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
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.
Findings Of Fact At all times pertinent to this hearing, Petitioner held a license issued by the Florida Department of Insurance as a general lines insurance agent. On or about April 3, 1979, Steven B. Atkinson entered the Okeechobee Insurance Agency in West Palm Beach, Florida, from whom he had purchased his auto insurance for approximately three years. His intention at this time was to purchase only that insurance necessary to procure the license tags for his automobile, a seven-year-old Vega. He told the person he dealt with at that time at the insurance agency that this was all he wanted. He did not ask for auto club membership, did not need it, and did not want it. He asked only for what he needed to get his tags. However, he was told by a representative of the agency that he needed not only "PIP" insurance, but also auto club membership and accidental death and dismemberment insurance. Of the $144 premium, $31 was for the required "PIP" coverage, $75 was for auto club membership (not required), and $38 was for accidental death and dismemberment (AD&D) (not required). Representatives of the agency told him that he needed all three to get the tags and, though he knew what he was getting and knew he was purchasing all three, he agreed because he was told by the agency representatives that he needed to have all three in order to get his tags. 3 Diane Phillipy McDonald contacted the Okeechobee Insurance Agency in April, 1979, because she had heard on the radio that their prices were inexpensive. All she wanted was personal injury protection (PIP), which was what she thought the law required to get tags on her automobile. When she first called the agency and asked how much the coverage she wanted would be, she was told she could pay a percentage down and finance the rest. When she entered the agency, she was waited on by a man whose name she cannot remember. However, she did not ask for auto club coverage or accidental death and dismemberment coverage, nor did those subjects ever come up in the conversation. She asked only for PIP, and she paid a $50 deposit on her coverage. In return for her deposit, she was given a slip of paper that reflected that she had purchased PIP coverage. She was not told she was charged for auto club membership or accidental death and dismemberment. The forms that she signed, including those which reflect a premium for all three coverages in the total amount of $137, bear her signature, and though she admits signing the papers, she denies having read them or having them explained to her before she signed them. In fact, she cannot recall whether they were even filled out when she signed them. In regard to the papers, the premium finance agreement signed by the witness on April 3, 1979, reflects in the breakdown of coverage total premium of $137. However, immediately below, the total cash premium is listed as $158, $21 more than the total of the individual premiums for the three coverages, and the financing charge is based on that amount1 less the down payment. Marvin W. Niemi purchased his auto insurance from the Okeechobee Insurance Agency in March, 1979, after he heard their advertisement on the radio and went in to get the insurance required by the State in order to get his license tags. When he entered the agency, he asked personnel there for the minimum insurance required to qualify for tags because he was strapped for money at the time and could not afford anything else. He definitely did not want auto club membership. In fact, discussion of that did not even arise, nor did he want the accidental death policy. When he left the agency, he thought he was only getting what he had asked for; to wit, the PIP minimum coverage. All the forms that he signed were blank when he signed them. This application process took place very quickly during his lunch hour from work. He admits giving his son's (David Robert) name as the beneficiary on his insurance, but did not realize at the time that he was purchasing coverage other than the minimum coverage required. His rationale for giving his son's name as beneficiary was that agency personnel asked and the witness felt if there was any money involved, it should go to his son. In fact, Mr. Niemi was sold not only the PIP, but membership in an auto club and PIP coverage with an $8,000 deductible. Again, the total premium was $137, when the actual premium for the coverage he asked for was only $24. Frank Johnson purchased his insurance from Okeechobee Insurance Agency in April, 1979, because he had heard and seen their advertisement on radio and television and it appeared to be reasonable. He wanted only PIP coverage as required by law sufficient to get his license tags. When he entered the agency, he spoke with a man whose name he does not know, who after consulting the books came up with the premium for the coverage to be purchased. During this meeting, the question of motor club or AD&D coverage was not mentioned. His signature does not appear on the statement of understanding, which outlines the coverage and the premium therefor. In this case, because Mr. Johnson had had some prior traffic tickets, his total premium came to $243. His coverage, however, included bodily injury liability, property damage liability, PIP, and auto club. After paying a $50 down payment, he made two additional payments which totaled approximately $50, but thereafter failed to make any additional payments. On August 1, 1980, Marguerite and Steven von Poppel entered the Federal Insurance Agency in Lake Worth, Florida, to purchase their automobile insurance coverage. They purchased policies which included bodily injury and property damage liability, PIP coverage, and comprehensive and collision coverage. The PIP coverage had a deductible of $8,000, and the comprehensive and collision coverage both had $200 deductibles. Mrs. von Poppel indicates that it was not their intention to have such large deductibles on their coverage. In any event, on that day, they gave a check for down payment in the amount of $320 and advised the employee of the agency that upon billing for the balance due of the $915 total premium, they would send the check. Neither Mrs. von Poppel nor Mr. von Poppel desired to finance the balance due of $595, and Mrs. von Poppel did not affix her signature to an application for premium financing with Devco Premium Finance Company dated the same day which bears the signature of Kevin D. Cox as agent. This premium finance agreement lists a cash premium of $966, as opposed to $915. The receipt given to the von Poppels initially reflects a down payment of $320, which is consistent with the receipt, and an amount financed of $646, as opposed to $595, which would have been the balance due under the cash payment intended and desired by the von Poppels. Somewhat later, Mrs. von Poppel received a premium payment booklet from Devco in the mail. When she received it, she immediately went to the Federal Insurance Agency, told them she did not desire to finance the payments, and that day1 September 3, 1980, gave them a check in the amount of $595, which was the balance due on their insurance coverage. This check was subsequently deposited to the account of Federal Insurance Agency and was cashed. This did not end the von Poppel saga, however, as subsequently the von Poppels were billed for an additional amount of $116.18, which reflects the interest on the amount ostensibly financed. When the von Poppels received this statement, they contacted the Federal Insurance Agency and were told that there was some mistake and that the matter would be taken care of. They therefore did not make any further payments, except a total payment of $20, which they were told was still owing. This $20 payment was made on May 29, 1981, after their insurance had been cancelled for nonpayment of the balance due on the finance agreement. The policy was, however, subsequently reinstated, back-dated to the date of cancellation, after the von Poppels complained. Their complaints, however, did nothing to forestall a series of dunning letters from a collection agency to which Devco had referred the von Poppels' account. It is obvious, therefore, that Federal Insurance Agency did not notify Devco of the fact that the amount due and payable had been paid, and did not clear the von Poppels with Devco or with the collection agency thereafter. As a result, the von Poppels filed a complaint with the Insurance Commissioner's office. That terminated their difficulty on this policy. On September 15, 1980, Federal Insurance Agency submitted a check in the amount $595, the amount paid to them by the von Poppels in full settlement of their account, to Devco. There appears to have been no additional letter of explanation, and though Devco credited this amount to the von Poppel account, it did not know to cancel the finance charges since the von Poppels' decline to finance their premium. Of the total amount of the von Poppel premium, the majority, $636, was attributable to the basic insurance in the amount of $10,000-$20,000 liability written by American Risk Assurance Company of Miami, Florida. The supplemental liability carrying a premium of $180 and covering $40,000-$80,000 liability was written by Hull and Company, Inc., out of Fort Lauderdale for Empire Fire and Marine Insurance Company. The third portion of the coverage carrying a charged premium in the amount of $150 covered the AD&D covered by Reliance Standard Life Insurance Company (RSLIC) of Philadelphia, Pennsylvania. This coverage, in the principal sum of $10,000 in the case of Mr. von Poppel and $5,000 in the case of Mrs. von Poppel, was included without the knowledge or the cosnet of the von Poppels. The policies, numbered 10753 R and 10754 R, were never delivered to the von Poppels as, according to an officer of RSLIC, they should have been, but are in the files of the Federal Insurance Agency. Further, the von Poppels were overcharged for the coverage. Respondent, however, did not remit any of the premium to Reliance Standard Life Insurance Company Instead, on August 1, 1980, the same day the von Poppels were in to purchase their insurance, he issued a sight draft drawn on Devco Premium Finance Company to Reliance Standard Life in the amount of $150. Reliance Standard Life was not the same company as Reliance Standard Life Insurance Company, was not controlled by Reliance Standard Life Insurance Company, and in fact had no relation to Reliance Standard Life Insurance Company. Reliance Standard Life was a corporation duly organized and existing under the laws of the State of Florida in which Kevin D. Cox was president and Howard I. Vogel was vice president-secretary. Of the $150 premium, 90 percent was retained by Respondent or his company as commission and 10 percent was transmitted to Nation Motor Club along with a 10 percent commission on policies written for other individuals. Nation Motor Club would then transmit the bona fide premium of 24 cents per $1,000 coverage to RSLIC. More than a year later, on October 16, 1981, Federal Insurance Agency reimbursed the von Poppels with a check for $42.50, representing the unearned portion of the unordered AD&D coverage. Clifford A. Ragsdale went to the Federal Insurance Agency in Lake Worth on April 19, 1982, to purchase his auto insurance because after calling several agencies by phone and advising them of the coverage he wanted, this was the least expensive. To do this, he would read off the coverage from his old policy and get a quote for the identical coverage. After getting this agency's quote, he went to the office where, after talking with two different ladies to whom he described the coverage he desired, he got to the person with whom he had talked on the phone and read his current coverage, and who already had some of the paperwork prepared. During all his discussions with the agency's employees on the phone and in person, he did not speak of, request, or desire auto club membership. He has been a member of AAA since 1977, and his membership there covers all the contingencies he is concerned with. Additional auto club membership in another club would be redundant. He gave the agency representative a check for $247 as a down payment and agreed to finance the balance due through Premium Service Company. Though he was given a receipt for the $247 deposit, the premium finance agreement he signed that day at the Federal Insurance Agency reflected a cash down payment of only $147, thus falsely inflating the balance due to be paid by the client. The $100 difference was refunded to Mr. Ragsdale by Federal Insurance Agency on October 25, 1982, some six months later after he complained to the Insurance Commissioner's office and was told that the $100 difference was for membership in a motor club that he did not desire or agree to. As late as December 29, 1982, over eight months later, the agency had still not remitted the $147 to Premium Service Company, who then added this deposit already paid by the client back to the account balance. Mr. Ragsdale did not read all the documents he signed at the agency, and he never received the policy he ordered. He was told he was signing an application for insurance and signed several instruments in blank at the request of the personnel at Federal Insurance Agency. He was told they would later fill in what wad needed. Respondent was the general lines agent of record for the Okeechobee Insurance Agency, located at 1874 Okeechobee Boulevard, West Palm Beach, Florida, during March and April, 1979, and at the Federal Insurance Agency, 3551 South Military Trail, Lake Worth, Florida, during the period which included August, 1980, and April, 1982. In each agency, he had instructed his' personnel how to serve and handle customers who came to the agency requesting the lowest minimum required insurance in which the agency specialized and which the agency, through its advertising program, purported to offer. As testified to by Linda Holly, an employee of Federal Insurance Agency, and as admitted by Respondent, when a prospective customer entered the agency requesting the minimum required coverage, the agent was to ask if the customer knew what the minimum was. The agent would then explain what was required and quote a premium which included not only the minimum required insurance, but also some additional service which, depending on the time, could be AD&D, towing, motor club, or the like, none of which was required by the State of Florida. Respondent instructed his employees to do this on the rationale that the premiums and commissions on the minimum required insurance were so low that the agency could not make sufficient profit on the sale of it, alone, to stay in business.
Recommendation Based on the foregoing, it is RECOMMENDED: That Respondent's license as a general lines agent in the State of Florida be revoked. RECOMMENDED this 3rd day of August, 1983, in Tallahassee, Florida. ARNOLD H. POLLOCK Hearing Officer Division of Administrative Hearings Department of Administration 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of August, 1983 COPIES FURNISHED: Daniel Y. Sumner, Esquire William W. Tharpe, Jr., Esquire Department of Insurance Legal Division 413-B Larson Building Tallahassee, Florida 32301 Mr. Kevin Denis Cox 1483 S.W. 25th Way Deerfield Beach, Florida 33441 The Honorable Bill Gunter State Treasurer and Insurance Commissioner The Capitol Tallahassee, Florida 32301
The Issue The issue in this case is whether Respondent, David Randall Woodard ("Woodard"), violated provisions of Chapter 626, Florida Statutes (2008),1 and, if so, what penalty or sanction should be imposed.
Findings Of Fact The Department is the government agency responsible for enforcing the statutory provisions of Chapter 626, Florida Statutes, relating to general lines insurance agents. Woodard, at all times relevant to this proceeding, was a general lines insurance agent and was operating an insurance business known as Trinity Insurance, Inc. ("Trinity"). Woodard was the responsible agent for Trinity. On April 26, 2006, Joseph Perez purchased a workers' compensation insurance policy (through Trinity) from Summit Insurance Company. Perez paid Trinity a down payment of $3,327.20 by way of a check. Woodard remitted a check from Trinity to Summit Insurance Company in connection with Perez' workers' compensation insurance. The check from Trinity was returned for insufficient funds. As a result, Perez did not have the workers' compensation coverage he believed he had purchased. Thereafter, Woodard repaid Perez the premium that Perez had initially paid to Trinity. However, the first repayment check sent from Woodard to Perez was also returned for insufficient funds. Ultimately, Woodard repaid all of Perez' premium down payment. On May 14, 2007, Senia Lewis purchased homeowners' insurance (through Trinity) from Citizens Property Insurance Corporation ("Citizens"). The insurance premium invoice received by Lewis included a processing fee of $60. The processing fee was a charge, by Woodard, of $20 per page for notarizing Lewis' signature on three forms. The processing fee was retained by Woodard and was not made part of the premium payment made to Citizens. In October 2006, Denise and Steven Russell obtained a mortgage from Wells Fargo Financial. A Wells Fargo employee, Matt Jackson, arranged for the purchase of homeowners' and flood insurance from Citizens (through Trinity). Wells Fargo gave Trinity a check in the amount of $3,178 as payment of the premium for the insurance. However, in December 2006, the Russells were notified that their insurance had been rescinded because Citizens had not received a premium payment from Trinity. Woodard was arrested and plead nolo contendere to a misdemeanor charge relating to the transaction with the Russells. As part of his plea, Woodard repaid the Russells the amount of their premium. In July 2006, Lance and Cindy Bundy paid $1,576 to Trinity to acquire homeowners' insurance on their new home. Woodard sent Citizens a check in the sum of $1,226 to secure the desired insurance. In October 2006, the Bundys were notified that their insurance policy was being cancelled for non-payment of the premium. Trinity had not paid Citizens on a timely basis, resulting in cancellation of the policy. Woodard made restitution to the Bundys, but not for the entire amount of their premiums. However, inasmuch as the Bundys had insurance for a short period of time, they were generally satisfied with the amount of the reimbursement from Woodard. Woodard does not dispute the basic facts surrounding each of the above-described transactions. He says none of the cancellations or rescissions of insurance policies was intended. Rather, Woodard failed to properly manage the accounts of Trinity and allowed checking accounts to be overdrawn. However, when a check was drawn on an overdrawn account, the result would be detrimental to clients who had placed their trust in Woodard. Woodard says that out of 350 clients handled by his company, these four are the only complaints that have been made. Nonetheless, each of the complaints is legitimate. Woodard has a fiduciary responsibility to his clients and is bound by law to provide all services for which the clients pay. It is not acceptable to violate the fiduciary relationship by failing to procure insurance coverage as contracted for by a client. Woodard is not currently engaged in the practice of insurance sales. His license is active, but is currently in a pending status awaiting payment of fees or completion of continuing education courses. Woodard is presently not using his license actively in the sale of insurance, but uses the license in order to access certain information he may not otherwise be able to obtain. At this time, Woodard is working for a company as a software developer. Trinity Insurance, Inc., is no longer engaged in business.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by Petitioner, Department of Financial Services, revoking the general lines insurance agent's license of Respondent, David Randall Woodard. DONE AND ENTERED this 15th day of April, 2009, in Tallahassee, Leon County, Florida. R. BRUCE MCKIBBEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of April, 2009.
The Issue This is a license discipline proceeding in which the Petitioner seeks to take disciplinary action against the Respondent on the basis of allegations of misconduct set forth in an Administrative Complaint. The violations charged in the Administrative Complaint relate primarily to alleged mishandling of funds received on behalf of an insurer.
Findings Of Fact The Respondent, Louis Iannucci, is currently eligible for licensure and is licensed in this state as a life insurance agent, life and health insurance agent, and health insurance agent, and was so eligible and so licensed at all times relevant to these proceedings. At all times pertinent to these proceedings the Respondent was an officer and director of Certified Insurance Associates, Inc., an incorporated insurance agency doing business in Fort Lauderdale, Florida. At all times pertinent to these proceedings, the Respondent was a duly appointed agent in this state under contract with United American Insurance Company. At all times relevant to these proceedings, Respondent was the sole authorized signatory on his business bank account with Capital City Bank, now known as Union Planters Bank. On or about February 12, 1997, Respondent received a check from Gretchen Smith of Titusville, Pennsylvania, in the amount of $1,833.00 and made payable to United American Insurance Company. This sum was intended as the renewal premium payment of Mrs. Smith's United American Medicare supplement insurance policy. Respondent endorsed this check and deposited it into his business bank account on February 18, 1997. Even though the premium was due on or before March 1, 1997, the Respondent waited until April 14, 1997, to remit only $486.00 of the money received from Gretchen Smith to United American Insurance Company in payment of a quarterly premium on her policy. Respondent retained the remainder of the funds for his own use and benefit. A short while later it was brought to the attention of United American Insurance Company that Gretchen Smith had paid an annual, not quarterly, premium for the policy. United American Insurance Company wrote to Mrs. Smith and requested a copy of her cancelled check for $1,833.00 that she had given to the Respondent. Upon receiving Gretchen Smith's response and a copy of her premium check, the insurance company credited her account with payment of an annual premium and reversed out the quarterly payment that had been posted to her account. The Respondent was charged for the difference of $1,347.00. On or about September 6, 1996, Respondent received a check from Mr. and Mrs. Lew Kisver of Plantation, Florida, in the amount of $3,666.00 and made payable to United American Insurance Company. This sum was intended as the renewal premium payments of Mr. and Mrs. Kisvers' United American Medicare supplement insurance policies. Respondent endorsed this check and deposited it into his business account. The Respondent, on or about September 25, 1996, remitted only $1,894.00 of the money received from Mr. and Mrs. Kisver to United American Insurance Company in payment of a semi-annual premium on each Kisver policy. Respondent retained the remainder of the funds for his own use and benefit. On or about March 7, 1997, it was brought to the attention of United American Insurance Company by Mr. and Mrs. Kisver that they had paid an annual, not semi-annual, premium for each of their policies. United American requested Mr. and Mrs. Kisver to provide a copy of their cancelled check or receipt for their payment of the premium. In response, the Kisvers mailed to the insurance company a copy of their cancelled check for $3,666.00 that they had given to the Respondent to pay their policy premiums. Upon receiving the Kisvers' response and copy of their premium check, the insurance company credited their account with payment of annual premiums and reversed out the semi-annual payments that had been posted to their accounts. The Respondent was charged the difference of $1,894.00. By coincidence, at this same time in March 1997, Respondent remitted $1,894.00 to the insurance company in payment of the next semi-annual premium due on the Kisver policies. The insurance company subsequently credited the money to Mr. Iannucci's account as he had already been charged for the premiums. The Respondent's agency contract then in effect with United American Insurance Company provided in relevant part: The Agent shall immediately remit to the Company all premiums collected by the Agent or sub-agents in excess of the Agent's initial commission thereon. In addition, the contract limited the agent's authority to collect premiums by specifically providing that the Agent shall not "collect or receipt for premiums other than initial premiums with applications for insurance." At all times material, the United American Insurance Company had on file at the Capital Bank a letter of authorization. The letter of authorization read as follows, in pertinent part: This letter will authorize the captioned General Agent of United American Insurance Company [the Respondent] to endorse and deposit to the General Agent's account with your bank checks made payable to the United American Insurance Company for premiums collected at the time of application for insurance with this Company. The General Agent may also withdraw or disburse any such funds so deposited. Pursuant to both the agency contract and the letter of authorization on file with the bank, the Respondent lacked authority to deposit and cash checks received from customers in payment of their renewal premiums. Similarly, the Respondent lacked authority to hold premium funds in his bank account for lengthy periods of time. The Respondent was aware, or should have been aware, of these limitations on his authority. Between September 1996 and April 1997, the balance of Respondent's business bank account with Capital City Bank at the end of each month was less than the amount of the premium funds that Respondent had received from the Kisvers and Gretchen Smith but had not remitted to the insurance company. At the end of September and October 1996, Respondent's bank account had an ending balance of $1,659.91, and $1,589.82 respectively. At this time he should have been holding $1,894.00 of unremitted funds in trust on behalf of the Kisvers and the insurance company. In February 1997, the end of the month balance of the business account was only $71.19, even though Respondent should have been holding not only the $1,894.00 previously received from the Kisvers but also the $1,347.00 received from Gretchen Smith on February 12, 1997, but not remitted to the insurance company. Respondent had apparently applied the insurance premium payments received from the insureds for his own use and benefit, even though the funds were fiduciary in nature and were held in trust. At all times material to this case, it was the practice of United American Insurance Company to forward monthly statements to the Respondent. If the Respondent had a credit balance, the statement would be accompanied by a check in the amount of the credit balance. If the Respondent had a debit balance, the statement would request that the Respondent make "payment in full by return mail." Although the United American Insurance Company debited the Respondent's account for the portions of the Smith and Kisver funds that were not promptly forwarded to the insurance company, there is no clear and convincing evidence that the United American Insurance Company ever made demand on the Respondent to pay those specific amounts. There is no clear and convincing evidence that the Respondent had any fraudulent or dishonest intent in connection with his handling of the Smith and Kisver funds discussed above. The Respondent's handling of those funds does, however, demonstrate a lack of fitness to engage in the business of insurance as well as a lack of reasonably adequate knowledge and technical competence to engage in the transactions authorized by his license.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a Final Order to the following effect: Concluding that the Respondent violated Sections 626.611(7), 626.611(8), and 626.611(10), Florida Statutes, as charged in Count One and in Count Two of the Administrative Complaint; Concluding that the allegations that the Respondent violated Sections 626.611(9) and 626.621(4), Florida Statutes, should be dismissed for lack of clear and convincing evidence to establish those violations; and Imposing a penalty consisting of a suspension of the Respondent's License for a period of six months. DONE AND ENTERED this 18th day of November, 1998, in Tallahassee, Leon County, Florida. MICHAEL M. PARRISH Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 18th day of November, 1998.
