instance which would cause the miscalculation to be unusual and suspect. Due to the miscalculation of the premium, by letter dated January 12, 1995, AIB notified Mr. Vidal that an additional $120 was due on the premium. Further, the letter provided that he had three options: (1) pay the $120 by February 10, 1995; or (2) cancel the insurance policy by February 26, 1995, and demand return of unearned premiums; or (3) take no action and the insurance policy would be cancelled by February 26, 1995. Mr. Vidal decided to cancel the insurance policy. On January 30, 1995, Mr. Vidal went to GIG II and executed a Cancellation Request Form cancelling his insurance. Respondent's signature appears on the Form as the agent. At some point in time, the cancellation form was forwarded by GIG II to AIB. By notice dated February 6, 1995, WPF notified Mr. Vidal, among other things, that he had ten days to pay his monthly installment ($225.18) due on February 1, 1995, 1 plus a late charge of $10, totaling $235.18 and that, if he failed to pay, his insurance would be cancelled. The address for Mr. Vidal on the notice was GIG II's address. By notice dated February 16, 1995, WPF notified Mr. and Mrs. Vidal, among other things, that their insurance policy was cancelled due to nonpayment of the monthly installment. The address for Mr. and Mrs. Vidal on the notice was GIG II's address. By letter dated February 14, 1995, to AIB, Mr. Vidal notified AIB that he had chosen to cancel his insurance policy and had executed a cancellation form on January 27, 1995, 2 and demanded a refund of the unearned premiums. Further, Mr. Vidal indicated in the letter that he had neither heard from AIB or received a refund and that he was notifying it of his cancellation and demand for a refund. As a result of the cancellation by Mr. Vidal, AIB issued WPF a check dated February 22, 1995, in the amount of $549.67. Subsequently, on or about March 1, 1995, WPF issued GIG II a check in the amount of $79.31 Even after Mr. Vidal cancelled the insurance coverage and Respondent had received a refund from WPF, Respondent failed to adjust her conduct to conform with the Vidals' situation which was that the insureds, the Vidals, had paid the quoted premium in full. Not having received a refund, on April 17, 1995, approximately two and one-half months after signing the cancellation form, Mr. Vidal filed a request for assistance with Petitioner. By check dated July 10, 1995, more than five months after Mr. Vidal signed the cancellation form, Respondent issued Mr. Vidal a refund in the amount of $239.33 for insurance coverage that he had in effect for a little over two months. The refund check was issued from GIG II's escrow account. The refund monies included $49 which represented the difference between what the Vidals paid for the coverage ($997) and the finance contract price ($948.54). Consequently, Mr. Vidal was assessed the interest charged on a finance contract which never should have existed in his situation as the quoted premium was paid in full. In a premium finance situation in which a refund is due an insured, it is customary in the insurance industry for a three-step process to take place: (1) the insurance company issues a check to the premium finance company for the refund and forwards the check to the premium finance company which may take at least 30 days; (2) the premium finance company issues a check to the agent for the refund and forwards the check to the agent which may take at least another 30 days; and (3) the agent issues a check to the insured for the refund and sends the check to the insured. The same refund procedure was followed in this situation but with less time involved for steps (1) and (2). Moreover, in this instance, an important factor which makes this situation different is that Respondent had in her escrow account the full premium paid by the insureds, the Vidals. After receiving Mr. Vidal's request for assistance, Petitioner conducted an investigation. At first, Petitioner determined that no violation of the Insurance Code had occurred and Petitioner closed its file. However, subsequently, Petitioner re-opened its investigation which led to the filing of the administrative complaint against Respondent. After filing of the administrative complaint and more than one year after Respondent refunded the $239.33 to Mr. Vidal, Respondent acknowledged that more monies were due Mr. Vidal. Having reviewed the computations with Petitioner, Respondent refunded the additional monies to Mr. Vidal. An individual who is not licensed by Petitioner may qualify for a license by experience. Petitioner prescribes the activities in which an unlicensed person may engage. Over the years, Respondent has had unlicensed employees who were attempting to qualify for licensure by experience. Respondent identified two unlicensed employees, Maria Cancio and Maritza Inclant, who provided premium quotes to customers. Approximately ten percent of Ms. Cancio's time was devoted to providing premium quotes. However, more than ten percent of Ms. Martiza's time was devoted to providing premium quotes. Petitioner presented no evidence as to the time periods, i.e., six months or twelve months to which the percentages were applicable.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Insurance and Treasurer enter a final order Finding in Count I that Maria Amelia Pou violated Subsections 626.561(1), 626.611(4), (5), (7), (10) and (13), 626.621(2) and (12), and 626.9541(1)(k)1 and (o) 1 and 2; Dismissing Count II; and Suspending the license of Maria Amelia Pou for nine months. DONE AND ENTERED this 15th day of April, 1997, in Tallahassee, Florida. ERROL H. POWELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 15th day of April 1997.
The Issue Whether Petitioner is entitled to an award of attorney's fees and costs, associated with defending DOAH Case No. 13- 3820PL, pursuant to section 57.111, Florida Statutes (2014), as a small business and a prevailing party.
Findings Of Fact DFS is the state agency charged with the licensing and regulation of insurance agents in Florida and is responsible for administrating the disciplinary provisions of chapter 626, pursuant to sections 20.121(2)(g) and (h), Florida Statutes. At all times material to this case, de la Paz was a licensed general lines insurance agent in Florida. De la Paz also is a director and officer of the MDLPA, which she has co- owned with her daughter, Jenny Mondaca Toledo (Mondaca), since 2000. On October 15, 2003, the Office of Insurance Regulation issued a cease and desist order (Order) against IWSF and NAM from conducting insurance-related activities in Florida, including but not limited to, "transacting any new or renewal insurance business in this state, and from collecting any premiums from Florida insureds." The sale of insurance products by unauthorized entities (UEs) poses a danger to Florida consumers, because UEs are not vetted by the Office of Insurance Regulation, their financial stability is questionable, they may not have sufficient reserves to pay claims for consumers, and they do not participate in the Guarantee Fund which protects consumers should a company become insolvent. DFS has undertaken a variety of media campaigns in an effort to warn licensed agents about the dangers and consequences of providing insurance products through UEs. DFS regularly conducts investigations against agents for selling UE products. Generally, consumers will not know the quality of alleged insurance providers until the consumer makes a claim against their policy. For this reason, DFS cautions agents to verify the status of insurance providers prior to selling a policy. Agents can access the website for the Office of Insurance Regulation or call to inquire about the status of a particular company. The website has been available for approximately 17 years. DFS tried to warn Florida insurance agents that IWSF was an UE; however, IWSF was the most prevalent UE selling in Florida, and approximately 584 consumers were provided with IWSF policies sold by various agents. In an effort to stop the sale of insurance products through IWSF and NAM, DFS obtained a list of Florida customers from the Canadian bankruptcy receiver of IWSF. DFS' Bureau of Investigations sent a survey to these consumers and through the survey, it was determined that Carlos Guzman (Guzman) and Jorge Saez (Saez) purchased IWSF watercraft insurance from MDLPA in April 2009. Field Insurance Regional Administrator Lidia Azcue (Azcue) and Investigator Marlene Suarez (Suarez) opened an investigation regarding this transaction. Azcue and Suarez went to MDLPA on December 4 and 5, 2012. The alleged violation being investigated was that the agency sold unauthorized products, and the purpose was to see if any others were being sold. They did not inform the staff at MDLPA of the reason for the investigation. De la Paz was not present nor was she interviewed during these visits. Azcue and Suarez asked for and received the binder book of MDLPA on a thumb drive. Mondaca was present on the first day of the investigation and was described by Azcue as cooperative. Azcue also requested and received files for other consumers who purchased marine insurance products from MDLPA. As a result of the investigation, and prior to the filing of the Administrative Complaint, DFS obtained the following information and documentation regarding MDLPA and the transaction between MDLPA, Saez, and Guzman: De la Paz and her daughter, Mondaca (referred to on the Bank of America signature card as "Jenny M. Toledo, President") had signature authority for the MDLPA corporate bank account at Bank of America; An IWSF quote printed April 14, 2009, for the vessel owned by Saenz (sic) and Guzman, which was faxed to MDLPA by IWSF to "Odalis" (referring to Odaylis Chiullan (Chiullan), an employee of MDLPA) which references de la Paz and MDLPA as the contact; A fax dated May 6, 2009, from Chiullan to IWSF asking IWSF to bind coverage for Guzman and Saez effective May 6, 2009; Undated handwritten notes on a "File Action Log" form regarding "Jorge Sahel Saez" in the handwriting of Chiullan; A fax dated May 6, 2009, from IWSF to "Odaylis" at MDLPA; An unsigned and undated "Insurance Premium Financing Disclosure Form" to be signed by Guzman and Saez, which was obtained by Chiullan from the premium financing company. In correspondence prior to the issuance of the Administrative Complaint, de la Paz advised DFS that it was Chiullan who had the form signed by Guzman and Saez and transmitted the signed forms and check for the down payment to the finance company; A receipt prepared by Chiullan dated May 6, 2009, acknowledging delivery of $280.00 as a "down payment" by Guzman and Saez for financing of a policy with NAM; The premium finance agreement between the finance company and Guzman and Saez prepared by the finance company and sent to Chiullan. The agreement is signed by Guzman and by de la Paz on behalf of MDLPA as "broker or agent"; Check number 1138 dated May 6, 2009, and drawn on the bank account of Guzman payable to the finance company in the amount of $370.00. This check was delivered to Chiullan and forwarded by her to the finance company along with the signed, original documents for the financing of the balance of the insurance premiums; A fax dated May 12, 2009, from NAM to Odaylis at MDLPA, requesting confirmation of the payment plan arranged with Saez and Guzman; IWSF declaration page for Guzman and Saez; IWSF renewal certificate for Guzman and Saez for the period of May 6, 2010, through May 5, 2011, signed by Guzman on May 4, 2010; and Correspondence from IWSF to de la Paz at MDLPA dated May 13, 2010, returning two checks, one signed by Mondaca and one signed by de la Paz, for reissuance in the name of IWSF. No interviews were conducted as part of the investigation by DFS of de la Paz, Mondaca, Chiullan, Guzman, or Saez. After the field investigation was concluded, the investigative file was forwarded on January 16, 2013, to Veronica Jackson, Government Analyst I, who reviewed the file for legal sufficiency. On May 24, 2013, a letter from Kathy Spencer, Stipulation Program Coordinator with the Office of the Chief Financial Officer, Jeff Atwater (Atwater), was sent to de la Paz alleging that she "aided and abetted an unauthorized entity in the sale of insurance." No further details were provided, nor were any Florida Statutes cited. Attached to the correspondence was a proposed settlement stipulation for consent order which offered de la Paz a $5,000.00 penalty and a one-year period of probation in lieu of having a formal administrative complaint filed against her. On June 13, 2013, de la Paz responded with a letter to Atwater explaining that at no time had de la Paz or anyone at MDLPA received notification that IWSF and NAM were not authorized to sell insurance products in Florida. De la Paz asserted that Chiullan, who held a 220 license and only worked for MDLPA for a few weeks, was the individual who handled the transaction with Guzman and Saez. De la Paz pointed out that to be charged with violation of section 626.734, de la Paz, as the licensed agent and owner of the insurance agency, cannot be subject to disciplinary proceedings due to Chiullan's placing this one policy with IWSF, because she was not aware of such act and the facts constituting a violation of the insurance code. Additionally, de la Paz pointed out that section 626.910 provides a person "aiding an unauthorized insurer" shall pay a civil penalty of not more than $1000.00 for each non-willful violation. De la Paz emphasized that she personally "did absolutely nothing to violate the code, let alone commit a willful violation of the code." For this reason, she could not sign the stipulation admitting that she committed a willful violation. De la Paz's letter was forwarded to Jackson who asked de la Paz for documentation supporting de la Paz's position. De la Paz corresponded with Jackson on June 29 and July 2, 2013. In this correspondence, in addition to once again supplying the requested documentation, de la Paz reiterated her lack of knowledge of IWSF as a UE and her lack of involvement in the Guzman/Saez transaction. On July 2, 2013, Azcue contacted de la Paz to invite her to come to DFS' office and review the investigative file. This meeting was not mandatory. According to de la Paz's credible testimony, she asked to bring her attorney and was told she could not. De la Paz declined to attend the meeting. On August 26, 2013, after negotiations with de la Paz were unsuccessful, DFS filed a one-count Administrative Complaint against de la Paz, alleging that on May 6, 2009, Guzman and Saez purchased a policy for watercraft insurance from MDLPA. De la Paz was charged with a violation of section 626.611, "Knowingly aiding, assisting, procuring, advising, or abetting any person in violation of or to violate a provision of the insurance code or any order or rule of the department, commission, or office." De la Paz was also charged with a violation of section 626.734, which provides that any general lines agent who is an officer, director, or stockholder of an incorporated general lines insurance agency shall remain personally and fully liable and accountable for any wrongful acts, misconduct, or violations of any provision of the code committed by such licensee by any person under his or her direct supervision and control while acting on behalf of the corporation. A final hearing on the Administrative Complaint was held on December 4, 2013, and January 7, 2014. A Recommended Order was entered by the undersigned on March 28, 2014, which found that DFS failed to prove, by clear and convincing evidence, that de la Paz knowingly aided, assisted, procured, advised, or abetted two UEs when Chiullan sold what was purported to be watercraft insurance in the spring of 2009 to Saez and Guzman. DFS admits that de la Paz is a "small business party" and was a "prevailing party" for purposes of the Florida Equal Access to Justice Act, section 57.111. There is no dispute that de la Paz's attorney's fees for defending the underlying action in the amount of $29,700.00 and costs in the amount of $1,265.39 are reasonable. De la Paz's additional cost for the final hearing Transcript in the amount of $831.75 is also reasonable.
The Issue The issues in this case are whether the Florida Real Property and Casualty Joint Underwriting Association (FRPCJUA) failed to comply with applicable requirements and standards of Part I of Chapter 627, Florida Statutes, when it utilized a request for proposals (RFP) in autumn 1995 to arrive at its decision in early 1996 to contract with Intervenors, Audubon Insurance Company (Audubon), AIB Holdings, Inc. (AIB), and American International Insurance Company (AIIC), but not with the Petitioner, Bankers Insurance Company (Bankers), for insurance policy servicing work through the year 1999. Specifically, Bankers asserts: (1) that FRPCJUA improperly gave policy servicing work to AIB, which is not a licensed insurance company; that FRPCJUA violated Chapter 287, Florida Statutes, regarding competitive bidding requirements for state agencies; that, regardless whether Chapter 287 is applicable, whether FRPCJUA acted arbitrarily and in bad faith instead of using procedures equivalent to the procedures found in Chapter 287, Florida Statutes; and (4) that FRPCJUA violated the Government in the Sunshine Law, Chapter 286, Florida Statutes. The Respondent, the Department of Insurance (the Department), and the Intervenors oppose Bankers' assertions. After initially seeking maintenance of the status quo or a contract on the same terms as the others, Bankers now seeks money damages from FRPCJUA, including attorney fees and costs.
Findings Of Fact In response to Hurricane Andrew, which struck in September 1992, insurers either stopped or significantly curtailed writing residential property and casualty insurance in Florida, or in parts of Florida. In response to this crisis, the Florida Legislature enacted Section 627.351, Florida Statutes, which created the Intervenor, the Florida Real Property and Casualty Joint Underwriting Association (FRPCJUA). FRPCJUA is an unincorporated association of insurers licensed to write residential property and casualty insurance in Florida. In addition to the licenses held by its members, FRPCJUA itself also is required by law to be licensed by the Respondent, the Department of Insurance (Department), as an insurer in Florida. FRPCJUA is governed by a Board of Governors chosen in accordance with the statute; some members are appointed by the Insurance Commissioner. The Petitioner, Bankers Insurance Company (Bankers), was represented on the initial FRPCJUA Board of Governors. The FRPCJUA Board hires an executive director and other staff to conduct the day-to-day operations of FRPCJUA. The evidence indicates that Florida Representative John Cosgrove and his staff were the primary drafters of the FRPCJUA legislation and that the House Insurance Committee he chaired was its primary sponsor. Rep. Cosgrove believed that the legislation did not intend to authorize FRPCJUA to contract with non-insurers for policy and claims servicing. Rep. Cosgrove's primary reasons for wanting to limit policy and claims servicing to insurers were to ensure the financial backing of those doing the work and to maintain regulatory control over them. However, policy and claims servicing providers bear no policy risk, and the Department maintains regulatory control over FRPCJUA both under the Section 627.351 and under the statutes regulating licensed insurers. Insurance Commissioner, Tom Gallagher, and his staff also were involved in the enactment of the FRPCJUA legislation. Commissioner Gallagher believed that the legislation authorized FRPCJUA to contract with non-insurers for policy and claims servicing. He believed that the legislation was not designed to enable insurers, who had "created" the insurance crisis by refusing to write or curtailing the writing of, insurance, to keep the lucrative policy and claims servicing to themselves. Section 627.351 requires FRPCJUA to operate pursuant to a plan of operations approved by the Department. FRPCJUA's first plan of operations and its articles of association were approved by the Department in 1993. The First Amended Articles of Association were approved by the Department on December 29, 1993. Before approving them, the Department reviewed both of these documents and required FRPCJUA to make corrections or revisions. Both of these documents provided for the use of insurers (called service carriers) and non-insurers (called servicing providers) to provide policy and claims services for FRPCJUA. In addition, they provided that FRPCJUA itself could provide those services. Bankers' President, David Meehan, was on the FRPCJUA Board when it produced the first two versions of FRPCJUA's plan of operations. Bankers never objected to the provisions for the use of non-insurers to provide policy and claims services. In accordance with the plans of operation, FRPCJUA formed the Shared Market Insurance Services, Inc. (SMISI) to provide policy and claims services for FRPCJUA. SMISI in turn contracted with other entities, including Intervenor, Policy Management Services Corporation (PMSC), which did policy servicing using a computer system it developed called the Point System. In addition to the SMISI contract, FRPCJUA also had policy and claims servicing contracts with five servicing carriers: Bankers; Diamond State Insurance Company; Fortune Insurance Company; Intervenors, Audubon Insurance Company (Audubon); and American International Insurance Company (AIIC). In late 1994, Bankers objected to the growth of SMISI. When Bankers' President tried to persuade Commissioner Gallagher to abolish or down-size SMISI, he was informed that Gallagher himself supported SMISI. In response, Meehan said he was going to resign in protest. Gallagher told Meehan that he intended to ask all representatives of FRPCJUA's members to resign and asked Meehan to wait until all resigned for the sake of appearance. Meehan agreed. Approximately coinciding with Meehan's conversation with Commissioner Gallagher, the Department initiated a market conduct examination of Bankers. For various reasons, Bankers believed and alleged in this proceeding that Bankers was targeted for the market conduct examination and other punitive measures in reprisal for opposing SMISI and for arguing the issue with Commissioner Gallagher. Bankers' allegations were not proven by the evidence in this case, but Bankers' beliefs colored its perception of the Department's dealings with it from then on. They also caused Bankers to suspect that the Department also was trying to influence FRPCJUA to take punitive action against Bankers. But it was not proven that the Department's relations with Bankers had any effect on FRPCJUA's dealings with Bankers. In late 1994, Florida elected Bill Nelson to succeed Tom Gallagher as Insurance Commissioner in January 1995. Commissioner Nelson appointed William Wilson as new chair of the FRPCJUA Board and recommended that Wilson consider James W. (Jay) Newman, Jr., for appointment as new Executive Director of FRPCJUA. Wilson interviewed and hired Newman, who had impressive credentials (including service as Insurance Commissioner for the State of Virginia) and extensive and directly relevant experience. The Department approved FRPCJUA's Second Amended Plan of Operation on July 21, 1995. As with the earlier versions of the plan of operations, the Department reviewed the document and required FRPCJUA to make corrections or revisions before approving it. As with the earlier versions of the plan of operations, the Second Amended Plan of Operation provided for the use of insurers (called service carriers) and non-insurers (called servicing providers) to provide policy and claims services for FRPCJUA. It also provided that FRPCJUA itself could provide those services. Although Bankers no longer was represented on the FRPCJUA Board, it knew of these provisions and voiced no objection to them. By September 1995, FRPCJUA had decided to reduce its business (so-called "depopulation") and thought that it soon would not need so many contracts for policy and claims servicing. It also thought it could save money by reducing the number of servicing contracts. Meanwhile, the contracts of the five servicing carriers were due to expire in February 1996, and the deadline for notice of non-renewal was approaching. (Bankers' contract would have expired in approximately June 1995, but it was extended.) Although all of the contractors were performing satisfactorily, Executive Director Newman thought FRPCJUA should give notice to the five servicing carriers that their contracts would not be renewed and should initiate a request for proposals (RFP) for new contracts. His desire was to reduce the number of contracts from five to either two or three. (The SMISI contracts and subcontracts were not due to expire, and no consideration was given to terminating those contracts at the time.) At the FRPCJUA Board meeting on September 19, 1995, which was noticed and conducted as an open meeting, Newman presented this idea, and the FRPCJUA Board agreed with him. It directed Newman to give notice of non-renewal to the five servicing carriers and to proceed with the RFP process. On October 18, 1995, FRPCJUA published notice in the Florida Administrative Weekly that it would be accepting proposals from insurance companies interested in servicing FRPCJUA policies and that the deadline for proposals would be December 4, 1995. The notice referred those interested to FRPCJUA staff from whom the RFP would be available at a later date. No specifics of the RFP were included in the notice. Prior to the Board's next meeting on October 25, 1995, Newman prepared Proposed Servicing Carrier Selection Criteria. At the Board's meeting on October 25, 1995, which was noticed and conducted as an open meeting, the Board decided to add a provision that FRPCJUA should reserve the right to reject all proposals and instead negotiate contracts apart from the RFP and that the criteria should allow all existing servicing carriers to be eligible for selection. The Board directed Newman to proceed with the RFP so that the Board would be in a position to make its selection decision at its December 1995 meeting. (It does not appear from the evidence that there was a November 1995 meeting of the Board.) Immediately after the meeting on October 25, 1995, Newman began the task of drafting an RFP with the help of FRPCJUA General Counsel Michael Colodny and FRPCJUA staff attorney Fred Karlinsky. At some point in the drafting process, Colodny noticed that, by its terms, the draft RFP only solicited proposals from servicing carriers (insurers) and could be construed to prohibit servicing providers (non-insurers) from responding. To include servicing providers, other modifications to the RFP also would have to made. Newman, Colodny, and Karlinsky re-drafted the RFP to accommodate proposals by servicing providers and issued the re-drafted RFP on November 7, 1995. Bankers did not object to the eligibility of non- insurers to respond to the re-drafted RFP. Instead, it proceeded to prepare its response. On November 17, 1995, FRPCJUA published an amended notice in the Florida Administrative Weekly that it would be accepting proposals from both insurance companies and non- insurers interested in servicing FRPCJUA policies and that the deadline for proposals would be December 6, 1995. The RFP provided for a pre-bid conference to answer any questions on the services to be rendered under the RFP; it also provided an opportunity for written inquiries after the pre-bid conference. The pre-bid conference was held on November 28, 1995. Bankers attended and asked questions about the applicability of Chapter 287, Florida Statutes, and Newman answered that it did not apply. Bankers also asked questions on how to present compensation proposals and how different proposals would be scored. Newman explained that the intent was to encourage creative responses. Questions also were asked at the pre-bid conference about the requirements for a non-insurer to act as a servicing provider. Newman explained the terms of the RFP and confirmed that proposals from non-insurers were welcomed. Bankers did not object then or at any time prior to submission of its proposal. The RFP provided that proposals would be evaluated by FRPCJUA's executive director and staff. Newman asked FRPCJUA Chief Operating Officer, Robert Sklenar, Colodny, and Karlinsky to assist him in evaluating the proposals. Sklenar had extensive (35 years) experience in the insurance industry, mostly as vice-president of personal lines for Travelers Insurance Company. His experience included the design and preparation of competitive scoring processes for vendor selection by Travelers. Newman asked him to prepare the documents to be used for scoring RFP responses (the score sheets). Proposals were received on December 6, 1995. Proposals were received from Bankers, AIIC, Audubon, PMSC, Fortune, Hartford Fire Insurance Company, Mobile America Insurance Group, Inc., National Con-Serv, Inc. (NCSI), American Southern Insurance Company, and Intervenor, AIB Holdings, Inc. (AIB), which had a subcontract for policy and claims servicing with Diamond State. The RFP provided that submission of a response signified acceptance of the terms and conditions of the RFP. Newman, Sklenar, Colodny, and Karlinsky met in Tallahassee to evaluate the responses on December 6, 1995. First, the four jointly evaluated the proposals to determine whether they met seven mandatory criteria. They determined that all ten proposals met the mandatory criteria. Then each evaluator independently scored the ten proposals on each of seven technical criteria, using a numerical point scale of 1 to 5 for each criterion. Then they compared their scores, discussed any differences, and attempted to reach consensus scores for each technical criterion. Then they added the consensus scores given on all technical criteria for each of the ten proposals. At this point in the process, the evaluation team observed that 15 points seemed to be a natural break point and reasoned that American Southern Fortune, Mobile America, and NCSI should be eliminated from further consideration because they got less than 15 points on the technical criteria. Of the proposals still under consideration, Hartford scored 23 on the technical criteria, PMSC scored 22, Audubon scored 21, AIIC scored 20, Bankers scored 18, and AIB scored 17. The evaluators then discussed the top two scorers, Hartford and PMSC. The team did not think FRPCJUA should enter into a contract under the RFP with either Hartford or PMSC. By this time, the evaluation team was aware that the SMISI contract would terminate as of December 27, 1995, for "breaches and defaults of the agreements and obligations owing to the FRPCJUA by SMISI," in accordance with correspondence from FRPCJUA Board Chairman Wilson, dated November 14, 1995; however, it was anticipated that PMSC would continue to handle the SMISI business--fully half of FRPCJUA's total book of business--under a direct contract with FRPCJUA. Due to capacity concerns, the team did not think additional business should be directed to PMSC until those concerns were allayed. Meanwhile, Hartford's proposal disclosed that it would not be in a position to handle a large number of policies for some time, and it proposed either delaying initiation of services or subcontracting with PMSC in the interim. The evaluation team did not think either alternative was acceptable. Evaluation of the mandatory and technical criteria took approximately six hours and was not completed until 1 or 2 a.m. on December 7, 1995. The evaluators decided not to review or evaluate the compensation proposals; however, the other three evaluators persuaded Newman to at least look at the compensation proposals and generally advise the group as to the general nature and parameters of the compensation proposals without identifying the proposers. Colodny was unable to meet again on December 7, 1995. Newman, Sklenar, and Karlinsky met briefly to review the proposals, but it was decided that Newman would conduct a more thorough review and report his findings and recommendations to the others by telephone. Although Newman knew the team would not recommend either Hartford or PMSC, he evaluated their compensation proposals for information and comparison. Hartford offered a flat 18.42% fee. PMSC offered two alternatives. One was a very favorable flat fee of 14.9%; the other proposed flat dollar amounts. Bankers proposed an 18% fee for six-month policies, and an 18.45% fee if FRPCJUA returned to annual policies. The other compensation proposals were tiered by volume (either net written policies or policies in force). AIB structured its compensation proposal as follows: 18% fee for $25 million net written policies (NWP); 17.75% for $25-$30 million NWP; 17.50% for $30- $35 million NWP; 17.25% for $30-$40 million NWP; and 17.00% for more than $40 million NWP. Audubon proposed a 17.9% fee for up to 50,000 policies in force (PIF), 17.5% for up to 100,000 PIF, and 16.9% for over 100,000 PIF. AIIC structured its proposal: 20.0% for up to 50,000 PIF; 19.5% for up to 100,000 PIF; 19.0% for up to 150,000 PIF; 18.5% for up to 200,000 PIF; 18.0% for up to 250,000 PIF; and 17.5% for over 250,000 PIF. In order to evaluate the tiered proposals, Newman had to exercise professional judgment as to future volume in light of FRPCJUA's "depopulation" efforts and intention to replace five contracts with just two or three. Newman did not score the Hartford and PMSC compensation proposals since he knew the team would not be recommending that FRPCJUA should enter into contracts with either under the RFP. In Newman's judgment, based on a 15 point scale, the Audubon and AIB compensation proposals deserved scores of 14, Bankers' proposal deserved a score of 10, and AIIC deserved a score of 9. Adding these scores to the technical scores, Audubon's proposal would be scored the best, with 35 points, AIB would score 31 points, AIIC would score 29 points, and Bankers would score 28 points. As agreed, Newman telephoned the other evaluators to discuss the compensation proposals and Newman's scoring of them. All agreed with Newman's assessments. They decided to recommend that FRPCJUA contract with Audubon and attempt to negotiate with the others to accept Audubon's compensation proposal. Sklenar wanted to recommend that FRPCJUA contract with Audubon and one other; Newman thought it would be more prudent to contract with three. It was agreed to recommend that FRPCJUA first attempt to negotiate with AIB and AIIC to accept Audubon's compensation proposal and to negotiate with Bankers (and, if necessary, those previously eliminated from consideration) only if either AIB or AIIC refused to accept Audubon's compensation proposal. The recommendation of the evaluation team was put in writing on December 11 and was presented to the FRPCJUA Board at its meeting on December 14, 1995, which was noticed and conducted as an open meeting. The evidence was that the Board had a full and open discussion of the recommendation. Ultimately, the Board voted unanimously to accept the evaluation team's recommendation, and it instructed Newman and his staff to proceed with contract negotiations. Section 24 of the Second Amended Plan of Operation provided a means for resolving disputes with respect to any decision of the FRPCJUA Board. Section 24 provided: Except as to any dispute, cause of action, claim or controversy arising under, or out of, any contract or Agreement pertaining to bonding or borrowing by the Association, any person or entity aggrieved with respect to any action or decision of the Board of the Association, or any Committee thereof, (other than matters regarding Assessments which appeals are governed by Sections 15, 16 and 17 hereof) may make written request of the Board for specific relief. All written requests for relief or redress shall be deemed Appeals and shall be delivered to the Executive Director. The Executive Director shall schedule any Appeal for hearing at the next regularly scheduled Board meeting occurring, not less than ten (10) days nor more than forty (40) days from the Executive Director's receipt of the Appeal. Any person or entity whose Appeal for relief is denied by the Board may appeal to the Insurance Commissioner in the manner provided by § 627.371, Florida Statutes. A transcript of any Appeal items shall be made at the time of hearing. In accordance with Section 24 of the Second Amended Plan of Operation, Bankers and Fortune appealed from the FRPCJUA Board's action taken at its meeting on December 14, 1995. Before the next scheduled meeting of the FRPCJUA Board on February 7, 1996, Newman was able to successfully negotiate contracts with Audubon, AIIC, and AIB. However, the contracts were not finalized and executed by the time of the meeting. Bankers also indicated its willingness to accept the terms being offered to the other three if FRPCJUA would agree to contract with Bankers as well. At the Board's meeting on February 7, 1996, which was noticed and conducted as an open meeting, the Board fully and openly discussed several subjects relevant to the RFP contracts, including capacity concerns and whether to contract with Bankers, Fortune and Hartford. Ultimately, a motion was made to reject the RFP process and negotiate contracts with the five existing servicing carriers--i.e., Audubon, AIIC, Bankers, Fortune, and Diamond State--with new contract provisions and a blended compensation rate. The Board voted to approve the motion with only member Diaz voting "no." Bankers and Fortune indicated that the Board's action was acceptable to them, and Chairman Wilson announced that the Board's action mooted the appeals of Bankers and Fortune. Audubon, AIIC, and AIB did not indicate whether the Board's action was acceptable to them. Before the next regular meeting of the Board, all three appealed from the Board's action under Section 24 of the Second Amended Plan of Operation. The next regular meeting of the FRPCJUA Board was held on February 29, 1996, which was noticed and open to the public. The Board considered a motion by member Ricciardelli to rescind its action on February 7, 1996. After a full and open discussion, the Board voted to approve the motion; members McGriff and Burgess voted "no." As part of its attempt to prove improper influence by the Department and arbitrary and capricious action by the FRPCJUA Board, Bankers introduced as evidence that Insurance Commissioner Nelson contacted Board member McGriff once by telephone prior to the meeting on February 29, 1996, to ask him to support the FRPCJUA staff's recommendation made on December 14, 1995. But there also was evidence that Bankers' representatives contacted McGriff several times to ask him to vote to uphold the Board's action on February 6, 1996, and it is self-evident that Commissioner Nelson's telephone contact did not influence McGriff at all. In accordance with Section 24 of the Second Amended Plan of Operation, on February 29, 1996, Bankers filed an appeal of the Board's actions of that date, and Bankers presented its appeal to the Board at a meeting on April 7, 1996, which was noticed and open to the public. After hearing and discussion, the Board denied the appeal. On April 24, 1996, Bankers appealed the Board's decision to the Department of Insurance. It is found from the evidence presented that the FRPCJUA's actions in connection with the RFP were neither arbitrary nor capricious. The Board and its staff set about to reduce the number of servicing contracts it had (other than the SMISI contract) from five to either two or three in order to save money. FRPCJUA thoughtfully adopted a reasonable RFP process for achieving its objective and implemented the RFP in a thoughtful and reasonable manner. The result achieved the objective. FRPCJUA replaced the five existing servicing contracts with three new contracts and has saved FRPCJUA millions of dollars a year in servicing fees. Bankers presented the testimony of an expert in business valuation, RFP processes, and gaming theory in an attempt to prove that the RFP process and the scoring of the proposals was so flawed as to be arbitrary and capricious. But Bankers' evidence itself was flawed. First, Bankers' expert questioned RFP specifications that Bankers accepted. Second, the expert questioned the points given by the evaluators on the scoring scale they used without ever reviewing or considering any proposals other than those submitted by Bankers, Audubon, AIIC, and AIB. Third, while the expert conceded that it was important to understand the thought processes of the evaluators in assessing the validity of their judgments, he had absolutely no evidence and no knowledge about the judgments of Colodny or Karlinsky. Fourth, while the expert criticized the scoring system as not being sophisticated enough to indicate "fractional differences" between proposals, and criticized the team's failure to use a "tie-breaking" mechanism, he conceded that the consensus scoring used by the team was a valid and acceptable way to assess relatively small differences between proposals and to break scoring ties. Fifth, much of the expert's criticism amounted to disagreements as to how to evaluate aspects of the proposals; meanwhile, as the expert admitted, in most cases the evaluation required the exercise of professional judgment, and the evaluation team had more and better expertise. The expert's testimony did not prove that the RFP process and the scoring of the proposals was arbitrary or capricious.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Insurance enter a final order denying Bankers' appeal and claim for money damages and attorney fees. DONE AND ENTERED this 10th day of November, 1998, in Tallahassee, Leon County, Florida. J. LAWRENCE JOHNSTON 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 Filed with the Clerk of the Division of Administrative Hearings this 10th day of November, 1998. COPIES FURNISHED: Douglas A. Mang, Esquire Wendy Russell Wiener, Esquire Mang Law Firm, P.A. Post Office Box 11127 Tallahassee, Florida 32302-3127 Michael H. Davidson, Esquire Division of Legal Services 200 East Gaines Street 612 Larson Building Tallahassee, Florida 32399-0333 Seann M. Frazier, Esquire Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A. Post Office Drawer 1838 Tallahassee, Florida 32302 Perry Ian Cone, General Counsel AIB Insurance Group, Inc. 2500 Northwest 79th Avenue Miami, Florida 33122 Michael Colodny, Esquire Stuart B. Yanofsky, Esquire Colodny, Fass & Talenfeld, P. A. 2000 West Commercial Boulevard Suite 232 Fort Lauderdale, Florida 33309 Fred E. Karlinsky Associate General Counsel Florida Residential Property and Casualty Joint Underwriting Association 101 North Monroe Street Suite 1000 Tallahassee, Florida 32301 Zollie M. Maynard, Esquire William C. Owen, Esquire Panza, Maurer, Maynard & Neel, P.A. 215 South Monroe Street, Suite 320 Tallahassee, Florida 32301 Mitchell B. Haigler, Esquire Paul R. Ezatoff, Esquire Katz, Kutter, Haigler, Alderman, Bryant & Yon, P.A. Post Office Box 1877 Tallahassee, Florida 32302 J. Stephen Menton, Esquire Rutledge, Ecenia, Underwood, Purnell & Hoffman, P.A. Post Office Box 551 Tallahassee, Florida 32302-0551
