The Issue Whether Petitioner is entitled to a refund of state group life insurance premiums retroactive to the date she became disabled and continuing through the date of approval of a waiver of premium based on disability.
Findings Of Fact During her entire career with the State, Petitioner was employed by the Department of Corrections (DOC). At all times material, DOC, like all State governmental agencies, had its own personnel office. At all times material, the Division of Retirement (Retirement) handled all governmental agencies’ employees’ retirement issues. At all times material, the State has provided its employees, including Petitioner at DOC, with various types of insurance through Respondent Department of Management Services (DMS), Division of State Group Insurance (DSGI), the Respondent herein. For more than 20 years, ending January 1, 2007, the State of Florida provided state officials, employees and retirees basic life insurance coverage through Prudential Insurance Company of America (Prudential). Although Petitioner retired on full disability in mid- 2000, at all times relevant to these proceedings, Petitioner has continuously participated in the State Group Insurance Program’s (Program’s), life insurance plan (Plan). The Program is authorized by Section 110.123, Florida Statutes. Because of enhanced benefits, employees were required to complete a new life insurance enrollment form during “open enrollment,” conducted in 1999, for coverage beginning January 1, 2000. Petitioner completed the life insurance enrollment form and dated it "10/04/99." Directly below Petitioner's signature on this enrollment form, the following statement appears: Waiver of Premium for Disability If you are totally disabled for a continuous 9 months and are less than 60 years of age at the time disability begins, Prudential will continue your coverage with no premium due, provided you report your disability within 12 months of its start and submit any required proof to Prudential. The second page, last paragraph of the 1999, enrollment form provided an address and a toll-free telephone number for Prudential, and advised participants that the form was intended to provide a summary of benefits, as more completely set out in the certificate. Petitioner produced the enrollment form in response to Respondent's request for production of documents. She identified her signature thereon at hearing, and had the enrollment form admitted in evidence as Exhibit P-1. She also admits in her Proposed Recommended Order that she signed it. Although her testimony waffled in some respects, on the whole, she testified to the effect that she had retained a copy of this form where she had access to it at all times material. She is, therefore, found to have had knowledge of its contents since 1999. Petitioner testified that she never received either a life insurance policy nor a certificate of insurance, from Prudential or from any entity of Florida State Government, and that neither her DOC Personnel Office, Retirement, Florida First,1/ or DMS/DSGI advised her at the time of her retirement in mid-2000, that she could apply to Prudential for a life insurance premium waiver. However, Petitioner also had admitted in evidence as Exhibit P-2, a “Continuation/Termination Form” which she signed on “4-11-00,” stating a retirement date of “3- 10-00.” That form specifies that “. . . the amount of life insurance shall be $10,000 . . .” with a footnote reading, “This [referring to the $10,000, amount] would only apply if Waiver of Premium is not approved.” (Bracketed material supplied.) Also, the credible testimony of Respondent’s witnesses and of exhibits in evidence show that a complete certificate of life insurance was mailed to Petitioner in a timely manner. There is no proof that the insurance certificate varied the substance of the enrollment form as quoted in Finding of Fact 7. Indeed, the certificate provided, in pertinent part: The Policyholder will continue the full premium for continuance of insurance in accordance with item 8 above, [referring to “Total disability commencing before age 60— Unlimited for Employee Term Life Insurance”] provided the employee furnishes written proof of such total disability when and as required by the Policyholder. * * * Period of Extension Protection for a Disabled Employee— one year after receipt by Prudential’s Home Office of written proof that his total disability has existed continuously for at least nine months, provided the employee furnishes such proof no later than one year after the later of (1) the date premium payments for the employee’s insurance under the Group Policy are discontinued or (2) the cessation of any extended death benefit under the provisions for “Extended Death Benefit for Total Disability” above, and successive periods of one year each after the year of extension under (1), provided the employee furnishes written proof of the continuance of the employee’s total disability when and as required by Prudential once each year. Only employees disabled before retirement and under 60 years of age were eligible for the premium waiver. Employees who became disabled during retirement were not eligible for the waiver. By the terms of her enrollment form and certificate, if Petitioner did not notify Prudential before the twelfth month, she could not receive the waiver. When, precisely, Petitioner became “totally disabled” for purposes of her State life insurance certificate’s definition is debatable, because for some time prior to her actual retirement date, she was working off and on while pursuing a “permanent total disability” determination, pursuant to the definition of that term as expressed in Chapter 440, Florida Statutes, The Florida Workers’ Compensation Law. Petitioner ultimately received the workers’ compensation ruling she sought, possibly before March 10, 2000. Petitioner’s last day of work was March 10, 2000, when, she testified, a superior had her forcibly removed from DOC property. Despite her assertion that she was not approved for in-line-of-duty retirement until September 1, 2000, Petitioner also testified that the State granted her retirement upon disability, effective April 1, 2000, and April 1, 2000, is the date put forth by Respondent as Petitioner's disability retirement date, as well. Upon that concurrence, it is found that Petitioner qualified for total disability for State life insurance purposes before retirement and that she qualified for the waiver by age at retirement. When Petitioner retired on disability in 2000, employees of both DOC and of Retirement knew that she was retiring on disability. Retirement provided Petitioner with printed materials referring her to the insurance company and/or DMS/DSGI for insurance questions and stating that Retirement did not administer any insurance programs. There is no evidence Petitioner asked anyone about the waiver in 2000. From her retirement date in mid-2000, until Prudential ultimately granted her a premium waiver in 2007, Petitioner paid the full life insurance premiums to the State Life Trust, either via deduction from her retirement or directly by her own check. From the date of her retirement through December 2006, Petitioner paid $4.20, per month for life insurance, and beginning January 1, 2007, through November 2007, she paid $35.79, per month. According to Petitioner, she only became aware of the availability of the potential waiver of premiums when she received a booklet during open enrollment in October 2007, advising her that beginning January 1, 2008, the State life insurance coverage would be provided through Minnesota Life Insurance. The specific language that caught her eye was: No premium to pay if you become disabled --- If you become totally disabled or as defined in your policy, premiums are waived. Petitioner conceded that there is no substantive difference between the foregoing instruction and the statement on her 1999, enrollment form for Prudential. (See Finding of Fact 7.) Petitioner applied for the Minnesota life insurance, with premium waiver, triggering a series of bureaucratic decisions that maintained her continuous life insurance coverage by Prudential and permitted Petitioner to apply to Prudential for waiver of the life insurance premium as described in her 1999, enrollment form. Although bureaucratic delays occurred through DOC’s personnel office, Prudential accepted Petitioner’s proof of age, disability, etc., and granted the waiver of premiums based on disability. The monthly premiums of $35.79, that Petitioner paid in October and November 2007, were retroactively reimbursed to her by the State, based upon Prudential's receipt of Petitioner's waiver package on October 3, 2007. Beginning in December 2007, Prudential activated the waiver of premium, so that Petitioner has not had to pay any premium since. Adrienne Bowen, a DSGI manager of Prudential contracts for twenty years, testified that, in 1999-2000, Prudential’s waiver did not apply until after nine months of continuous disability and after the participant had reported the disability to Prudential, and after Prudential had approved the waiver of premiums. She further testified that she believed that there was no provision for the waiver to apply retroactively. For this testimony, Ms. Bowen relied upon Exhibit R-11, a “Group Life Administration Manual,” which had been devised so that the State life insurance plan would be consistently administered. On the foregoing issues, The Group Life Administration Manual states, in pertinent part: WAIVER OF PREMIUM When an employee becomes disabled and is unable to work because of a disability, the employee may be eligible to extend the group life coverage without premium payments. In order to extend coverage, the employee must submit proof of disability within the period shown on the Group Contract (generally at least 9 months but less than 12 months after the total disability starts). If the proof is accepted, you may stop the premium on behalf of the employee’s group coverage. We recommend that premium payments continue for that employee until a decision is made regarding the claim. (Emphasis in original.) However, Ms. Bowen also testified that DSGI and Prudential now allow an insured to request the waiver at any time after nine months of continuous disability, without automatic denial if the employee’s first request is not made within 12 months after she first becomes disabled. This was done in Petitioner's situation in 2007. Prudential did not refuse to waive premiums because Petitioner’s application was not made within 12 months of total disability. However, the premiums refunded related back only to the first day of the month in which she made application for waiver. Petitioner seeks a reimbursement for overpayment of premiums from April 1, 2000, to September 30, 2007. Her first request to Respondent for an administrative hearing appears to have been made on or about May 12, 2008. After several levels of internal agency “appeals,” the cause was referred to the Division of Administrative Hearings on or about August 28, 2008.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that the Department of Management Services, Division of State Group Insurance, enter a final order which calculates the State group life insurance premiums Petitioner paid between May 12, 2006, and October 1, 2007, and orders payment to Petitioner of that amount within 30 days of the final order. DONE AND ENTERED this 23rd day of December, 2008, in Tallahassee, Leon County, Florida. S ELLA JANE P. DAVIS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 23rd day of December, 2008.
Findings Of Fact At all times material hereto, Respondent was an Ordinary Life, including Disability Agent, and a Disability Agent licensed by the State of Florida. During this period, Respondent was licensed to sell life and health insurance policies for National States Insurance Company, American Guaranty Life Insurance Company, and Old Southern Life Insurance Company. Respondent was employed as an agent by Diversified Health Services, an insurance agency whose office is located in St. Petersburg, Florida. At no time material hereto was Respondent employed by any agency of the State of Florida. As indicated above, there remain viable in the Administrative Complaint ten counts charging Respondent with various violations of provisions of the Florida Insurance Code. For purposes of clarity, the findings of fact with regard to each of those remaining counts will be set forth separately. COUNT I On February 12, 1983, Respondent visited Lucille Shock at her home in Bradenton, Florida. Mrs. Shock had earlier purchased a Medicare supplement policy from National States Insurance Company through another agent, but had decided to cancel that policy. Respondent visited Mrs. Shock's home in response to her notice of cancellation in hopes of persuading her to reinstate coverage. In paragraph three of Count I of the Administrative Complaint, Respondent is charged with having told Mrs. Shock that he was ". . . authorized by the Florida Department of Insurance to investigate the Diversified Health Agency" when, in fact, he was not employed by any state agency. While it is true that Respondent was not at the time of his visit to Mrs. Shock employed by any state agency, the record in this cause is insufficient to establish the foregoing allegation of the Administrative Complaint. Respondent denies having made any c representation to Mrs. Shock that he was employed by the State of Florida. Further, Mrs. Shock's testimony in this regard is inconsistent and conflicting. In a February 21, 1983, letter to a representative of the Florida Department of Insurance, Mrs. Shock stated that at the time of his visit to her home the Respondent represented that he ". . . was an investigator for the Diversified Health Agency. . . . At final hearing, Mrs. Shock testified that Respondent told her that he was an investigator for the "insurance department," but also, on cross-examination, testified that Respondent told her that he was an investigator for Diversified Health. Despite these inconsistencies, it is clear from the record in this proceeding that before the end of Respondent's visit with Mrs. Shock on February 12, 1983, she knew that Respondent was an insurance agent for National States Insurance Company. Because of the inconsistencies in Mrs. Shock's testimony, it is specifically concluded that her testimony concerning Respondent's representation about his employment is unreliable. Other than Mrs. Shock's testimony, there is no other record basis to establish that Respondent represented himself to be an employee of the Department of Insurance as alleged in Count I. Respondent is also charged in paragraph five of Count I of the Administrative Complaint with having "falsely represented the financial condition of several insurance companies licensed to do business in Florida as part of your sales presentation to induce Mrs. Shock to buy insurance policies from you." The record in this cause establishes that Respondent and Mrs. Shock discussed several insurance companies, including Vulcan Insurance Company, Tara Life Insurance Company, and Bankers Life during their visit on February 12, 1983. Respondent reviewed with Mrs. Shock data contained in certain A. M. Best Company reports concerning these insurance companies.Respondent advised Mrs. Shock that Vulcan Insurance Company was "a rather shaky company" and that Tara Life Insurance Company had been experiencing "financial problems." There is, however, nothing of record in this proceeding to establish either that these companies are licensed in Florida or that the representations made by Respondent to Mrs. Shock concerning these insurance companies were false. Accordingly, the allegations contained in paragraph five of Count I have not been established. COUNT II On or about February 10, 1983, Respondent visited Koy B. Cook at his home in Port Orange, Florida. The purpose of Respondent's visit to Mr. Cook was to dissuade Mr. Cook from cancelling a policy with National States Insurance Company whichir. Cook had previously bought from another agent. After buying the National States policy initially, Mr. Cook had attempted to cancel a preexisting policy with Bankers Life Insurance Company, but had been advised by that company that the policy could not be cancelled. Mr. Cook determined that he could not afford duplicated coverage, so he contacted National States Insurance Company and advised them of his desire to cancel his National States policy. Be was advised, in writing, by National States, that his policy had been cancelled and that his premium had been returned to the insurance agency which had sold him the policy for refund. Sometime prior to January 12, 1983, Respondent contacted Mr. Cook by telephone, identified himself by name, and arranged an appointment to visit with Mr. Cook in his home. Mr. Cook understood from the conversation with Respondent that the purpose of their appointment was to return Mr. Cook's refund check from his cancelled National States policy. Immediately prior to Respondent's arrival at Mr. Cook's home, Mr. Cook had been asleep. When Respondent arrived at Mr. Cook's door, Mr. Cook was still in a "daze," having just awakened. This fact is of significance, because at various times in his testimony Mr. Cook testified that Respondent identified himself as . . . an adjuster with Bill Gunter out of Tallahassee, or . . . an adjuster for the insurance company out of Tallahassee." Mr. Cook also testified that Respondent showed him some identification which bore a photograph of Insurance Commissioner Bill Gunter. This photograph was apparently attached to a document, the contents of which were unknown to Mr. Cook. Respondent denies having represented that he was an employee of the Department of Insurance. During the course of their conversation, Mr. Cook advised Respondent that he preferred the coverage offered under the National States policy to that of the Bankers Life policy, but simply could not afford duplicate coverage. Respondent and Mr. Cook discussed the amount of unearned premium outstanding on the Bankers Life policy as compared to the cost of reinstating the National States policy. Mr. Cook had originally paid $630 for the issuance of the National States policy. Respondent returned to Mr. Cook a check in that amount during the course of their visit. Further, by offering to reinstate the National States policy for a $526 annual premium, Respondent demonstrated to Mr. Cook that he would save approximately the amount that remained in unearned premiums on the Bankers Life policy. Mr. Cook agreed to this proposal, Respondent completed an application form, and Mr. Cook gave Respondent a check for approximately $526 to reinstate the National States policy, with the understand- ing that the National States and Bankers Life policies would overlap for some period of time. Upon leaving Mr. Cook's house, Respondent gave Mr. Cook one of his business cards, which identi- fied Respondent as an agent of National States Insurance Company. In Count II of the Administrative Complaint, Respondent is charged with having told Mr. Cook that he was an "insurance adjuster working out of Tallahassee" and that he "worked for the Florida Department of Insurance. Respondent is further charged with having told Mr. Cook that he "had a refund check for a cancelled Bankers Life policy when in fact the] had no such check." The testimony of Mr. Cook and Respondent on the issues alleged in Count II are diametrically oooosed. Viewing the transaction between Mr. Cook and Respondent in its totality, it is concluded that Respondent's version of the transaction is the more credible. Mr. Cook's testimony concerning Respondent's representations about his employment status contained several contradictions and inconsistencies. In addition, it is clear that Mr. Cook expected to receive a refund check from National States Insurance Comoany, that Mr. Palesky contacted him by telephone prior to his February 10 visit to advise him that he had his refund check, and that Respondent conducted himself during the entire transaction in a manner which clearly identified him as an insurance salesman. Finally, Respondent furnished Mr. Cook with a business card during the course of their meeting which clearly showed Respondent to be an agent of National States Insurance Company. It is also clear that Mr. Cook was aware during this entire transaction that his Bankers Life policy had not been cancelled, and that as a result of his transaction with Respondent he would be carrying policies with National States and Bankers Life which afforded duclicate coverage, and that he was advised of this fact by Respondent. These facts are clearly inconsistent with Mr. Cook's testimony that Respondent advised him that he had a refund for a cancelled Bankers Life policy in his possession. COUNT IV On or about March 2, 1982, Respondent visited Marjorie Brubaker in her home in Bradenton, Florida. The purpose of Respondent's visit to Mrs. Brubaker was to dissuade her from cancelling an insurance policy with National States Insurance Company which she had previously purchased through another agent and had subsequently cancelled. Mrs. Brubaker testified that, upon arrival at her home, Respondent represented to her that he was an "investigator for the state" or a "state investigator," looking into her cancellation of her policy with National States Insurance Company. Respondent denies having made that representation. The record is clear, however, that shortly after entering Mrs. Brubaker's home, Respondent showed Mrs. Brubaker materials which clearly identified him as an agent of National States Insurance Company, and that Mrs. Brubaker clearly understood within minutes after his entering her home that he was, in fact, a salesman for National States Insurance Company. Under these circumstances, it is specifically found that Respondent's testimony concerning his employment status is more credible. If, as is clear from the record, Respondent intended to sell insurance to Mrs. Brubaker, there is little logic to his having represented himself as a state employee at the door to her home, and within minutes clearly divulging to her that that was indeed not the case. Petitioner also alleges in the Administrative Complaint that Respondent displayed a photograph of Insurance Commissioner Bill Gunter to Mrs. Brubaker to establish his position as an investigator for the state. Mrs. Brubaker, however, was unable to identify the person in the photograph displayed to her by Respondent, other than to assert that the person in the photograph was not the Respondent, but instead a clean-shaven person with light hair and fair, reddish complexion. Those facts, standing alone, are insufficient to establish that the person in the photograph was, in fact, Mr. Gunter. Respondent is alleged in paragraph twenty of Count IV of the Administrative Complaint of having ". . . . falsely represented the status of Medicare coverage in this state in order to induce Mrs. Brubaker to purchase' new insurance policies from you." The only evidence in the record on this issue is Mrs. Brubaker's testimony that Respondent told her that Blue Cross-Blue Shield would soon cease to be the Medicare carrier in Florida, and that there existed a substantial possibility that National States Insurance Company would be designated as the new Medicare carrier in Florida. The record in this cause is absolutely devoid of any evidence that that representation, even if it had been made, was false. Accordingly, Petitioner has failed to establish facts to support the allegations that Respondent has falsely represented the status of Medicare coverage in Florida. Finally, paragraph twenty-one of Count IV of the Administrative Complaint alleges that Respondent falsely told Mrs. Brubaker that her present insurer, Orange State Life Insurance Company, was cancelling its Medicare Supplement policies. . . . It is undisputed that Mrs. Brubaker, at the time she was visited by Respondent, had insurance coverage through Orange State Life Insurance Company. Mrs. Brubaker, it is clear from the record, was under the impression that her policy with Orange State Life Insurance Company was a Medicare supplement policy. Respondent testified that her policy was not a Medicare supplement policy, and, in fact, bore a statement across the top of the policy to the effect that the policy was not a Medicare supplement policy. Petitioner offered no evidence to rebut Respondent's testimony in this regard, and neither party sought to introduce the policy into evidence. The only evidence offered by Petitioner to support the allegation that Respondent's representation that Orange State Life Insurance Company was cancelling its Medicare supplement policv was the fact that Mrs. Brubaker had continued to pay premiums on her policy after the representation was made by Respondent without receiving notice of any cancellation. However, any inference that might be drawn from continued payment of premiums fails if, in fact, the policy held by Mrs. Brubaker was not a Medicare supplement policy. Neither party having offered competent evidence to establish that Mrs. Brubaker's Orange State Life Insurance Company policy was in fact a Medicare supplement policy, the allegations contained in paragraph twenty-one of Count IV of the Administrative Complaint are deemed to be without factual support. COUNT VI In Count VI f the Administrative Complaint, it is alleged that Respondent visited the home of Leila Mueller on October 18, 1979. It is further alleged that at that time Respondent told Mrs. Mueller that he was ". . . from Medicare and that [Respondent] had called at one of [Mrs. Mueller's] neighbor's homes to explain the changes in Medicare coverage." It is further alleged that Respondent ". . . misrepresented [his] actual employment in order to induce Mrs. Mueller to buy insurance policies. The record in this cause establishes that on or about October 18, 1979, Mrs. Mueller was visited in her home by two insurance salesmen whom she believed to be in some way affiliated with Medicare. Mrs. Mueller did not recall the names of either of the two men, was not asked to physically identify the Respondent, and could not recall which of the two men led her to believe that they were affiliated with "Medicare." Mrs. Mueller inquired about whether there existed any written material that she could review to decide whether to purchase insurance coverage. One of the men furnished her a brochure which had the name "Palesky" on it. There is no evidence of record in this proceeding to establish that Respondent was ever in the home of Mrs. Mueller or that he in any fashion ever represented to her or to anyone else that he was a representative of Medicare. The only testi- mony in this record that in any way connects Respondent with Mrs. Mueller was her testimony that she was given a brochure, which was not introduced into evidence, containing Respondent's name. This fact, standing alone, is insufficient to establish the factual allegations contained in Count VI of the Adminis- trative Complaint. COUNT XI On or about March 21, 1982, Respondent visited William F. and Winifred M. Bell in their home in Sarasota, Florida. The purpose of Respondent's visit to the Bells was to sell them a Medicare supplement policy. The Bells had previously purchased a policy from Union Fidelity Insurance Company. During the course of Respondent's visit with the Bells, Respondent advised them that Union Fidelity was "not a good company" and that the policy they had with Union Fidelity was "not a good policy." In addition, Respondent advised the Bells that if anything happened to Mr. Bell that Mrs. Bell would not be insured within two months after Mr. Bell's death. Paragraph fifty-five of Count XI of the Administrative Complaint alleges that Respondent told the Bells ". . . that their present insurance coverage was no good" and that if Mr. Bell died, Mrs. Bell would not be insured when in fact [Respondent] knew that both of those statements were false." The record in this cause contains no evidence that the representations set forth above made by Respondent to the Bells were false. The Bells' insurance policy was not received into evidence because Petitioner failed to respond fully to Respondent's Request for Production of Documents, and had further failed to fully exchange exhibits with Respondent, including a copy of the Bells' policy, as required by the Pre-hearing Order entered by the Hearing Officer approximately two months prior to the date set for final hearing in this cause. Accordingly, there are no facts to substantiate the allegations contained in Count XI of the Administrative Complaint. COUNT XII On or about February 4, 1983, Respondent visited Louise S. Donovan at her home in Daytona Beach, Florida. Respondent visited Mrs. Donovan in response to her cancellation of a previous policy purchased from National States Insurance Company from another agent on or about November 17, 1982. Soon thereafter, she cancelled that policy but on December 22, 1982, reinstated the policy after having available coverages explained to her by the other agent. Sometime thereafter she again can- called the National States policy. By letter dated January 17, 1983, from the home office of National States Insurance Company, Mrs. Donovan was advised that her refund-check had been returned to her agency for refund to her. On February 4, 1983, Respondent visited Mrs. Donovan in her home. Under direct examination, Mrs. Donovan testified as follows concerning that visit: Q So, you showed [the January 27, 1983] letter to Mr. Palesky; and, how did he respond to the letter? A He said sort of -- it's a little vague now after all these months -- that, oh, well, they didn't pay any attention to those things, or some- thing like that, and that the company would not refund any money on the policy. Q Be made the statement to you that the company was not going to refund? A The company would not -- now, I believe his interpretation of that, but it wasn t clear to me, was that there was a certain clause in that policy that I was not satisfied with and that he would not reissue the same policy under the same conditions. Well, I'm a lay person. I don't know all these fine points. And, I under- stood that he meant that the company would not refund any money to me at all... During the course of their discussions, Mrs. Donovan advised Respondent that she had cancel led the policy because she did not have nursing home coverage. Respondent explained to her that, under those circumstances she would have to either add nursing home coverage to the policy she had cancelled, which he was not sure that he could do for her because the so-called "RS 100 feature" was in the process of being discontinued, or she could take out a separate nursing home policy. Resnondent advised her that in order to keep the RS 100 feature she would have to reinstate the policy which she had cancelled, and take out a separate nursing home policy at a later date. This is the option which Respondent recommended to Mrs. Donovan, and the option that she ultimately chose. Accordingly, Mrs. Donovan opted to fill out an application reinstating the cancelled policy. She had originally paid $659 for the policy she took out on December 22, 982, but premium rates had increased since that time. The application filled out by Mrs. Donovan on February 4, 1983, reflects the premium rate increased to $691. Mrs. Donovan testified that she did not recall endorsing a refund check in the amount of $659 from National States Insurance Company and allowing Respondent to submit the endorsed check to National States along with the application dated February 4, 1983. Respondent testified that she did, in fact, endorse that check, which he forwarded to National States Insurance Company with the February 4, 1983, application. According to Respondent's testimony, which is uncontradicted, he submitted the $659 check to National States, notwithstanding the fact that the premium rate had increased to $691, with the understanding that the company had the option of either reinstating the policy for $659 or insisting upon the increased premium rate. Thereafter, Mrs. Donovan again decided to cancel the coverage she received as a result of the February 4, 1983, application submitted through Respondent. Mrs. Donovan signed a sworn statement on March 30, 1983, which provided, in part, as follows: Mr. Palesky has shown me the com- plaint filed against him by the Department of Insurance. I totally disagree with the accusa- tions in the complaint. My only problem with Mr. Pale sky was a misunderstanding concerning the fact that the RS 100 rider could not be refunded and reissued (as it was being discontinued) [sic] I thought he meant the entire policy could not be refunded. . . . Count XII of the Administrative Complaint alleges that Respondent ". . . refused to return [premium] money to Mrs. Donovan. . ., and that ". . . as a result of your refusal Mrs. Donovan felt pressured into applying for a new policy at a higher premium." Further, Count XII alleges that ". . . the new policy was written for a higher premium, that [Resoondent] signed a receipt acknowledging receipt of the higher premium, and that Mrs. Donovan gave [Respondent] no money during [the] visit [of] February 4, 1983." The evidence in this cause does not establish that Respondent refused to return premium money to Mrs. Donovan, nor does the evidence establish that Mrs. Donovan was pressured into applying for a new policy at a higher premium. Finally, the evidence in this cause establishes that Respondent attempted to have National States Insurance Company reinstate Mrs. Donovan's coverage at the premium originally paid in December of 1982, notwithstanding a premium increase that had occurred in the interim, a procedure which has not been shown by the record in this cause to be in any way improper. COUNT XV On or about January 24, 1983, Kenneth E. Fritz bought a National States Insurance Company policy from an agent other than Respondent. On or about February 12, 1983, Mr. Fritz cancelled that policy and asked for a full refund. Mr. Fritz subsequently received a letter dated March 11, 1983, from National States Insurance Company acknowledging his request for cancellation, and advising him that a full refund of his premium was being sent to the agency office which had sold the policy to him, with instructions to deliver the refund to him. On or about March 24, 1983, Respondent visited Mr. Fritz in his home in Largo, Florida, with Mr. Fritz' refund check. In paragraph eighty-eight of Count XV of the Administrative Complaint, Respondent is charged with having ". told Mr. Fritz that [Respondent was] an `investigator with Florida' and that [Respondent] pointed to an emblem on [Respondent's] jacket which gave [Mr. Fritz] the idea [Respondent was] employed by the State of Florida' when in fact [Respondent was] not and are not employed by the Florida Deoartment of Insurance in any capacity." It is further alleged that Resoondent made this representation to influence Mr. Fritz to buy insurance policies, and that Mr. Fritz did not realize that Respondent was not a government employee until reading a newspaper article on or about April 2, 1983, concerning the emergency suspension of Respondent's licensed. Respondent denies ever having represented to Mr. Fritz that he was an employee of the State of Florida. Indeed, Mr. Fritz testified on this issue only that: Mr. Palesky came here, and he had a thing on his coat, and he says[sic] you bought some policies from the -- and he mentioned the name of the company in St. Louis, and he says[sic] I'm here to check on that, and he rattles this thing and give [sic] me the impression that he was the--was from the State of Florida checking this. . . . As mentioned above, Respondent is charged with representing to Mr. Fritz that Respondent was an "investigator with Florida." Nothing contained in the record in this cause establishes that Respondent ever made such a representation to Mr. Fritz. Indeed, Mr. Fritz clearly testified that he could not remember exactly what Respondent said to him to give him the "impression" that he was an employee of the State of Florida. It is, however, clear from the record in this cause that the allegation of the Administrative Complaint that Mr. Fritz did not know that Respondent was not a state employee until reading of Respondent's emergency suspension in a newspaper article on or about April 2, 1983, is false. What is clear is that Respondent made a sales presentation to Mr. Fritz which resulted not only in Mr. Fritz' reinstating the policy he had earlier purchased from another agent and cancelled, but in fact buying another policy from Respondent at the same time. It is also clear that Respondent gave Mr. Fritz a business card during the course of their conversation which clearly identified Respondent as a salesman for National States Insurance Company. In short, this record does not establish that Respondent ever represented himself as an employee of the State of Florida during the course of his sales presentation to Mr. Fritz, nor did Mr. Fritz reinstate his cancelled policy and purchase a second policy based upon any such representation. COUNT XVII On April 15, 1981, Esther Huddleson purchased two Medicare supplement policies issued by National States Insurance Company from agent Michael Frye. On April 16, 1901, she requested a refund on the National States policies. On June 1, 1981, she was visited in her home by Respondent. Count XVII alleges that Respondent falsely advised Mrs. Huddleson that he was an "insurance investigator" and an "investigator for the State." It is also alleged that Respondent was not an "investigator" for National States Insurance Company and that his status with the company had always been that of a sales representative. Further, it is alleged that Respondent ". . . falsely told Mrs. Huddleson her statutory `free look' had expired and so persuaded her to sign a conservation notice." It is clear from the record in this proceeding that Respondent never advised Mrs. Huddleson that he was an "investigator for the State" or in any other manner employed by the State of Florida or the Department of Insurance. A sworn statement signed by Mrs. Huddleson upon which she was closely interrogated by counsel and the Bearing Officer during the course of this proceeding clearly reflects that Respondent identified himself either as "an investigator from National States Insurance Company" or "States Insurance Company." Fur ther, there is no evidence in the record in this cause from which it can be concluded that this representation by Respondent was in any way false. Finally, the only testimony in the record in this cause concerning Mrs. Huddleson's statutory "free look" period occurred on the direct examination of Mrs. Buddleson as follows: Q Did [Respondent] lead you to believe that your 30-day period had passed? A yes. At least, that was in my mind. Mrs. Buddleson's testimony in this regard is, at best, equivocal, and does not persuasively establish that Respondent did, in fact, advise her that her "free look" period had expired as alleged in the Administrative Complaint. There is, accordingly, insufficient evidence of record in this proceeding to establish the allegations against Respondent contained in Count XVII of the Administrative Complaint. The Bearing Officer feels constrained, further, to note with concern the failure of Petitioner's counsel to deal with both Mrs. Huddleson's sworn statement and direct testimony concerning the fact that Respondent never represented himself to her to be an employee of the State of Florida. In fact, to say that Petitioner's counsel failed to deal with those issues is most charitable. It would perhaps be more accurate to say that the proposed findings submitted by Petitioner's counsel on this particular issue have absolutely no factual basis in this record, despite citations to a portion of the transcript purportedly supporting the allegations of the Administrative Complaint. COUNT XXI In December of 1982 Mary Ellen Stapleton purchased a Medicare supplement policy from an agent, other than Respon- dent, representing National States Insurance Company. After reviewing the policy and deciding that she did not want to retain it, Mrs. Stapleton returned the policy on or about February 8, 1983, to National States Insurance Company, and requested a refund of her premium. Through a series of correspondence with National States Insurance Company, Mrs. Stapleton's cancellation request was acknowledged, and she was advised that her premium refund had been returned to the office of the agency selling the policy, with instructions to make immediate delivery to her. On or about March 8, 1983, Respondent telephoned Mrs. Stapleton at her home and advised her that he was an investigator for National States Insurance Company and that he was investigating a Mr. Buffer, who had sold Mrs. Stapleton her National States policy. Count XXI, in pertinent part, alleges: That on or about March 8, 1983, you, JOSEPH MICHAEL PALESKY, telephoned Mrs. Stapleton at her home in Lakeland, Florida, and told her you were "an investigator for National States and [that you were] investi- gating Mr. Buffer" when in fact you were not and are not an investigator for National States Insurance Company but were and are only a salesman. That at no time did you tell Mrs. Stapleton that you represented Diversified Health Services of St. Petersburg, Florida. That you, JOSEPH MICHAEL PALESKY, created the false impression of your employ- ment status in order to induce Mrs. Stapleton to keep the [cancelled] policy. . Respondent did not tell Mrs. Stapleton that he represented Diversified Health Services of St. Petersburg, Florida. It is undisputed that Respondent was, on March 8, 1983, a salesman for National States Insurance Company. Petitioner has not established by any evidence whatsoever that Respondent was not an investigator for National States Insurance Company with authority to investigate Mr. Buffer. Neither has it been shown in this record that Respondent was under any obligation to identify the insurance agency by whom he was employed after having first clearly identified himself as being affiliated with National States Insurance Company. It is, therefore, specifically concluded that there are no facts of record to establish the violations alleged in Count XXI of the Administrative Complaint. COUNT XXII On September 24, 1980, Respondent visited John Capers Smith and Lillian H. Smith in their home in Bradenton, Florida. Respondent went to the Smiths' home in response to the Smiths having sent a card to National States Insurance Company requesting information concerning Medicare supplement policies. Upon his arrival at the Smiths' home, Respondent was advised by Mrs. Smith initially that she did not wish to speak with him further on that day because her husband had recently undergone surgery and was still recuperating. However, uoon Respondent's insistence, he was admitted to the Smiths' home at approximately 1:00 p.m. Respondent remained in the Smiths' home until approximately 8:00 p.m. on September 24, 1980. When he first arrived in the Smiths' home, Respondent told the Smiths that he worked for the State of Florida and that Bill Gunter was his boss. In the course of discussing National States Insurance Company policies, Respondent advised the Smiths that this type of policy was something that Mr. Gunter was attempting to do to assist elderly Floridians. During the course of his conversation with the Smiths, Respondent displayed a photograph of Mr. Gunter to the Smiths as proof of his affiliation with the State of Florida, and offered to call Mr. Gunter on the telephone to verify his credentials. After a long period of discussion, the Smiths purchased an insurance policy from Respondent, and gave him a check for $694. The Smiths' purchase of the policy was due in large part to Respondent's representation that he was an employee of the State of Florida, and that Mr. Gunter approved of the policy. Respondent denies having made any representation to the Smiths concerning his employment by the State of Florida, but, under the circumstances here present, it is specifically concluded that the Smiths' versions of the transaction occurring on September 24, 1980, are more credible.
The Issue The issue to be determined is whether Respondent, Gary L. McKinley (Respondent or McKinley), violated sections 626.611(5), (7), (8), (9), or (13); 626.621(2) or (6); 626.9521; 626.9541(1)(e)1.; or 627.4554, Florida Statutes (2007-2010), or Florida Administrative Code Rules 69B-215.210 or 69B-215.230 as alleged in the Administrative Complaint. If it is found that Respondent violated any or all of these provisions as alleged, then it must be determined what penalty should be imposed.
Findings Of Fact At all times relevant to these proceedings, Respondent was licensed as an insurance agent in the State of Florida. Respondent has served as the president, owner, managing member, and agent in charge of McKinley and Associates, LLC, 6622 Southpoint Drive South, Suite 350, Jacksonville, Florida 32216-6188. Respondent has been licensed as a life insurance agent, variable annuity and health agent, variable annuity agent, and a life and health agent, since April of 1988 and at all times relevant to this proceeding. McKinley was at one time registered with the Financial Industry Regulatory Authority (FINRA) as a broker representative with Intervest International Equities Corporation (Intervest) from May 2008 until November 2010, and was an associated person with other entities including The Leaders Group, Inc., from November 2006 through February 2008. Prior to the incidents giving rise to this case, Respondent was the subject of a complaint of misconduct related to the purchase of an annuity. As a result, and without admitting the allegations in that case, he agreed to a 30-day suspension of his FINRA credentials and a fine. Thereafter, he signed agreements with the Office of Financial Regulation (OFR) on March 8, 2007, September 24, 2007, and October 21, 2007, agreeing to strict supervision with respect to the sale of securities. During the period relevant to these proceedings, the brokers who filled the role as supervisor were Bill Beck and David Arnold. Neither gentleman supervised any of Respondent’s insurance responsibilities except with respect to the sale of variable annuities. Mr. McKinley has been appointed as an agent for various insurance companies, including John Hancock Life Insurance Company (Hancock), ING USA Annuity and Life Insurance Company (ING), Pacific Life Insurance Company (Pacific Life), Lincoln National Life Insurance Company (Lincoln), Reliastar Life Insurance Company (Reliastar), Government Personnel Mutual Life Insurance Company (GPM), Aviva Life and Annuity Company (Aviva), Nationwide Life and Annuity Insurance Company (Nationwide), West Coast Life Insurance Company (West Coast), Transamerica Life Insurance Company (Transamerica), and Metropolitan Life Insurance Company (Metlife). The Vaughn Family Merie Vaughn is a widow with two married sons and five grandchildren. She was born November 18, 1934, and is currently 81 years old. Mrs. Vaughn grew up in and lived in Jackson County, Florida, where she met and married her husband, Rufus Vaughn. She graduated from high school in Jackson County, took some post-secondary business courses, and worked in a variety of places while Mr. Vaughn attended college. Mr. Vaughn worked in the banking industry, and by his retirement had risen to the position of bank president of the Regions Bank in Marianna, Florida. During Mr. Vaughn’s banking career, Mrs. Vaughn sometimes worked as a teller at various banks that he managed. Mr. Vaughn retired in the ‘90s and died in 1997. Mr. Vaughn was a financially-savvy gentleman and believed in saving. During his lifetime, he and Mrs. Vaughn set up several trusts for the management of the funds they had accumulated during their life together. At the time of his death, there was a family trust and a marital trust, as well as an IRA. The trusts were administered by Regions Bank out of Birmingham, Alabama. At the time of Rufus Vaughn’s death in 1997, Ms. Vaughn’s assets were worth approximately $2 million. They were heavily invested in bank stocks. Mrs. Vaughn has two sons, David and Terry. David is approximately ten years older than Terry, is married to Yvette (Lori) Day, and they have four children: Avery, Carly, Chloe, and Dawson, who are 25, 22, 14, and 9 years old, respectively. David and his family live in the Jacksonville area. Terry Vaughn is married to Stephanie Vaughn, and they have one son, Connor, born February 1, 2008. The family lives in Tallahassee, Florida. Toward the end of 2008, Connor was diagnosed with mild autism. Terry has a congenital heart condition that may require valve replacement in the future. In approximately October 2001, Ms. Vaughn moved from Marianna to the Jacksonville area because it was easier for her to receive treatment at Mayo Clinic for an ongoing health problem. Her funds, however, remained with Regions Bank in Birmingham, which served as trustee for the trusts in effect at that time. By 2007, approximately 10 years after her husband’s death, Mrs. Vaughn’s assets had grown to between $7 million and $8 million. In addition to the trusts and an IRA, Mrs. Vaughn’s holdings included a lake-side home in Jackson County, 135 acres of undeveloped land, her home in the Jacksonville area, a car, and a boat. Mrs. Vaughn monitored her holdings on a computer software system purchased for her by one of her sons. At some time in 2007, Mrs. Vaughn became dissatisfied with the trustee at Regions Bank, because she wanted to buy a new car and he would not permit her to withdraw enough funds to do so. In addition, having the trusts handled in Birmingham while she was living in the Jacksonville area was cumbersome for her. She decided that moving the trusts to somewhere closer to her made sense. Around this time, Mrs. Vaughn’s son David introduced her to Respondent. David had met McKinley through his daughter Avery’s soccer team, for which McKinley was a coach. David had talked with McKinley about rolling over some IRAs after an employment change, and had purchased two annuities from him as a result. David met John Crawford, a well-respected, board- certified, estate planning attorney who worked with the law firm Marks Gray. The parties stipulated that Mr. Crawford is a well- respected expert in the field who works with one of Jacksonville’s pre-eminent and well established law firms. Mrs. Vaughn first met with both McKinley and John Crawford in approximately May of 2007. There were a series of meetings with Mrs. Vaughn beginning in May or June 2007, through the end of Mr. McKinley’s relationship with her in October 2010.3/ These meetings were, according to Mrs. Vaughn, generally 30 to 40 minutes long. Among the initial suggestions made to Mrs. Vaughn by Mr. McKinley, with the concurrence of investment planner Bill Beck and attorney John Crawford, was that Mrs. Vaughn diversify her investments. At the time of their initial meetings, Mrs. Vaughn was almost exclusively invested in banking stocks. Mrs. Vaughn followed this advice, which was timely, given the downturn in the stock market and damage to the banking industry that occurred the following year. With each meeting Mr. McKinley prepared an agenda for discussion purposes that he shared with Mrs. Vaughn or whoever attended the meeting. The handwritten notes on the agendas admitted into evidence have been disregarded, as no evidence was presented to demonstrate who made the notations and whether they were made in preparation of the meeting, during the meeting, or in an effort to summarize what was actually discussed. While Mrs. Vaughn did not remember some of the specific details reflected on the meeting agendas, she acknowledged that McKinley discussed in detail many of the specific items that were referenced in the agendas. Moreover, she acknowledged that there was ample opportunity to ask questions about any item mentioned on an agenda that was not initially covered. The focus of many of these meetings, especially the early ones, was creating an estate plan for Mrs. Vaughn that would meet her stated goals: to provide for herself during her lifetime; to provide for her children and grandchildren, and possibly future generations; and to reduce any estate taxes that might be due at her passing. Mr. Crawford’s role in these early meetings was as Mrs. Vaughn’s attorney. As is discussed in more detail below, Mr. McKinley, John Crawford, and Mrs. Vaughn agreed to an investment and estate planning strategy that involved the creation of several Irrevocable Life Insurance Trusts (ILITs), with John Crawford acting as trustee for them. Mr. McKinley assisted with the purchase of life insurance policies on the lives of Mrs. Vaughn, David Vaughn and Yvette Day, Terry and Stephanie Vaughn, and Avery, Carly, Chloe, and Dawson Vaughn. An educational trust fund was also created, as well as a special needs trust for the benefit of Connor Vaughn. Over the course of 2007 through 2010, a number of life insurance policies were purchased, and some of the policies originally purchased were either surrendered or allowed to lapse as other policies were purchased to replace them. At some point late in 2010, Mrs. Vaughn became dissatisfied with the amount of funds being used to purchase life insurance, and she terminated Mr. McKinley’s services. She voiced some of her concerns to David Arnold, who advised her to get an attorney.4/ She has since directed that several of the policies that were in place be terminated, and has filed a civil suit against Mr. McKinley. It is the propriety of the creation of the insurance trusts and the purchase of the life insurance policies contained in those trusts that gives rise to these disciplinary proceedings. Factors to Consider with the Purchase of Life Insurance Generally, the purchase of life insurance requires consideration of several factors, including but not limited to the purchaser’s financial goals, insurability, capacity, and the sustainability of the planned purchase. Life insurance can be used for a variety of purposes, including the traditional goal of providing for one’s family in the event of the one’s death. In addition, life insurance can be used to provide a source for the payment of estate taxes, to create capital and to create liquidity for one’s estate. For purposes of both estate planning and the purchase of insurance in general, it is imperative that all professionals in the process consider which of these uses are consistent with the client’s goals. Here, as stated above, Mrs. Vaughn’s goals were to provide for herself during her lifetime; to provide for her children and grandchildren, and perhaps future generations; and to reduce any estate taxes that might be due at her passing. In 2007, when Mrs. Vaughn began meeting with Gary McKinley and John Crawford, the exemption for estate taxes was $2 million, leaving approximately $5 million of her assets subject to a 45 percent tax rate, which would result in a tax bill estimated at anywhere from $1.8 to $2.25 million upon her death. There have been some dramatic changes in the tax law from 2007 to 2015: in 2011, Congress increased the estate tax exemption to $5 million, but the increase was originally only for two years, when it was scheduled to sunset. As of 2015, the exemption is $5,430,000, and indexed for inflation. However, at the time of most of the events in this case, the exemption remained at $2 million. Accordingly, during the time at issue in this proceeding, reduction of estate taxes for Mrs. Vaughn was an acceptable, realistic goal, in addition to the goals of providing for herself and her family. The insurability of the proposed insured must also be considered. There are many factors that can affect a person’s insurability, such as one’s age; health; habits, such as smoking or alcohol use; and lifestyle or potentially dangerous hobbies, such as skydiving, international travel, reckless driving, or other activities that increase the risk of death or injury. Questions about one’s health history and lifestyle are included on insurance applications, and usually a medical exam, including blood work, is required by underwriting. The questions regarding one’s health can be pretty extensive, and most insurance companies will not issue a policy without a physical given by a physician or a paramedic. There are some instances where an insurance company will insure a person with health problems or a riskier lifestyle, but the policy will be “rated,” meaning that the premium will be higher than the standard premium for the same coverage. With respect to some of the policies in this case, rating is reflected as, for example, 1.75 while others reflect the same rating as 175 percent. Both indicate that the premium would be 1.75 times the standard premium for the same coverage. In this case, two of the insureds had issues that caused a higher rating with respect to insurance premiums: Merie Vaughn was in her early 70s when she started meeting with McKinley and purchasing life insurance. She also had some health conditions, such as high cholesterol and blood sugar issues that caused some of her policies to be rated. Similarly, as noted above, Terry Vaughn has a congenital heart condition that resulted in higher-rated policies. Also to be considered is the insured’s capacity to buy the proposed insurance: in other words, how much insurance can the insured afford to purchase? According to Mike Saunders, while each carrier has different rules, most insurance companies will insure someone for 20 times the person’s income, or up to the person’s net worth. If a policy is a replacement policy, that can expand the person’s capacity. Insurance companies will not generally issue life insurance for more than they think is financially reasonable, unless there are special circumstances that are disclosed. Using Mr. Saunders’ numbers, Mrs. Vaughn’s capacity in terms of coverage would have been approximately $6-7 million. Mr. Saunders did not believe that Mrs. Vaughn was over-insured, and saw no indication that any carrier considering a policy application ever indicated that she was over-insured. Finally, an important consideration is whether the person seeking to purchase life insurance can realistically afford the premiums. Common sense dictates that one should only consider buying something that they can continue to afford to pay. There are allegations in the Administrative Complaint contending that McKinley’s purpose in purchasing so many life insurance policies was to waste Mrs. Vaughn’s estate and earn more commissions for himself. However, it does not appear, from the evidence presented, that it was the purchase of life insurance that caused the wasting of Mrs. Vaughn’s estate. Count I: Creation of the ILITs After numerous discussions over the course of several months with Mr. McKinley, John Crawford, and Tim McFarland, an estate planning attorney with John Hancock, Mrs. Vaughn agreed to the proposed strategy of creating a series of ILITs. An ILIT is an accepted estate planning strategy used to shield income from creditors and to reduce estate taxes upon a client’s passing. It is an irrevocable trust designed to hold life insurance policies, and is a common strategy used with the idea of removing the death benefit of an insurance policy from someone’s taxable estate. The ILIT must be set up so that the settlor has no incidents of ownership over the trust, or the proceeds will not be removed from the estate. ILITs are a commonly used and entirely appropriate vehicle in an estate plan in order to shift the client’s wealth from what the client owns to irrevocable trusts for the benefit of the settlor’s family. They are a management vehicle for wealth that protects that wealth from creditors, and allows assets to pass from the settlor to the trust, outside the estate, straight to the beneficiaries without being subject to estate tax. For a client with assets such as Mrs. Vaughn, the use of ILITs was an appropriate and beneficial estate planning tool. An essential element of an ILIT is the removal of the incidents of ownership from the settlor to the trustee. With respect to each of the ILITs discussed below, Merie Vaughn agreed to appoint John Crawford as the trustee. What this meant in practical terms, is that while Merie Vaughn funded each of the ILITs by paying the premiums for the life insurance policies purchased for the ILITs out of her assets (or those of the trusts for which she was the beneficiary), she relinquished ownership and control of the trust (and its contents) to John Crawford, as the trustee. Moreover, as trustee, John Crawford was considered the owner of the life insurance policies in each ILIT that was created, regardless of whose life was insured. As trustee, it was his responsibility to make the decisions regarding the purchase of insurance policies, and the payment of the premiums on those policies. Before the creation of the ILITs, McKinley showed Merie Vaughn multiple estate planning diagrams to illustrate the overall plan. He also made Mr. Crawford available for any questions she might have. When asked, Merie Vaughn acknowledged that she had multiple opportunities to ask questions, and that did not believe that McKinley was trying to hide anything from her. As a result of the estate planning strategy presented to Merie Vaughn, with which she agreed, the Rufus C. Vaughn Revocable Trust and the Merie M. Vaughn Revocable Trust from Birmingham, with Regions Bank as the trustee, were moved to Jacksonville, and John Crawford was appointed as the successor trustee. In addition, several ILITs were created between September 2007 and March 2010, also naming John Crawford as trustee. Mr. Crawford explained the various trust documents to Merie Vaughn during this process. The trusts created for Merie Vaughn’s estate plan are as follows: the Merie M. Vaughn Irrevocable Insurance Trust, executed September 25, 2007; the Merie Vaughn Retained Annuity Trust, executed October 23, 2007; the David C. Vaughn Irrevocable Insurance Trust, executed October 31, 2007; the Terry R. Vaughn Irrevocable Insurance Trust, executed October 20, 2007; the Stephanie Eller Vaughn Irrevocable Insurance Trust, executed May 21, 2009; the Yvette L. Day Irrevocable Insurance Trust, executed April 18, 2009; the Merie M. Vaughn Trust F/B/O Connor E. Vaughn, executed March 30, 2010; and the Vaughn Family Education Trust, executed March 30, 2010. With the exception of the Merie Vaughn Retained Annuity Trust, for which Merie Vaughn is the trustee, all of the other trusts, i.e., all of the ILITs, name John Crawford as trustee. With respect to each ILIT, the following provision, or one substantially similar to the following provision, is found at Article II, Section 2, of the trusts: I anticipate, but do not require, that the Trustees will purchase one or more policies of insurance on my life with any cash amount contributed to this trust, and I authorize the Trustees to so apply for insurance on my life (or on the life of anyone else other than a Trustee), in amounts and under terms that the Trustees, in their sole discretion, deem advisable and proper. All incidents of ownership in and to all insurance policies transferred to or purchased by the Trustees shall be vested in the Trustees, and the insured under any such policy shall not participate in any right or benefit respecting such policies or any other right under this trust, including a power of withdrawal hereunder, either individually, as guardian, custodian, trustee or in any other capacity.[5/] Likewise, all of the ILITs contained a provision at Article II, Section 1, providing, I, the undersigned Grantor, have this day absolutely and irrevocably transferred, assigned and delivered to the Trustees, and to their successors and assigns as Trustees hereunder (all being hereinafter referred to as the “Trustees”), in trust, certain policies of insurance as set forth in a receipt signed by the Trustees. Those policies, as well as any other cash or property that may be received by the Trustees from me or any other source, shall be administered by the Trustees under this agreement. Stephanie Vaughn and Yvette Day did not testify at hearing. Gary McKinley and John Crawford also did not testify. Both David and Terry Vaughn testified that they fully understood the terms of the trust agreements. Merie Vaughn testified that she did not understand the effect of the trust, but she acknowledged that she had ample opportunity to ask questions of both McKinley, and of John Crawford, the attorney she retained. She also acknowledged that she never told John Crawford that she did not understand the ILITs, and while McKinley offered to take as much time as she needed to review the estate plan, including the ILITs, with her, she did not take advantage of his offer. Count I of the Administrative Complaint, at paragraph 29, alleges that “[y]ou, Gary L. McKinley, completed a new account form on behalf of Mrs. Vaughn for the Leaders Group. On that form, you listed Mrs. Vaughn as being an experienced investor, her net worth as $8 million, her liquid net worth as $3 million and her annual income as $250,000. You knew or should have known that these representations were false.” While the investment application was shown to Mrs. Vaughn at hearing, she did not testify regarding the completion of the form, and did not identify who was responsible for the estimation of her net worth. There is simply no evidence as to who completed the form. Moreover, the estimation of her assets at $8 million, considering both her securities and her real property, is a reasonable estimate. The record does not include evidence as to what amount of her income is considered liquid.6/ However, Mrs. Vaughn testified that at the beginning of this process with Gary McKinley, she decided to take a monthly withdrawal of $12,500 to meet her expenses. She also received a minimum distribution on her IRA account, according to David Arnold, of approximately $80,000 a year. A monthly withdrawal of $12,500, plus her Social Security benefit of $1,204 monthly, and the minimum distribution provides annual income along the lines listed in the application. Ironically, there was similar information on a form David Arnold had Mrs. Vaughn complete. He testified that he did not ask her where the liquid assets were, he simply had Mrs. Vaughn complete the form. The more persuasive and compelling evidence presented did not establish that the trusts established as a part of Mrs. Vaughn’s estate plan, and the resultant sales of life insurance policies, were beyond Mrs. Vaughn’s estate planning needs. Likewise, the evidence did not demonstrate that the life insurance policies were not in her best interests or the best interests of her family members. The evidence also did not demonstrate that the insurance policies were sold for the sole purpose of obtaining fees and commissions. Contrary to the allegations in the Administrative Complaint, the evidence did not demonstrate that McKinley engaged in willful misrepresentations or deceptive acts and practices. In fact, Mrs. Vaughn testified that she did not believe that McKinley was trying to hide anything from her, and consistently offered to spend more time if necessary to explain anything she did not understand. The Administrative Complaint also alleges at paragraph 33 that McKinley wrote a total of 10 life insurance policies on Mrs. Vaughn with death benefits totaling $10,111,052 and premiums totaling $467,024.97. What the Administrative Complaint omits is that some of these policies replaced other policies, resulting in lower overall premium costs to Mrs. Vaughn at higher benefits. The annual cost of the premiums on the life of Mrs. Vaughn was significantly lower than that alleged in the Administrative Complaint. Mike Saunders, the only person represented as an expert in the practice of selling life insurance,7/ testified credibly that replacing policies with more “efficient” policies is an acceptable practice that benefits the client. Count II: ING Policies on the Life of Merie Vaughn Count II of the Administrative Complaint deals with the purchase of ING policy number 1624559 (ING 59). Mrs. Vaughn applied for this policy on August 17, 2007, and it was issued on or about November 7, 2007, with a death benefit of $375,323 and an annual premium of $20,000. The owner of the policy is the Merie Vaughn ILIT. This policy is one of the first policies purchased as part of the estate plan, and contains a signed acknowledgment that the premium is higher than usual, as the insured is rated at 1.75. There is a policy delivery receipt signed by John Crawford dated November 20, 2007, as well as an amendment changing the death benefit to $452,000. However, Respondent is correct that the policy contained in evidence appears to be incomplete: for example, the revised illustration delivered with the policy indicates that it is 16 pages long, but only six of those pages are included. While the Department alleges in the Administrative Complaint, and asserts in its PRO, that Gary McKinley earned a commission of $14,997.80 for the sale of ING 59, it points to no exhibit or testimony to support this proposed finding. Even assuming that this amount is correct, the credible, competent evidence at hearing established that the commissions received by McKinley were not improper. Competent, credible evidence at hearing established that the ING 59 policy was a good policy from a good company. Petitioner asserts that, had Mrs. Vaughn lived to her life expectancy of approximately 14 years, she would have paid $280,000 in premiums. Under those circumstances, the trust would have received a death benefit of $452,000, meaning that the trust would have received $152,000 more than it paid. An amendment to the policy application indicates that the original application was submitted on September 28, 2007, while the application itself reflects the August 17, 2007, date. In any event, Mrs. Vaughn met with McKinley on August 14, September 17, and September 25, 2007. Insurance applications are listed as agenda items for two of these meetings, and the ING application is specifically listed for the September 17, meeting. Mrs. Vaughn was and is a competent adult who had exhibited the capacity to track her investments and understand her assets. There is no competent, credible testimony to support the notion that Mr. McKinley used undue influence to convince her to purchase this policy. Count III: John Hancock Policies on the Life of Merie Vaughn Count III of the Administrative Complaint addresses the purchase of two John Hancock policies. Petitioner’s Exhibit 27 is the application for Hancock policy number 93541373 (Hancock 73), but the actual policy, including the receipt for the policy, is not included in the exhibits for this hearing.8/ The policy specifications at Petitioner’s Exhibit 28 indicate that Hancock 73 had a death benefit of $578,000, an annual premium of $20,000, and was owned by the Merie Vaughn ILIT. The application was also submitted August 17, 2007, and the policy issued November 16, 2007. There is no indication that the policy is rated higher than standard, non-smoking rates. It is difficult to tell if a complete copy of the second policy, John Hancock policy number 94331410 (Hancock 10), is in evidence. However, from the information presented, this policy had a death benefit of $828,518, required an annual premium of $30,000, and the policy was in force beginning in January 1, 2009. It also appears to be issued at the standard non-smoking rate. The policy receipt was signed by John Crawford on December 31, 2008, and the owner of the policy was the Rufus Vaughn Family Trust, with John Crawford as trustee. Both policies enjoyed very respectable rates of return and were considered to be good policies. The more persuasive and compelling evidence established that the policies were part of an acceptable and appropriate estate plan for Mrs. Vaughn. No evidence was presented to establish that the policies were purchased for the sole purpose of generating commissions for McKinley. The two policies lapsed in June and July 2010, respectively. Contrary to the allegations in the Administrative Complaint, however, absolutely no evidence was presented to support the allegation that “you, Gary McKinley, knew the importance of maintaining life insurance policies and not allowing them to lapse, but you allowed them to lapse because you desired to generate larger commissions on new replacement sales rather than settle for receiving smaller residual commissions on extent policies.” Under the express terms of the Merie Vaughn ILIT, the ultimate decision with respect to purchasing, paying for, or surrendering life insurance policies was to be made by the trustee, John Crawford, not by McKinley. Respondent did not have the authority to pay the premiums. Neither John Crawford nor Respondent testified in this proceeding, so little if anything is included in the record of this case regarding the decision-making related to allowing these policies to lapse. However, the record indicates that these two policies were meant to be replaced by Transamerica policies in 2010. The application for Transamerica 65140389 (Transamerica 89) specifically lists the John Hancock 73 policy, the ING 59 policy, and the Lincoln 09 and 28 policies as policies that may be replaced, while the application for Transamerica 65144360 (Transamerica 60) lists the John Hancock 10 policy as intended for replacement. While the John Hancock policies had a respectable rate of return, the rate for the Transamerica policies was better. The more compelling and persuasive testimony established that allowing a policy to lapse is the proper method for dealing with the policy when it is going to be replaced by a more efficient policy. No competent, persuasive evidence of any willful misrepresentations or deceptive acts or practices was presented. Count IV: GPM Policies on the Life of Merie Vaughn Count IV deals with the application process and issuance of three GPM policies, referred to as GPM 25, GPM 30, and GPM 39. On October 21, 2007, McKinley submitted an application for a GPM universal life insurance policy which would become GPM policy 758825 (GPM 25). The illustration for the policy indicates a death benefit of $500,000, with an annual premium of $20,000. The actual application lists under the plan for insurance a benefit of $330,123. The Administrative Complaint alleges that the application for GPM 25 was filled out by Gary McKinley, but no evidence was actually presented with respect to this allegation. The application is signed by both Mrs. Vaughn and Mr. McKinley. The application asks GPM to contact the agent with an offer, and lists the insured as Merie Vaughn, and the owner as a trust, with the trustee as payor.9/ The Administrative Complaint alleges that the application was incomplete in that none of the general information (pages 3 and 4) was completed, and that the application indicated that no other life insurance was in force on Mrs. Vaughn. With respect to the general information on pages 3 and 4 of the application, those pages are in fact blank in the initial submission. However, the Amendment of Application and Policy Delivery Receipt found at Petitioner’s Exhibit 45, page 258, states that “the answers on pages 3 and 4 were given by the proposed insured(s), age 15 and older, by telephone to GPM’s tele-underwriter, who typed in the answers.”10/ Further, contrary to the allegations in the Administrative Complaint, at page 238 of Petitioner’s Exhibit 43, the application amendment contains a listing of three insurance policies for Merie Vaughn. While the application listed the proposed owner as a trust, the policy was issued listing Merie Vaughn as both the owner and insured. All of this becomes irrelevant because, according to the records supplied to the Department by GPM, Mrs. Vaughn decided she did not want a universal life policy, but wanted a whole life policy. The documentation from GPM states: Policy No. 758825 was a universal life policy issued on the life of Merie Vaughn with an effective date of January 1, 2009, and a planned premium of $30,000 annually. Mrs. Vaughn did not accept this policy as issued, having decided she wanted whole life coverage instead. Our administrative system builds multiple screens for universal life policies that we are unable to change to accommodate a different plan of insurance. For administrative purposes only, we terminated the records for Policy No. 758825 as “not taken” and issued a new Policy No. 760030 for the whole life plan with an effective date of January 1, 2009. The $30,000 premium for Policy No. 788525 was reversed, along with all associated commissions, and re-applied as the initial premium of $29,999.97 for the whole life Policy No. 760030. As noted, GPM 30 was issued January 1, 2009, based on an application dated October 21, 2008, with a death benefit of $348,819 and a planned annual premium of $29,999.97. The policy was rated at 150 percent. Mrs. Vaughn did not remember a discussion related to whole life as opposed to universal life. However, whether such a discussion actually took place is also irrelevant. GPM 30 was owned by the Rufus Vaughn Family Trust, for which John Crawford was serving as trustee. The application for GPM 25 also listed the proposed owner of the policy as a trust, not as Merie Vaughn. Article XI, paragraph (k)(1) and (2) of the trust document specified: (k)(1) Unless the Grantor has been declared incapacitated (either legally or by the terms of this agreement), the Grantor may contribute or direct the Trustee to purchase insurance policies on the life of the Grantor and hold each such policy of insurance purchased by or contributed to the Trustee. . . . The Trustee shall be under no obligation to invest any cash value accumulated in any life insurance policy owned by the Trust regardless of investment yield on such value within the policy as compared to the net investment yield which could be obtained outside the policy. (2) The Trustee shall be under no obligation to pay the premiums which may become due and payable under the provisions of any policies of insurance that may be held in this trust, or to make certain that the premiums are paid by the Grantor or others, or to notify any persons of the non- payment of premiums. Upon notice at any time during the continuance of this trust that the premiums due upon any policy are in default, or that premiums to become due will not be paid, the Trustee, in its sole discretion, may apply any dividends or cash values attributable to the policy to the purchase of paid-up insurance or of extended insurance, or may borrow upon the policy for the payment of premiums, or may accept the cash values of the policy upon its forfeiture, with notice to the Grantor or beneficiaries of the trust or any other person . . . . Clearly, the decision-maker with regard to the purchase of and continued vitality of these policies was John Crawford, who did not testify in this proceeding. There was no evidence presented as to his thought process or any actions taken by him with respect to these policies. Further, the only person who testified at any length as to the standard process for submitting life insurance applications was Mike Saunders. Mr. Saunders described the process in detail, and stated that it is not at all uncommon to submit incomplete applications in order to get the process started. Applications are “scrubbed,” both by the insurance agent’s office and by the insurance company, and there are often amendments to the applications during the process. Mr. Saunders also testified that it was not uncommon to have a client just sign the signature page on an application (something done with several of the policies in this case), because there are going to be multiple “looks” at the application and multiple opportunities to amend as additional information is garnered. In fact, many of the amendment forms in evidence actually include a statement that information included in the amendment will be treated as if it was included on the original application. The failure to have the policy application completely filled out when first submitted is not clear and convincing evidence of a false statement. Mr. Saunders’ testimony, which is unrebutted, is accepted. There is no credible, persuasive evidence that demonstrates that the termination of GPM 25 and issuance of GPM 30 was as a result of McKinley’s “lack of reasonably adequate knowledge and technical competence.” Moreover, no evidence was presented to establish what standard represents “adequate knowledge and technical competence,” or how Respondent may have violated that standard. GPM 30 was terminated as of January 1, 2010, for non- payment of premium. As noted above, payment of premium was in the sole discretion of the Trustee. No testimony was presented as to why the premium was not paid, but it was not within McKinley’s authority to pay it. In any event, McKinley assisted in the process of having the policy reinstated. The application for reinstatement of GPM 30 contained information on all of the outstanding policies on the life of Mrs. Vaughn, which was, at this time, at or near the highest point in terms of both death benefit and premium costs. Clearly, the insurance company made the decision to reinstate the policy with full knowledge of the amount of life insurance held on her life at that time. As found above, life insurance “capacity” is a measure used by insurance companies to determine the maximum amount of insurance a company is willing to write on an individual. If Merie Vaughn was over-insured at this point, it is unlikely that the insurance company would have reinstated the policy. Indeed, at no point during the purchase of any of the policies does it appear that any insurance company refused to issue a policy based on lack of capacity. Paragraphs 61 through 65 of the Administrative Complaint reference events that occurred after McKinley’s services were terminated by Mrs. Vaughn. While the exact date of this termination is not in the record, testimony by Mrs. Vaughn and Mr. Arnold place it at late September or early October 2010. Moreover, these paragraphs allege actions by John Crawford as trustee, not actions by McKinley. Paragraph 64 of the Administrative Complaint alleges that John Crawford requested Michael Halloran to replace McKinley “due to your multiple failures to assist in the maintenance of GPM 30.” No evidence was presented regarding John Crawford’s rationale for requesting Mr. Halloran to be reflected as agent of record, although it can be inferred that he was honoring Mrs. Vaughn’s wishes to no longer do business with McKinley. The Department did not present evidence of multiple failures by McKinley regarding the maintenance of GPM 30. The Administrative Complaint also takes issue with the application, issuance, and monitoring of GPM Policy 751339 (GPM 39). The application was originally submitted for GPM 39 in June of 2007, very early in Mrs. Vaughn’s relationship with McKinley.12/ A letter from McKinley dated June 21, 2007, referencing the policy number, states: Please find the enclosed application for Merie Vaughn. As we discussed, trusts will be executed over the next 2-6 weeks and ownership, beneficiaries and FEIN tax ID’s will be re-faxed upon completion. We may place some or all of this premium and death benefit with a standard offer from GPM. Likewise, the Agent’s Report found with the application indicated that McKinley planned to submit the case to other companies, and named John Hancock or best offer. As found above, the fact that the application is not complete is not clear and convincing evidence of a false statement. Moreover, when all of the documents are read together, it is clear that this application was a work in progress. There is no evidence to support the allegation that the policy was “sold” as a million dollar policy but only issued for $221,440. The reference to one million dollars is a reference to the insurance plan. At the point the application was completed, that was the target amount, and McKinley’s letter clearly states that they would place “some or all” of the death benefit with the company, depending on the offer. GPM 39 was issued October 16, 2007, listing Merie Vaughn as the owner, with a death benefit of $221,440 and an annual premium of $19,999.18. The policy was rated at 150 percent. While the portion of the policy included in Exhibit 39 indicates that the policy has 29 pages, only six pages are included in the exhibit. There is an amendment and policy receipt signed by John Crawford as trustee and by McKinley as agent on October 23, 2007, with a second amendment and policy receipt signed by Merie Vaughn as owner on October 29, 2007. The policy receipt showed the beneficiary of the policy to be the trust. However, without the entire policy with all amendments being included in the exhibits, no finding can be made that any type of material error occurred with respect to this policy. Finally, paragraph 58 of the Administrative Complaint alleges that in November 2009, Gary McKinley directed that GPM change GPM 30, GPM 39, and GPM 84, which will be discussed in more detail below, to paid-up policies with no further premiums to be paid. While this is so, the Administrative Complaint does not allege, and the evidence did not demonstrate, why this action was not in Mrs. Vaughn’s best interests. Further, the Administrative Complaint did not allege and the evidence did not demonstrate whether McKinley made these instructions independently, in consultation with others, or solely at the behest of John Crawford or Mrs. Vaughn. The more persuasive and compelling evidence established that the policies were part of an acceptable and appropriate estate plan for Mrs. Vaughn. No evidence was presented to establish that the policies were purchased for the sole purpose of generating commissions for McKinley. Count V: Lincoln Policies on the Life of Merie Vaughn Count V of the Administrative Complaint addresses the purchase of three policies from Lincoln: Lincoln Policy JJ7061061 (Lincoln 61); Lincoln Policy JJ7085909 (Lincoln 09); and Lincoln Policy JJ7085928 (Lincoln 28). The exhibits related to these three policies are Petitioner’s Exhibits 59 through 69. They are, however, incomplete and somewhat confusing. Petitioner’s Exhibit 59 is a copy of the application for Lincoln 28. However, it appears to be a reiteration of Petitioner’s Exhibit 60, with the word MODIFIED stamped on several of its pages. The application is dated April 26, 2009, but the fax legend for this modified document is dated April 28, 2009. With respect to question 50, no policy is listed, but the box to answer “no” is not checked. The exhibit also includes a Lincoln “appropriateness verification form,” used when the policy applied for is going to be used as a replacement policy. It appears that the document is incomplete, however: the fax legend indicates that there were 36 pages faxed, but the exhibit only includes pages 7-16, with one page bearing no legend. Petitioner’s Exhibit 60 also purports to be an application submitted April 26, 2009. The application also appears to be incomplete. For example, the fax legend at the top of the page reflects that there were 17 pages faxed. The exhibit only contains pages 2, 7-10, 13, 14, and 15. Similarly, the numbering on the application pages are 1 of 5, 2 of 5, 3 of 5, 3A of 5, 3D of 5, 4 of 5, and 5 of 5. For question 10 of the health summary, the application says “see attached,” but no attachment is included in the exhibit. Petitioner’s Exhibit 61 is part, but not all, of Lincoln Policy 28, issued July 28, 2009. The policy is owned by the Rufus Vaughn Family Trust, has a death benefit of $1,250,028, with a premium of $13,000, and is rated at 1.75 for the first 20 years. The exhibit includes a July 15, 2009, amendment to the application, but references an application date of May 7, 2009, as opposed to April 26, 2009, referenced above. The amendment supplies the identifying features of six policies in force for Mrs. Vaughn at that time. Petitioner’s Exhibit 62 is a mixture of documents related to Lincoln Policies 61 and 28. The first part of the exhibit appears to be an application for insurance for Lincoln 61, signed November 21, 2008. Like the application at Petitioner’s Exhibit 60, there are references in the application that say, “see attached,” with no attachments included. Following the application there is what appears to be part of the policy issued for Lincoln 61, listing the schedule of benefits with a death benefit at $912,388, an issue date of January 28, 2009, an annual premium of $30,000, and the use of standard rates. The portion of the policy included begins with page 3, and includes pages 4A-F only. Petitioner’s Exhibit 62 then reverts to documents related to Lincoln 28. It includes a schedule of benefits for that policy, indicating it was issued on July 28, 2009; includes an amendment to the application that references the application as being dated May 7, 2009 (as opposed to April 26, 2009); repeats some of the documents contained in Petitioner’s Exhibit 61; and includes a policy endorsement page and policy receipt for Lincoln 28, reflecting a premium of $60,000 as opposed to $13,000. Petitioner’s Exhibit 64 appears to be a modified application for Lincoln 61, dated January 13, 2009, whereas the original application was dated November 21, 2008. It also refers to attachments that are not included. There is a letter dated January 21, 2008 (although the fax legend reflects January 23, 2009), notifying Lincoln that from the time of application, two additional policies were placed in the Rufus Vaughn Family Trust. There are two copies of an endorsement page for Lincoln 61, identifying the date of coverage as January 28, 2009, and two copies of an amendment to the application, providing additional information for questions 19, 20, and 21. Petitioner’s Exhibit 66 is an application for Lincoln 09, marked as modified, and also dated April 26, 2009. It appears to duplicate the application at Petitioner’s Exhibit 59. Similarly, Petitioner’s Exhibit 67 is also an application dated April 26, 2009, which appears to duplicate Petitioner’s Exhibit 60. At page 430 of Petitioner’s Exhibit 67 is an endorsement for Lincoln 09 that actually references the April 26, 2009 application, as opposed to the May 7, 2009 application referenced (but not supplied) in Petitioner’s Exhibit 62. There is also a Policy receipt for Lincoln 09 dated and signed July 15, 2009, and an unsigned amendment for the policy. Finally, Petitioner’s Exhibit 69 contains a Schedule of Benefits for Lincoln 09, but not the policy in its entirety. The Schedule of Benefits reflects an issue date of July 29, 2009, for a policy with a death benefit of $832,853, with a premium of $40,000. The policy is rated at 1.75 for the first 20 years, then reverts to standard rates. The Schedule of Benefits is the only part of the policy included, and reflects pages 3, and 4A through 4F only. This mishmash of partial applications and partial policies undermines any confidence that the documents represent the whole of what took place with respect to the application and issuance process for these three policies. All that can be said is that Lincoln 61 was issued on January 28, 2009, with a death benefit of $912,388 and an annual premium of $30,000, with a standard rating. The owner of the policy was the Rufus Vaughn Family Trust. On July 28, 2009, Lincoln 09 and Lincoln 28 were issued. Lincoln 09 was owned by the Merie Vaughn Revocable Trust, had a death benefit of $832,853.00, an annual premium of $40,000, and a 1.75 rating. Lincoln 28 was owned by the Rufus Vaughn Family Trust, had a death benefit of $1,250,028, a $60,000 annual premium, and 1.75 rating. Any initial omissions with respect to the applications appear to have been resolved through amendments to the application, consistent with the process described by Michael Saunders. After issuance of Lincoln 61 and before the issuance of Lincoln 09 and Lincoln 28, Mrs. Vaughn signed a letter to McKinley dated April 1, 2009, confirming the strategy of replacing some of her life insurance policies with policies that had more efficient terms. The letter states in part: Gary: Please take all necessary steps to lower my premiums for the life insurance where I am the insured to consider getting the same insurance for a lower premium or leveraging and lowering my premiums to increase Death Benefits. Please check the financials of each company and do your best to confirm the company is indeed solvent and one of the top companies. I understand John Hancock and Lincoln will be the initial and possibly the carriers of choice. The reason I’m doing this is I have noticed and as you have pointed out, my most recent policy with Lincoln for 30k of premium bought me almost $100,000.00 more of death benefit and with the economical environment, it would be helpful if we can lower premiums by some 30k or 50k total this year and going forward, I would like the opportunity to do this. Even with the over 5 Mil saved, I must be prudent in times like this. I realize the initial calculations are that I might save approximately 30k to 50k annually and still be able to increase my Death Benefit by 500k to 1 mil dollars. This is certainly worth us considering consolidation and savings and I appreciate your monitoring my insurance portfolio regularly looking for these types of arbitrage. As of April 29, 2013, Lincoln 61 remained an active policy. Both Lincoln 09 and Lincoln 28 lapsed on January 3, 2011, several months after Mrs. Vaughn terminated McKinley’s services. The Administrative Complaint charges that McKinley failed to provide information in the applications on all in- force life insurance policies on Mrs. Vaughn’s life, specifically listing ING 59, Hancock 73, GPM 30, and GPM 39. As noted above, the applications were updated through the amendment process, which unrefuted evidence indicates is an accepted practice in the insurance industry. While the documents are incomplete, it appears that all necessary information was supplied. While the Administrative Complaint states that “Lincoln later added amendments to L 61, L 09 and L 28 to add the insurance coverage information that you, Gary McKinley, should have included when the applications were originally submitted to Lincoln,” there was no testimony at hearing to demonstrate who supplied the information for the amendments (McKinley or the insurance company), and with documents as incomplete as these, to make any conclusions regarding the source of the information would be speculative. The responsibility for the lapsing of two of the policies cannot be laid at the feet of McKinley: not only was he not responsible for paying the premiums with respect to these policies, but he was no longer working with Mrs. Vaughn at the time the policies lapsed. Moreover, no persuasive, competent evidence was presented to demonstrate that the purchase of these policies was inappropriate and without demonstrable benefit to Mrs. Vaughn. Rather, the more persuasive evidence indicates that the purchase of these policies was part of an integrated strategy to reduce premiums, increase death benefit, and continue the overall goals of reducing Mrs. Vaughn’s taxable estate while still preserving her wealth. Likewise, no evidence was presented from which it could be found that the policies were sold for the “sole purpose of obtaining a fee, commission, money or other benefit for [McKinley] and for John Crawford,” or for the premise that McKinley’s intention was to generate larger commissions on new replacement sales rather than settle for receiving smaller commissions on existing residual policies. Count VI: Transamerica Policies on the Life of Merie Vaughn Count VI of the Administrative Complaint deals with Transamerica 89 and Transamerica 60. Mrs. Vaughn signed an application for the Transamerica 89 policy on May 26, 2010. The policy issued on August 6, 2010, with a death benefit of $3,882,000 and an annual premium of $130,000. The owner of the policy was the Merie Vaughn ILIT, and the policy was issued at the standard rate. The policy application for Transamerica 89 indicated that four policies would be replaced by Transamerica 89: Hancock 73, with a death benefit of $578,006 and annual premium of $20,000; ING 59, with a death benefit of $452,000 and annual premium of $20,000; Lincoln 09, with a death benefit of $832,853 and annual premium of $40,000; and Lincoln 28, with a death benefit of $1,250,028 and annual premium of $60,000. In other words, the purchase of Transamerica 89 to replace these four other policies meant an increase in death benefit (from $3,112,887 to $3,882,000), with a reduction in annual premium (from $140,000 to $130,000). Transamerica 60 was issued August 13, 2010, with the owner as the Rufus Vaughn Family Trust. The death benefit was $805,000 with a $27,000 annual premium, calculated at the standard rate. It replaced Hancock 10, which had a death benefit of $828,518, and an annual premium of $30,000. McKinley received commissions on the sale of both policies. Mike Saunders described the Transamerica policies as very efficient. According to the rate of return analysis prepared by John Linnehan, whose testimony is accepted as credible and persuasive, the internal rate of return for these policies was excellent, ranging from 17.1 percent should Mrs. Vaughn live to life expectancy, to a return of 207 percent should she die at the third anniversary of the policy.11/ The same rates applied for both policies. These rates of return far exceed what would be expected as an acceptable rate of return on life insurance policies, and was higher than the rate of return for the policies that they replaced. The more persuasive and compelling evidence demonstrated that the purchase of these policies was intended to and did provide a benefit to Mrs. Vaughn and was appropriate, given her financial circumstances and estate planning goals. Paragraphs 81 and 83 of the Administrative Complaint allege details regarding the cancellation of these policies, at a time when McKinley was no longer working with Mrs. Vaughn. Moreover, John Crawford, as trustee, is the person with the discretion and authority to make decisions with respect to the maintenance or surrender of any and all of the life insurance policies held by the various trusts. No evidence was presented to indicate that McKinley participated in any way with respect to the decisions to surrender or cancel these policies. Likewise, no evidence was presented from which it could be found that the policies were sold for the “sole purpose of obtaining a fee, commission, money or other benefit for [McKinley] and for John Crawford,” or for the premise that McKinley’s intention was to generate larger commissions on new replacement sales rather than settle for receiving smaller commissions on existing policies. Count VII: Hancock Long-Term Care Policy In Count VII, the Department takes issue with McKinley’s sale of a Hancock long-term care policy. Merie Vaughn applied for the policy on November 20, 2009, and John Hancock policy 7222784 (Hancock LTC 84) was issued December 29, 2009. Hancock LTC 84 was a policy with a five-year benefit period, and a policy limit of $396,000. The long-term care benefit was for $6,600 per month, and had an annual premium of $12,262.50. Other features of the policy are described in Petitioner’s Exhibit 91, but are not necessary for purposes of this discussion. The Department charges, “[y]ou, Gary McKinley, being both a licensed insurance agent and a securities broker, knew or should have known that the sale of the Hancock long term care policy, in addition to all of the life insurance policies you sold her, was beyond Mrs. Vaughn’s needs, was not in Mrs. Vaughn’s best interests, was neither necessary nor appropriate for a person her age and financial circumstances, was without demonstrable benefit to her, served to waste her estate and was done for the sole purpose of obtaining a fee, commission, money or other benefit for yourself and for John Crawford.” The only factual evidence in the record regarding the purchase of this policy is from Merie Vaughn. She testified that she wanted this policy, and told Gary McKinley that if he could find some long-term care coverage, she would be interested in it. Long-term care coverage was something she wanted. There is no credible, persuasive evidence to demonstrate that McKinley sold this policy just to get a commission. There is no evidence as to what advice McKinley gave Mrs. Vaughn about this type of policy: whether he advised that she obtain it or whether she insisted on buying against his advice. There is no evidence to prove the allegations in the Administrative Complaint. Count VIII: The ING Annuities Count VIII of the Administrative Complaint deals with the purchase of three ING annuities: one purchased with funds from Merie Vaughn’s IRA, one purchased by the Rufus Vaughn Family Trust, and one purchased by the Rufus Vaughn Marital Trust. On September 30, 2007, Mrs. Vaughn’s IRA account was worth approximately $795,972.43. On October 29, 2007, she applied for ING annuity 90275251 (ING Annuity 51), and on December 4, 2007, a one-time premium of $712,037.78 was paid from the assets in Merie Vaughn’s IRA to fund ING Annuity 51. ING Annuity 51 was issued on December 10, 2007, with a five- percent bonus on premium. A bonus is defined in the policy as “an amount equal to a percentage of the Single Premium, as stated on the Contract Data Page, that we add to the Contract’s Accumulation Value on the Contract Date. The Bonus is elected to the Strategies in the same ratio as you elect the Single Premium.” On August 4, 2008, John Crawford, as Trustee of the Rufus Vaughn Family Trust, applied for ING Annuity 90295107 (ING Annuity 07). On August 18, 2008, $500,000 was paid from the assets of the Rufus Vaughn Family Trust for the single premium of $500,000, and on August 19, 2008, ING Annuity 07 was issued with a five-percent bonus on the single premium. On August 4, 2008, John Crawford also applied for ING Annuity 90295108 (ING Annuity 08) as trustee for the Rufus Vaughn Marital Trust.13/ This annuity also had a single premium of $500,000, which was paid from trust proceeds on August 18, 2008. The ING Annuity 08 also issued on August 19, 2008, with a five-percent bonus on the single premium. While the Administrative Complaint alleges that “upon the advice and at the direction of you, Gary McKinley, . . . Ameritrade Clearing issued a check in the amount of $500,000.00 made payable to ING as the single premium” with respect to both annuities purchased by John Crawford as trustee, no evidence was presented to identify who arranged for payment of the annuities. Likewise, the Administrative Complaint alleges with respect to ING Annuities 07 and 08 that “you, Gary McKinley, with the cooperation of lawyer/trustee Crawford, gave your directions or consent . . . to having the [trust] disgorge $500,000.00 for funding the ING annuity,” there is no competent, credible evidence regarding the decision-making with respect to the purchase of these two annuities. Annuities are designed to provide a lifetime income from an initial investment of funds, or can be used to guarantee a certain identified rate of return over a fixed period. There are limitations on how much can be withdrawn from an annuity without incurring surrender fees. In the case of ING Annuity 51, Merie Vaughn withdrew $40,209.19 on December 22, 2008, and $69,675.89 on December 11, 2009. Both amounts were less than the 10 percent allowed annually without incurring surrender fees. From the dates of purchase until March 2012, each of the three annuities earned investment profits of approximately $75,000, for a total profit for the three annuities at $226,206.41. While the annuities have each made a significant profit, as of March 2012, they were not worth as much as they were when they were purchased, because of the amount withdrawn. However, no evidence was presented to identify who made the decision for distributions from the annuities or who decided how much those distributions would be. Moreover, the evidence suggests that with respect to ING Annuity 51, the IRA from which the funds were taken for its purchase was an IRA heavily invested in bank stocks. As noted previously, no one has questioned the advice to diversify those holdings and the testimony was uniform that diversification prior to the recession in 2008 was a positive development for the preservation of Mrs. Vaughn’s assets. There is no evidence as to what the return would have been had the IRA assets been left undisturbed. The returns offered by ING Annuity 51, as well as the other two annuities, were generally higher than that afforded by the market in general, and protected the assets from creditors. The Department did not prove what income would have been generated by the Rufus Vaughn Marital Trust and the Rufus Vaughn Family Trust had the annuities not been purchased for them and the trusts had remained with the mix of assets they each contained prior to the annuity purchases. The Administrative Complaint did not identify and the evidence did not reveal what, if any, willful representations or deceptive acts or practices McKinley committed with respect to the purchase of any of the ING annuities. McKinley earned commissions on the purchase of all three annuities. There was no testimony that the amount of commission was unusual for the products sold. Count IX: Policies on the Life of Terry Vaughn Count IX deals with those policies sold on the life of Terry Vaughn. Three of the policies were held in the Terry Vaughn ILIT, while the fourth was held in the Merie M. Vaughn Trust F/B/O Connor E. Vaughn. The four policies are Hancock 46300489 (Hancock 89), Aviva IL01198680 (Aviva 80), Lincoln 180003841 (Lincoln 41), and Lincoln 180004324 (Lincoln 24). Hancock 89 was taken out on Terry Vaughn’s life and held in the Terry R. Vaughn ILIT. While there was confusion as to when Terry Vaughn signed the application, in all probability he signed it on or about February 25, 2008, and the policy issued on March 6, 2008. The death benefit was $1,694,226, and the policy called for annual premiums of $25,000 for 10 years. The policy appears to be rated at 200 percent. Petitioner’s Exhibit 118, the policy specifications, references supplement dates of October 2, 2007; November 13, 2007; and January 28, 2008, but those supplements are not included in the record. On June 25, 2008, John Crawford, as trustee, applied for additional life insurance on Terry Vaughn’s life through Aviva, which became the basis for the Aviva 80 policy. The application was amended in August 2008, yet the policy reflects that it was issued July 23, 2008, with a death benefit of $1,588,310 and an annual premium of $25,000. The rating is not clearly indicated in the exhibits provided. The application indicates that the Aviva policy would be replacing a West Coast Life policy with a death benefit of $1,298,238. However, Terry Vaughn was unaware of the existence of that policy, which is listed as “personal,” and no other evidence regarding a West Coast Life policy is contained in the record. On October 26, 2009, John Crawford, as trustee of the Terry R. Vaughn ILIT, applied for a policy with Lincoln that became the Lincoln 41 policy. The application was also signed by Terry Vaughn as the insured and by McKinley. The application includes the question, “Please list amounts of all inforce life insurance on your life, including any policies that have been sold. (Please list in the box below.).” The application lists the Aviva policy, but indicates that it was issued in September of 2008 with a death benefit of $1.6 million. The Lincoln application also indicates with respect to the Aviva policy that there will be a replacement or change of policy. At the time of this application, the Hancock 89 policy was still in force, but there is no listing of that policy on the application. The Lincoln 41 policy was issued December 2, 2009, and then its issue date was changed to December 17, 2009. An endorsement to the policy states that Lincoln received all information necessary to issue the policy, but does not specify what information was received, other than the premium of $35,000, and no amendments or medical reports are included in the exhibit. There is also no signed policy receipt. The death benefit for the Lincoln 41 policy is $2,219,885. The policy was rated at two times the standard rate for the first 27 years. If there was certainty that the documents contained in the exhibits with respect to Lincoln 41 were in fact the complete documents submitted with respect to this policy, the undersigned would have no hesitation in finding that by failing to list the Hancock 89 policy as a policy on Terry Vaughn’s life, Respondent had misrepresented the amount of insurance outstanding at that time. However, there is no certainty regarding the completeness of the exhibits. As noted previously, the certification of records from Lincoln is a stand-alone exhibit, not attached to any particular document. (Petitioner’s Exhibit 89). Moreover, that document does not really certify much of anything. The form includes the following language: Pursuant to sections 90.803(6), and/or 90.902(11), Florida Statutes, I hereby certify the following: that as part of my regular duties I maintain custody and control of the records of the Company; that the attached documents consisting of pages, reflects entries of information that were made at or near the time of the occurrence of the matters set forth by, or from information transmitted by a person having knowledge of those matters; that it is the regular practice of the Company to make, keep and maintain the attached data and/or records during the course of regular conducted business; that the attached documents were made as a regular practice in the course of the regularly conducted activity; and that the attached documents are a true and correct copy of the original record contained in the Company’s business records. The space to indicate the number of pages supplied with the certification is left blank. There is no assurance that all of the documents received from this, or any insurance company, are included in the exhibits provided. No one at hearing testified that the records provided were complete, and Terry Vaughn testified that he signed a lot of documents, but often did not see the entire application. Given the unrefuted testimony that initial applications are often incomplete and errors and omissions are cleared up through amendments, without some assurance that the information in Petitioner’s Exhibit 122 and 123 comprise the entire application and insurance policy issued as a result, which they clearly do not, there is not clear and convincing evidence that McKinley made misrepresentations with respect to Lincoln 41. On April 1, 2010, John Crawford, as trustee, applied for additional insurance on the life of Terry Vaughn for the Merie M. Vaughn Trust F/B/O Connor E. Vaughn. The amount of the insurance for which he applied was $3 million, with an annual premium of $35,000. Both Terry Vaughn and McKinley also signed the application, which became the basis for Lincoln 24. The application for Lincoln 24 lists the Lincoln 41 policy as being in force on Terry Vaughn’s life. It does not list the Aviva 80 policy, but that omission is consistent with the stated intention in the Lincoln 41 policy application to replace the Aviva policy with the Lincoln 41 policy. The application does not list the Hancock 89 policy, which remained in force at that time, and there is some indication in the record that ultimately the Aviva 80 policy remained in force. Petitioner’s Exhibit 125, which represents those portions of the application in evidence, includes an appropriateness verification statement, which is included when the applied-for insurance is meant to replace some other insurance. The Lincoln 24 policy was issued April 7, 2010. The death benefit was $3 million, the amount for which the trust applied, with an annual premium of $35,000. The premium was rated at 2.5 for the first 27 years. Petitioner’s Exhibits 126 and 127 are parts of the Lincoln 24 policy. Petitioner’s Exhibit 126 includes the schedule of benefits and premiums at pages 3 and 4A-4F. Petitioner’s Exhibit 127 provides what appears to be most of the rest of the policy, but only includes page 17 of 17 of the illustration and, while it includes something called an indexed signature page, it does not include a policy receipt. In short, this policy, like Lincoln 41, does not appear to be complete. Like Lincoln 41, given the unrefuted testimony that initial applications are often incomplete and errors and omissions are cleared up through amendments, and given the incomplete nature of the documents related to Lincoln 41, the evidence is not clear and convincing that Respondent misrepresented information in the application by omitting reference to Hancock 89 and Aviva 80. There was some testimony regarding the appropriateness of establishing the trust fund for the benefit of Connor Vaughn. Merie Vaughn testified that she was very concerned with Connor’s future, and much of her time after his diagnosis in late 2008 was spent working with Connor. A special needs trust permits funds to be used for a disabled individual without jeopardizing the individual’s ability to receive governmental assistance. Even Petitioner’s expert noted that a special needs trust would be an option that he would have wanted Mrs. Vaughn to consider with respect to Connor. The Department has not demonstrated that establishing the special needs trust was not in Mrs. Vaughn’s or her family’s best interest. Clearly, Terry Vaughn did not believe that $3 million dollars was necessary to fund any of Connor’s future needs. He had received assistance through a program at Florida State University at little to no cost to the family. However, he was unaware of what research his mother may have done with respect to programs for autism, and acknowledged that there are many costly programs available for autism should someone want to avail themselves of such a program. The Administrative Complaint alleges that on June 7, 2011, John Crawford, as trustee, directed the cancellation of Hancock 89 and requested the return of any cash value. The policy was canceled and on June 21, 2011, Hancock remitted a check for $35,114.29. The cancellation of this policy was several months after McKinley was no longer providing services to the Vaughn family at Mrs. Vaughn’s behest. Likewise, the Administrative Complaint alleges that Lincoln 41 and Lincoln 24 lapsed and were canceled on January 20, 2011, and September 8, 2011, respectively. Both events occurred several months after Mrs. Vaughn had terminated McKinley’s services. Moreover, as stated previously, it is the trustee, and not McKinley, that is responsible for the payment of insurance policies held by the various trusts. The record in this proceeding contains no evidence regarding what Mr. Crawford considered in making the decisions to retain or cancel various policies owned by the trusts. The Administrative Complaint also charges that McKinley “willfully avoided underwriting protections designed to prevent the wasting of Vaughn family assets.” There is no persuasive evidence to support this allegation. Mr. Saunders testified that there is a master insurance bureau that has a database which includes negative information on insurance applicants. If one company has negative information about an applicant, a second company with which the applicant files an application would have access to that information. Here, Terry Vaughn’s policies were rated because of his health condition. There was no testimony from any insurance company that they issued a policy without sufficient information or based on false information provided by McKinley. Count X: Policies on the Life of David Vaughn Count X of the Administrative Complaint addresses two insurance policies purchased for the David C. Vaughn ILIT: GPM Policy 000753784 (GPM 84), and ING Policy 7218635 (ING 35). On November 2, 2007, an application for insurance was submitted to GPM. The proposed insured was David Vaughn, and the application indicates that a trust was to be established that would be both owner and beneficiary of the policy. The application is signed by Merie Vaughn as trustee, David Vaughn as the insured, and McKinley as the agent.14/ GPM 84 was issued December 1, 2007, as a whole life policy with a death benefit of $1,601,233 and an annual premium of $37,192, calculated at standard rates. While Petitioner’s Exhibit 137 indicates that the policy issued on December 1, 2007, the policy illustration included was prepared February 6, 2008. No policy receipt or amendments are included in the exhibit. On March 25, 2010, John Crawford, as trustee, wrote GPM requesting that the policy be changed to paid-up status. No evidence was presented to explain what Mr. Crawford considered in making the request to change the policy to paid-up status. While the change meant that no more premiums would be paid, it also meant that the death benefit was reduced, effective June 2, 2010, to $22,612. Sometime in late December 2007, McKinley submitted an application for ING 35. While the application has the date December 25, 2007, it is unclear which signature the date purports to signify, and David Vaughn did not execute the document on that day. The insured for this policy application is David Vaughn. The owner and beneficiary is the David C. Vaughn ILIT. A Verification of Coverage document as of December 12, 2010, indicates that ING 35 issued April 10, 2008, with a death benefit of $731,000 and an annual premium of $12,807. The rating is listed as “Super Preferred non smoker.” The documents in Petitioner’s Exhibit 145 include an undated and unsigned policy receipt and a premium notice dated April 11, 2011. On June 7, 2011, John Crawford, as trustee, requested the cancellation of ING 35, with any surrender value to be forwarded to him. No evidence was presented to explain what Mr. Crawford considered in making the request to cancel the policy. His request is copied to Merie Vaughn. As a result of his request, ING forwarded a check to John Crawford for $3,893.57, representing the surrender value of ING 35. While the Administrative Complaint alleges that McKinley violated the public trust by the sale of these two life insurance policies, there is no allegation describing what about the sale of these two policies actually violated that trust. There is no allegation that David Vaughn was over-insured or that the policies were not in his best interest. Count XI: Vaughn Family Education Trust Policies Count XI of the Administrative Complaint deals with policies purchased for the Vaughn Family Education Trust (Education Trust). The Administrative Complaint asserts that there were seven policies originally issued, but applications for and partial copies of only three policies are included in Petitioner’s exhibits. Merie Vaughn testified that the Education Trust was something she agreed to, although she told Gary McKinley to fund it from something other than her IRA. The life insurance purchased was consistent with the plan she agreed to with John Crawford. She also acknowledged at hearing that providing life insurance benefits to her grandchildren is valuable to them. Likewise, Mike Saunders testified that purchasing life insurance on children is “absolutely appropriate,” and is done to plan for the future. His testimony is accepted. Buying life insurance at this age is a good idea because insurability can change quickly, and having a policy in place before any change in insurability occurs is wise. It also allows for the buildup of cash value over time, and the ability to borrow against the policy. Included in Petitioner’s exhibits is an application for life insurance with Metlife on the life of Avery Elizabeth Vaughn, David Vaughn’s oldest daughter. She was 19 years old at the time of the application. The application is for a whole life policy and the amount of insurance listed on the application is $580,650. Avery Vaughn signed the application as the insured, John Crawford signed as trustee for the Education Trust, and McKinley signed as the insurance agent of record. The application was signed on April 22, 2010. While this application is included with a policy numbered 210238538A1 (Metlife 38), it does not appear to be the application that led to the issuance of Metlife 38. For instance, while the application is signed April 22, 2010, Metlife 38 was issued February 7, 2010, two months before the application was submitted. Moreover, while the application referenced $580,650 in death benefits, the issued policy was for $990,000, with a total premium of $8,118.50. No policy receipt or amendments are included. Metlife 38 was surrendered on or about October 14, 2011, after McKinley was no longer acting as Mrs. Vaughn’s insurance agent, and $79.39 was paid to the trust. Similarly, on April 20, 2010, John Crawford, as trustee, applied for life insurance on the life of Chloe Lorraine Vaughn, David Vaughn’s second daughter, who was nine years old at the time. The application was signed by McKinley, John Crawford, and, inexplicably, Terry Vaughn. The amount of requested coverage identified in the application was $946,611. Metlife Policy 210275718A (Metlife 18) was issued September 1, 2010, listing Chloe Vaughn as the insured and the Education Trust as the owner. Metlife 18 had a $9,000 annual premium and a death benefit of $2,528,249. No amendments or policy receipt are included in Petitioner’s exhibits, as well as no explanation of how the death benefit changed so dramatically. The policy was surrendered in June 2011, after McKinley was no longer acting as Mrs. Vaughn’s insurance agent. There is also a Metlife application submitted by John Crawford, as trustee for the Education Trust on the life of Dawson Caldwell Vaughn, David Caldwell’s then-4-year-old son. The application is also signed by Terry Vaughn as opposed to David Vaughn, and is signed by John Crawford as trustee and by McKinley. The application is for a whole life policy with a death benefit of $1,136,250, and a proposed premium of $5,999.83. The policy in Petitioner’s exhibits on the life of Dawson Vaughn is Metlife 210275676A (Metlife 76), a policy issued September 1, 2010, with a death benefit of $2,594,204 and an annual premium of $9,000. The portion of the policy in the record contains no amendments and no policy receipt, and thus no explanation as to how or why the death benefit and premium were changed. No testimony was presented to explain the difference. The policy was surrendered in June 2011, after McKinley was dismissed as Mrs. Vaughn’s insurance agent. Contrary to the allegations in the Administrative Complaint, competent, persuasive evidence was presented to show that purchasing life insurance on children is an accepted practice. While the amounts of the life insurance policies seem extravagant, the only person testifying who regularly sells life insurance did not believe that McKinley encouraged the purchase of too much life insurance. Further, while the Administrative Complaint alleges “by willful misrepresentations and deceptive acts and practices,” Respondent caused the wasting of Vaughn family assets, the Administrative Complaint does not identify just what “willful misrepresentation” or “deceptive act and practices” Respondent committed with respect to the purchase of these policies. Count XII: Policies on the Life of Stephanie Eller Vaughn As noted above, Stephanie Eller Vaughn is married to Terry Vaughn, and they live in Tallahassee, Florida. Terry and Stephanie married on March 31, 2007, and Stephanie gave birth to their son, Connor, on February 1, 2008. At some point in 2008, Terry and Stephanie met with a financial planner who had suggested it would be prudent for Stephanie to have life insurance. Contrary to the allegations in the Administrative Complaint, no evidence was presented to demonstrate that McKinley “convinced” Merie Vaughn and Stephanie Vaughn to buy the Sun Life policy discussed below. Purchasing life insurance was already something contemplated by Terry and Stephanie Vaughn, before meeting with McKinley. Terry and Stephanie met with McKinley to begin discussions regarding a life insurance policy for Stephanie in May of 2008. Stephanie Vaughn applied for a Sun Life policy on January 6, 2009. She is listed as both the insured and the owner of the policy, and Terry Vaughn is listed as the beneficiary. The application proposes a $1.5 million death benefit, with a proposed monthly premium of $712.50. Stephanie Vaughn paid $1,425.00 for two months of premium with the insurance application. Sun Life Policy 003016889 (Sun Life 89) was issued on April 3, 2009, for a $1 million death benefit and a monthly premium of $487.34. The premium appears to be computed using standard rates for a non-smoker. The record includes a revised illustration signed by Stephanie Vaughn on March 10, 2009, and a signed, undated request for alteration of application changing the death benefit to the amount ultimately issued, as well as including a charitable benefits rider, also included in the policy issued. The policy receipt for Sun Life 89 is signed by Stephanie Vaughn on April 9, 2009. Terry Vaughn testified that while he and his wife made the initial premium payment, premiums were taken over by his mother, and Terry and Stephanie were reimbursed for the premiums they originally paid on the policy. In May of 2009, McKinley’s office requested that the premiums be changed from monthly to yearly, and forms were sent to accomplish that. On June 5, 2009, John Crawford made a payment of $4,423.06 from his trust account for the remainder of the annual premium, and in September 2009, a request for the appropriate paperwork was submitted to change the ownership of the policy from Stephanie Vaughn to the Stephanie Vaughn ILIT. However, while payments were made by John Crawford, and McKinley requested that all payment invoices and correspondence be sent to John Crawford, it is unclear whether that change of ownership ever occurred. According to Terry Vaughn, Sun Life 89 is still in force, but currently no payments are being made on the policy. It is paid up to some point, and he understands that it has some value, so they opted not to cancel it. While the Administrative Complaint alleges that McKinley made a commission of $19,269.42, that amount is not clear from the record in this case. There are statements regarding commissions for many of the policies. However, on many of these statements, including the statement for Sun Life, there are columns labeled as commissions and columns labeled as overrides. No one testified as to how these statements are interpreted, and it is not clear on the face of the statements how much of the commission goes to the individual agent and how much goes to the agency for whom he works. It is clear that McKinley did indeed earn a commission (and that is how insurance agents are generally compensated), but it is not clear how much or that the amount was inappropriate. Stephanie Vaughn also applied for a life insurance policy with Nationwide. She submitted an application on March 9, 2009, with herself listed as the insured. The application contains a notation requesting that Nationwide contact the agent when preparing to issue the policy to see if the policy will be owned by Stephanie Vaughn or to a trust. The application contemplated a death benefit of $750,000, and was amended to include a long-term care supplement of $300,000 on June 19, 2009. On June 22, 2009, Nationwide Policy number B500118060 (Nationwide 60) was issued, listing Stephanie Vaughn as the insured and as the owner. The policy had a death benefit of $750,000, as requested, and an annual premium of $5,914, using non-tobacco standard rates. Terry Vaughn wrote a personal check for $1,762.08 for a premium payment on Nationwide 60 on July 15, 2009, and Stephanie Vaughn signed both the policy receipt and an amendment reflecting the long-term care rider that same day. John Crawford also wrote a check from his firm’s trust account for $5,000 on July 21, 2009. McKinley’s office requested that the overpayment of $838.08 be refunded to Stephanie Eller Vaughn at her address in Tallahassee. John Crawford also paid the $5,914 premium on May 25, 2010, and McKinley had requested earlier that year that John Crawford receive the invoices, as he was the one paying the premiums. As was the case with the Sun Life 89 policy, the premium payment made by Terry and Stephanie Vaughn was reimbursed by Terry’s mother, Merie Vaughn. Stephanie Vaughn requested cancellation of Nationwide 60 on July 5, 2011, because she and her husband did not want to continue paying for it. They did not receive any cash value for the policy. The Administrative Complaint alleges that Nationwide 60 was never placed in the Stephanie Vaughn ILIT. However, there is no allegation, nor proof, that McKinley was ever instructed to arrange for the transfer of the policy to the trust, nor is there any evidence indicating that there was a discussion of any kind regarding its ownership after it was issued. McKinley earned a commission on the sale of the Nationwide 60 policy. No evidence was presented to indicate that there was anything unusual about the commission earned. The Administrative Complaint alleges that by selling these two policies to Stephanie Vaughn, McKinley violated a public trust in violation of Florida Administrative Code Rule 69B-215.210. There is no indication in the Administrative Complaint as to how the sale of these two policies is a violation of the public trust, and no proof of such a violation was presented. Count XII: Policies on the Life of Yvette L. Day Finally, Count XII of the Administrative Complaint deals with the policies sold on the life of Yvette L. Day, the wife of David Vaughn. Those policies are Pacific Life Policy VP65887630 (Pacific Life 30) and John Hancock Policy 82233941 (Hancock 41). On April 15, 2009, Yvette Lori Day applied for a Pacific Life universal life insurance policy, which resulted in the issuance of Pacific Life 30. While the Administrative Complaint alleges that McKinley “convinced” Mrs. Vaughn and Ms. Day to purchase the policy, David Vaughn testified his wife actually insisted on picking the insurance company for the policy. The application lists Yvette Day as the insured, and the Yvette L. Day ILIT as the owner and beneficiary of the policy. The proposed coverage on the application is $137,447, with a planned premium of $5,000. The application is signed by Yvette Day, John Crawford, and McKinley. The policy issued on April 1, 2009, being backdated to take advantage of a lower premium. Pacific Life 30 was issued for the amount applied for and for the suggested premium of $5,000, and Ms. Day was considered a preferred non-smoker for rating purposes. An amendment to the policy was signed by both John Crawford and McKinley on September 14, 2009, as was the delivery receipt. Checks for $5,000 were issued from the Marks Gray trust account by John Crawford for premiums on September 1, 2009, and May 25, 2010. On June 7, 2011, John Crawford requested cancellation of Pacific Life 30, and return of any cash surrender value. Pacific Life responded by outlining the options to consider as alternatives to surrender, and advised that the tax loss upon surrender at this point would be $6,263.23. Mr. Crawford confirmed the intent to seek surrender, and on June 10, 2011, a check representing the surrender value of $3,760.90 was issued to the Yvette Day ILIT. A commission of $5,223.83 related to the policy was paid to Intervest, who in turn paid the premium to McKinley. Yvette Day also applied for a policy with John Hancock on April 15, 2009, with Yvette Day listed as the insured and the Yvette L. Day ILIT as the owner and beneficiary. The policy was issued on October 7, 2009, with a death benefit of $415,959 and a premium of $5,000. Yvette Day was listed as a preferred non-smoker for purposes of rating. John Crawford, as trustee, paid $5,000 in premium from his Marks Gray trust account on October 12, 2009. The policy receipt was signed by John Crawford on October 26, 2009, along with a form documenting that the policy would be backdated to April 17, 2009. Also completed on that day is an amendment answering a series of questions that were not answered on the original application, including questions related to the financing of the policy. The Administrative Complaint alleges that “when you, Gary L. McKinley, were asked by Hancock underwriting to respond to questions 10(a) and (b), you and attorney/trustee Crawford answered by providing Hancock with an application supplement dated October 26, 2009, stating that the premium payments would be coming from the insured’s income and ‘No’ as whether any entity other than the insured would be funding the premiums. Both answers were false.” In fact, however, McKinley did not sign the application supplement at all. The form is signed by Yvette Day and John Crawford. No evidence was presented to show that McKinley even knew about answers contained in the amendment. Moreover, contrary to the Department’s statement in its Proposed Recommended Order, the language on the amendment that “it is agreed that [the additions, corrections and amendments] are to be of the same effect as if contained in the application” does not transform a statement made by Yvette Day and John Crawford into a false statement by McKinley. The most logical meaning of this phrase, consistent with the testimony of Mike Saunders, is that the information provided by amendment is treated as if it was part of the original application. It does not mean that somehow Respondent’s signature on the original application embraces statements he did not make, but were in fact made by others in subsequent amendments. On June 7 and 11, 2011, John Crawford, as trustee, sent letters to Hancock requesting cancellation of Hancock 41 and the return of any cash value. Because of a discrepancy related to the identified date of the trust, a third letter was sent on August 8, 2011, correcting the listing of the trust date and providing a copy of the trust. Accordingly, on August 24, 2011, Hancock forwarded to John Crawford a check for $282.85, representing the unused premium for Hancock 41. McKinley received $5,336.23 in commissions related to the sale of Hancock 41. No person testified that the amount of the premium earned on this policy was unusual. Of the policies discussed above, 15 of them either lapsed or were canceled or surrendered after October 2010, when Respondent was no longer working with the Vaughns at Mrs. Vaughn’s direction. It cannot be determined what cash value would have been created had some or all of the policies remained in place. The most that could be said, based on the evidence that was presented, is that McKinley participated in the creation of an ambitious estate plan with a lot of moving parts. He replaced policies with more efficient policies, and while it may appear at first blush that he did so too quickly, the more persuasive evidence indicates that he did so to take advantage of changes in insurability while the opportunity to do so existed. There is no question that Respondent consulted with Mrs. Vaughn numerous times and made every effort to help her understand not only the overall plan but the specifics of the plan as well. Moreover, McKinley did not act alone. The trusts were established based on the recommendations of the estate planning team, which included Mrs. Vaughn, McKinley, and various other professionals and advisors. Attorney and trustee John Crawford, as well as attorney Tim McFarland, provided legal advice regarding the implications of the creation of the trusts, and the team considered a number of relevant factors in advising Mrs. Vaughn to establish these trusts. Once the decision was made to go forward with the identified estate plan, Respondent worked with Crump and Capitas insurance organizations, as well as representatives from various nationally-recognized and state- certified insurance companies, to obtain appropriate products to effectuate the goals established by the team. It is also clear that, while a significant amount of money was spent on life insurance premiums, the replacement of policies was undertaken with the goal of reducing the amount used for premium and increasing the death benefit, a course of action which Mrs. Vaughn approved in writing. Financial expert John Linnehan testified that the products purchased provided benefits to Mrs. Vaughn and her family, and that there were sufficient assets to sustain the premiums incurred for life insurance, even assuming her stated living expenses. His testimony is credited. Moreover, the reduction in Mrs. Vaughn’s assets was in large part caused by something other than the payment of insurance premiums. When asked where the rest of her money went, she answered, “I don’t know. It’s just gone.”
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 dismissing the Administrative Complaint. DONE AND ENTERED this 4th day of April, 2016, in Tallahassee, Leon County, Florida. S LISA SHEARER NELSON 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 4th day of April, 2016.
Findings Of Fact James Edward Snapp is licensed by the Department of Insurance as an Ordinary Life, including Disability Agent, Dental Agent and Disability Agent and was so licensed at all times in 1981 and 1982 in his dealings with Mrs. Mabel McCarthy and Mr. George Guertin. In July 1981 Respondent went to the apartment of Mabel McCarthy, a 79- year-old widow, and talked to her about insurance. His visit was unsolicited and Mrs. McCarthy initially told him she had adequate coverage with her Medicare, Medicaid and Blue Cross. Respondent discussed the issuance of a "gold" card which provided better coverage than she was presently receiving. They also discussed her $1,000 life insurance policy for which she had designated the Haven School in Miami as beneficiary. When she indicated she would also like to leave something to another school in Palm Beach County, Respondent suggested she cancel the $1,000 policy and take out two $5,000 policies and make each school beneficiary of one policy. Following Respondent's assertions to Mrs. McCarthy regarding her taking out different insurance policies, Mrs. McCarthy gave Respondent her check on 26 July 1981 in the amount of $1,100 made payable to Accident & Health Agency, the agent for whom Respondent worked. Mrs. McCarthy understood this to be the premium payment for the life insurance and hospitalization insurance policies. Respondent told Mrs. McCarthy the cash surrender value of her life insurance policy should be about $900. When she wrote Mutual of Omaha about the cash surrender value, she was advised it was nearer $700 and the company questioned her reasons for cancelling the policy. This aroused Mrs. McCarthy's suspicions and she called the Insurance Commissioner's branch office to inquire about Respondent. Up until this time she had full confidence in Respondent. In the application for health insurance for Mrs. McCarthy which Respondent subsequently submitted 12 July 1981 to American Sun Life Insurance Company, he checked the "no" square to the question "Is the insurance applied for intended to replace any insurance presently in force?" knowing he had suggested to Mrs. McCarthy this policy would replace her Blue Cross insurance policy. The total premium on these policies, one providing for medical expenses and the other providing for nursing home care, is $530. American Sun Life Insurance Company does not sell life insurance. On 28 July 1981 Respondent again visited Mrs. McCarthy, obtained her check in the amount of $380 made payable to Accident & Health Agency, and submitted an application to American Sun Life Insurance Company on behalf of Mrs. McCarthy which provides hospital and medical benefits. On this application he also checked the "no" square to the question about replacing existing insurance. The annual premium for this policy was $370. Mrs. McCarthy also gave Respondent a check in the amount of $500 payable to Accident & Health Agency for additional policies. Before this check had been cleared, Mrs. McCarthy received the first policies Respondent had sold her and realized they were no different from her prior coverage, no "gold" card was included and neither was a life insurance policy. Upon receipt of these policies on 11 August 1981 Mrs. McCarthy stopped payment on the $500 check and again called the Insurance Commissioner's office. When the Insurance Commissioner contacted American Sun Life Insurance Company with Mrs. McCarthy's complaint, they refunded $900 to Mrs. McCarthy for the policies they had issued. Those policies were for the maximum coverage Sun Life provides. The three policies issued by Orange State Life Insurance for various health care benefits were those applied for when the $500 check was written by Mrs. McCarthy and these policies were cancelled when payment was stopped on that check. The total premium for these policies was $449.99 plus a $26 policy fee. Respondent obtained the name of George Guertin as a potential client and called him for an appointment to discuss insurance. Upon arrival 18 January 1982 shortly after the phone call, Respondent looked at two policies Guertin showed him covering Medicare Supplemental payments on Guertin and his wife. These policies were issued by Tara Life Insurance Company. Respondent told Guertin that the agent who sold him these policies had charged top price and he could get these policies for him at a lower premium. The premium paid on the policy issued to George Guertin was $482 and the premium on the policy issued to Alma Guertin was $445. Respondent was not authorized to solicit policies for Tara. Guertin gave Respondent his check payable to J. Snapp in the amount of $540 to renew the two policies with Tara Life Insurance Company. Guertin also gave Respondent his life insurance policy issued on John Hancock Mutual Life Insurance Company to inquire about the cash surrender value. This policy was later returned to Guertin without change. Respondent's testimony that the $540 was for services he was to provide the Guertins in preparing Medicare claims and that the Guertins understood this at the time the check was signed, is not credible. George Guertin was born in Canada in 1903 but has lived in the United States for 65 years. Although he went to school in Canada through the eighth grade, he does not read English. George's brother Eme apparently lived with the Guertins and was disabled. Respondent offered to take Eme to the Veteran's Administration to get his disability pension increased. He was paid $250 for this service and for taking Eme to the VA on other occasions. Guertin testified that the signature on Exhibit 12 was not his signature and that on Exhibit 13 was not his wife's signature. Respondent testified that these "contracts" were signed by George Guertin and Alma Guertin in his presence. Regardless of the validity of the signatures, these "contracts" provide that compensation [of Respondent] shall be determined by mutual agreement. There was no mutuality of agreement that the $540 paid by Guertin to Respondent was for services to be rendered by Respondent in completing Medicare forms. When Guertin was advised by Tara Life Insurance Company that his policies were about to lapse for nonpayment of premiums, he realized Respondent had not renewed these policies as he was told Respondent would do, he complained to the Insurance Commissioner's office, and he sent premium payments to Tara. Respondent suffered injuries while serving in the Marine Corps in Korea. He was discharged with a 35 percent disability rating in 1955 and since that time he has been treated from time to time in VA facilities. He has had several heart attacks, five according to Respondent's testimony, and takes a wide variety of medication. In his testimony Respondent admitted that he only sold insurance and left the doing of the paperwork associated with these policies to the agency for whom he works. He does not keep records of his insurance transactions because he has a "real tough time" doing so. He leaves those chores to the agency.
Findings Of Fact At all times pertinent to the allegations contained herein, Respondents Richard Elliott Templin, Jr., was qualified for licensure as a general lines agent and as a life and health insurance agent in Florida and represented the Okeechobee Insurance Agency, (OIA), located at 1874 Okeechobee Boulevard, West Palm Beach, Florida. Respondent is currently eligible for licensure as a general lines agent and as a health and life insurance agent in Florida. RAVEN MILLER In March, 1984, Raven Miller applied for and was issued automobile insurance by OIA. She contacted that agency among others and found that it quoted her the cheapest price for the coverage she wanted, coverage sufficient to protect her and the finance company from loss. During the application process, she signed several forms provided to her by the agent who briefly discussed her coverage with her but did not advise her it would include life insurance or accidental death insurance. When she initially went into the office to renew the policy, she asked for coverage on the vehicle but did not desire anything else. The employee with whom she talked indicated understanding of her desires and filled out the required paperwork for her without asking any other questions of her. When the paperwork was completed, Ms. Miller was told that the premium cost would be $347.00 for which she gave a check and received a receipt, plus $110.00 for a term life insurance policy. She was not told that that this latter coverage was separate from the automobile coverage. Ms. Miller filled out nothing during the application process. All the documents were filled out by the clerk. The application form was completely filled out except for her signature when she signed it. It reflected that uninsured motorist coverage was rejected but Ms. Miller was not asked by anyone at the agency if she desired that coverage. When she inquired about deductibles, she was advised there was a mandatory $250.00 deductible and though she is reflected to have rejected bodily injury coverage, this was not discussed with her, either. The only form that Ms. Miller filled out personally was the pink application to Fortune Insurance Company, (Fortune), on which she identified her "beneficiary." This form was not explained to her, however, nor was there any discussion with her of life insurance coverage. Ms. Miller, who works with the Post Office, has $140,000 in life insurance coverage through her job and had she known she was being offered additional life insurance coverage, would have rejected it. When Ms. Miller signed the summary of coverage form, it was completely filled out. The lady with whom she was dealing briefly went over the various items on it but did not discuss them with her or explained anything to her. The confirmation form which she signed was filled out prior to being given to her for signature. The explanation regarding it was brief and she was not advised that life insurance coverage was optional. The life insurance premium was not forwarded by OIA to the company. She did not receive a policy from either Fortune Life or ATA. At no time during her dealings with OIA did she meet or deal with Respondent and she does not know him nor would she recognize him. When she sold her car in March, 1985, Ms. Miller cancelled the policy in person at the agency at which time she was advised that her refund would come in the mail. Even after numerous contacts with the agency to inquire where the refund was, it was not given to her. At no time during her dealings with OIA was she aware of the fact that she was applying for an accidental death policy. All she asked for, all she wanted, and all she thought she was getting was auto insurance sufficient to cover her, her bank, and others with whom she might have an accident in the event of loss. Notwithstanding the fact that Ms. Miller signed an acknowledgment of explanation both at the time of the original policy and and the time of renewal, the explanation in both cases was extremely brief. She asked no questions to speak of and no information was volunteered. In short, at the time of renewal the agency merely renewed the prior coverage. They did not show her what they were comparing with. She assumes that the figures were the same as for the original policy and she assumed that whatever she got was a standard coverage and charge to every applicant. Ms. Miller was satisfied with the coverage she received and the package she purchased. Her complaint to the Department of Insurance related to the failure to receive her refund not to the sale of the insurance to her. In fact, at the time she filed her complaint, she did not even know that she had a life insurance policy. DENNIS AND ALETA NELSON Dennis Nelson, who has worked for the Post Office for approximately 10 years, on or about March 21, 1985 went to the OIA because, having spoken with Respondent over the phone, and having gotten a quote for "full coverage" on his automobiles from him, he liked the price. Mr. Nelson dealt with Respondent who took down the particulars on the cars to be covered, then went to his rate books, and quoted a price to Mr. Nelson which was satisfactory. In doing so, he laid out the explanation of coverage form and indicated what coverage the Nelsons would have. In the course of the application process, there was no discussion of the limits of liability insurance, uninsured motorist Coverage, deductibles, or life insurance. When the paperwork was completed, Mr. Nelson signed the applications for insurance given to him and a premium finance agreement. Respondent explained to Mr. Nelson the application for life insurance and gave him the impression that it was mandatory. It was made mandatory by the company that a customer buy the whole package, but it was not mandatory under the state requirements. The failure to make this distinction is misleading and deceptive. Mr. Nelson never received any policies from any of the companies from whom he was supposed to have received coverage, though he made his premium payments. By the same token, the company did not receive Nelson's premiums from the agency and, therefore, did not issue a policy. Approximately three months after the coverage went into effect, OIA notified the Nelsons that the cost of coverage on their Blazer would be raised by more than $200 for the year. Mr. Nelson made the initial inquiry call to the company writing this coverage but he was poorly treated by company representatives and got no information. Thereafter, Mrs. Nelson went to OIA's Okeechobee Boulevard office and spoke with Respondent who indicated he could not understand it either. Nonetheless, she paid a part of the increase, ($110.00), at the time in cash. The Nelsons checked with other companies and were quoted lower prices. Because OIA could not explain the raise, they went to the Petitioner's local office where they were told that the life insurance coverage they had purchased was not mandatory. As a result, they decided to cancel their coverage with OIA which Mrs. Nelson did in person. When she attempted to fill out the cancellation form, she was told by an agency employee that she could not cancel the life insurance portion only her husband could do that. Mr. Nelson thereafter attempted to reach the Respondent to discuss this situation with him but could never seem to get in touch with him. Mr. Nelson felt he got repeated run arounds from the employees at OIA and was repeatedly referred to the Lake Worth office. When they ultimately received the refund from OIA, it was dishonored and thereafter, the Nelsons were reimbursed for it in cash. ROBERT M. ANDERSON Mr. Anderson, an employee of Pratt and Whitney Aircraft Corporation in West Palm Beach, purchased automobile insurance from OIA in July, 1985. He selected that agency because they offered him the best price for the coverage which he had told them he wanted, which was "the minimum necessary to satisfy state and bank requirements." During the course of his negotiations with the agency, he dealt with an individual known to him as "Rich" but though Respondent looks familiar to him, he cannot identify Respondent as that individual. He advised the individual with whom he dealt what kind of car he had, (a Porche 911), his age, and that he wanted the best deal he could get. In response, the individual gave him a quotation for a 12 month policy which was too high for his budget. He asked for a quote on the rate for 6 months which was quoted to him as $1,816.00, for which he wrote a check. Mr. Anderson thereafter filled out an application package for coverage. The summary of coverage form was not discussed with him in detail. For example, the $2,000 deductible of PIP coverage was not discussed nor were any details or deductibles on other coverages. Accidental death coverage was not discussed with him nor did he request it. He recognizes his signature on certain documents and does not dispute having signed them. However, he does not recall any discussion about them nor does he recall signing a power of attorney form or even discussing the need to have one signed. There was no discussion with Mr. Anderson regarding life insurance coverage and in fact, he would have declined it had it been discussed because he was fully covered through his company's group policy. Mr. Anderson was not prevented from asking questions but did not do so because he did not know what questions to ask. He was given the opportunity to read the forms but did not review them in detail because he did not understand them then and does not understand them now. He did not, however, indicate that he did not understand. Because he had 9 points on his driver's record, he did not ask many questions. He was grateful to get any coverage and did not feel it was appropriate to take the time, as busy as Respondent appeared to be, to ask questions. It was his understanding that everything he got was a part of the "total package" that he requested. Mr. Anderson had no complaint about the coverage that he received. His complaint to the Petitioner was based on his failure to secure a prompt refund from the agency at the time he desired to cancel the coverage, and it was at this time, in discussing the matter with the Commissioner's office, that he first learned he had life and other undesired coverages as a part of his auto insurance package. He has, however, subsequently received the refund requested. All of the individuals referenced above received and paid for as a part of their insurance coverage, membership in an automobile motor club. On policies of this nature, the selling agency retains 90 percent of the premium and remits only 10 percent to the insurer. The motor club membership included a life insurance policy issued by Fortune Life. None of the persons involved with Respondent here knew they were buying either life insurance, accidental death insurance, or motor club membership. All had asked for "total" coverage, desiring thereby only that coverage necessary to operator a motor vehicle legally in this state. Neither life insurance, accidental death insurance, nor motor club coverage is a requirement of the state for the operation of a motor vehicle. It is not unlawful for an insurance agency to make those coverages a necessary part of a package and condition the issuance of liability, property damage, and PIP coverage upon the purchase of a total package including the other. What is improper, however, is a failure on the part of the agency to disclose that the life, accidental death, and motor club coverages are not a part of the insurance requirements of the state and the failure to disclose this is the nexus of the offense alleged.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law it is, therefore: RECOMMENDED that the Respondent's licenses and eligibility for licensure be placed on probation for a period of two years and that he be ordered to pay an administrative fine of $2,500.00. RECOMMENDED this 27th day of July, 1987, at Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 27th day of July, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-0093 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. For Petitioner 1-4 Accepted and incorporated herein. 5-7 Accepted and incorporated herein. 8 Accepted and incorporated herein. 9 Accepted and incorporated herein. 10-16 Accepted and incorporated herein. 17-18 Accepted and incorporated herein. 19 Accepted and incorporated herein. 20 Accepted but irrelevant. 21 Accepted and incorporated herein. 22 Accepted. 23-26 Accepted and incorporated herein. 27 Accepted and incorporated herein. 28 Accepted and incorporated herein. 29 Accepted but irrelevant. 30 Accepted and incorporated herein. 31&32 Accepted and incorporated herein. 33 Accepted and incorporated herein. 34 Rejected as unproven. Witness never identified Respondent as the individual with whom he dealt. In the remaining paragraph rulings, it is assumed only that Respondent was involved. 35&36 Accepted and incorporated herein. 37-39 Accepted and incorporated herein. 40&41 Accepted and incorporated herein. 42&43 Accepted. For Respondent Accepted and incorporated herein. Accepted not as a Finding of Fact but as a recitation of the evidence, Accepted in substance. Paragraph is long and involved. See 3 above. See 3 above. COPIES FURNISHED: William Gunter, Commissioner Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, Florida 32399-0300 William W. Tharpe, Jr., Esquire Office of Legal Services Larson Bldg. Tallahassee, Florida 32399-0300 David W. Spicer, Esquire Tammy J. Kissell, Esquire NCNB Tower, Suite 910 1555 Palm Beach Lakes Boulevard West Palm Beach, Florida 33401-2363 =================================================================
The Issue The issues to be resolved in this consolidated proceeding concern whether the Petitioner, Abraham Maida's applications to represent certain life insurance companies should be denied based upon his alleged unlawful failure to forward premium funds from insureds to the insurers during the applicable regular course of business. Also at issue are the charges in the Administrative Complaint in the related penal proceeding which concerns the same factual conduct involving the Respondent's alleged failure to forward premiums to the insurers involved in the policy contracts at issue.
Findings Of Fact The Petitioner, Abraham George Maida, is licensed in Florida as a life insurance agent, a life and health insurance agent and a dental health care contract salesman. The Department is an agency of the State of Florida charged with licensing life, health and other types of insurance agents, with regulating their licensure and practice and with enforcing the licensure and practice standards embodied in the statutes cited hereinbelow. Abraham Maida engaged in the business of selling insurance coverage to various employees of the City of Jacksonville. The premium payments for this coverage were collected by payroll deduction from the employees, and lump sum premium checks were remitted over to the Petitioner/Respondent, Mr. Maida, by the appropriate personnel of the City of Jacksonville. Mr. Maida, in turn, was required by his contractual arrangements with the underwriting insurance companies involved and by the Florida Insurance Code, Chapter 626, Florida Statutes, with timely remitting those premium funds over to the insurers who underwrote the risk for the employees in question. Mr. Maida failed to timely remit the premium funds which he collected from the City of Jacksonville to the relevant insurers for the months of February, March and April of 1990, in the case of policy contracts written on behalf of Loyal American Life Insurance Company. Additionally, Mr. Maida failed to timely remit the premium funds received from the City of Jacksonville, after it received them by payroll deduction from its employees, for the months of March, April and May of 1990, with regard to the premium funds due in contracts involving the ITT Life Insurance Company, in accordance with his contract with that company. Mr. Maida failed to timely remit the insurance premiums of James E. Daniels to the ITT Life Insurance Company, as well. The Petitioner/Respondent's contracts with these insurance companies required him to remit premium funds which he received from insureds, within thirty (30) days of receipt, to the insurance company underwriting the risk involved. This the Petitioner/Respondent failed to do for the companies involved in the above Findings of Fact and for those months of 1990 delineated above. In the case of most of the delinquent premium funds due these companies, Mr. Maida authorized them to debit his commission and/or renewal accounts with those companies, which were monies due and owing to him from the companies, in order to make up the premiums which he had not remitted over to the companies involved at that point. That procedure did not defray all of the delinquent premium amounts, however. in the case of ITT Life Insurance Company and the monies owed that company by Mr. Maida, it was established that $10,554.21 of delinquent premium amounts were owing to that company and not timely paid by Mr. Maida. Although he paid the portion of that figure representing the March premium funds due the company for March of 1990, he did not directly pay the premium funds due for April and May of 1990 but, rather, suffered the company to charge those delinquencies, for those months, to his agent's commission account. This procedure still left $4,877.54 unpaid, as of the time of hearing. It was established by witness, Steven Heinicke of that company, that Mr. Maida is their most consistently delinquent agent, in terms of timely remission of premium funds due the company for insurance business which Mr. Maida has written. It has also been established however, that Mr. Maida made a practice of always paying premium funds due the companies for which he wrote insurance in the precise amounts owing, regardless of whether the billing statements to him from those companies had inadvertently understated the amounts which they were due. It was also established that his failure to timely remit the insurance premium funds in question was not due to any intent to defraud those companies of the funds involved or to permanently convert the funds to his own use. Rather, it was established that Mr. Maida's difficulty in timely payment of the premium funds was due to misappropriation of the funds because of financial problems which he was suffering at tee times in question, due at least in part to federal income tax difficulties he was experiencing. There has been no shoring in this record that Mr. Maida is not a competent insurance agent in terms of his abilities and qualifications to fairly and effectively obtain and contract for insurance business with insureds on behalf of the insurance companies he represents. There was no showing that he lacks reasonably adequate knowledge and technical competence to engage in the transactions authorized by the licenses or permits which he presently holds or which he seeks in the licensure application involved in this proceeding.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, and the candor and demeanor of the witnesses, it is, therefore RECOMMENDED: That the Petitioner be found guilty of the violations found to have been proven in the above Conclusions of Law portion of this Recommended Order and that his licenses and eligibility for licensure with the insurers for which license application was made be suspended for a period of three (3) months. DONE and ENTERED this 5th day of June, 1991, in Tallahassee, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk the Division of Administrative Hearings this 6th day of June, 1991. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 90-6670 Respondent/Department's Proposed Findings of Fact: 1-7. Accepted. COPIES FURNISHED: Tom Gallagher, State Treasurer and Insurance Commissioner Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, FL 32399-0300 Bill O'Neil, Esq. General Counsel Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, FL 32399-0300 Norman J. Abood, Esq. Willis F. Melvin, Jr., Esq. 1015 Blackstone Building Alan J. Leifer, Esq. Jacksonville, FL 32202 Department of Insurance and Treasurer 412 Larson Building Tallahassee, FL 32399-0300
Findings Of Fact The Respondent, John Edward Gonzalez, is licensed in the State of Florida as a life and variable annuity agent and as a life, health and variable annuity agent. During 1992, he was employed by Metropolitan Life Insurance Company (MetLife). The Respondent worked out of MetLife's Southeastern Head Office in Tampa under its marketing head, Rick Urso. Under Urso, the Tampa office developed a scheme for marketing whole life insurance to nurses as an "insured nurses' retirement" plan or program. The goal of the scheme was for the nurses to apply for a whole life insurance policy before they realized that the "insured nurses' retirement" plan or program consisted of nothing more than a whole life insurance policy. Under the marketing scheme, MetLife's Tampa office would mail unsolicited "pre-approach" letters to nurses informing them of a supposedly new retirement savings plan available to professional nurses. The "pre-approach" letter touted the retirement investment's high current interest rates, the availability of the investment's cash fund for emergencies and opportunities, the ability to make "deposits" monthly, an optional "disability benefit," and a guaranteed income at retirement. The wording of the "pre-approach" letter was designed to disguise the fact that the supposedly new retirement savings program was nothing more than a whole life insurance policy. The "pre-approach" letter allowed the recipient to tear off a form at the bottom of the letter to fill in and mail to MetLife for more information. In the spring of 1992, an unsolicited "pre-approach" letter was mailed from MetLife's Tampa office to Sharon Ward, a registered nurse living in Fort Worth, Texas. The letter was signed by the Respondent. If the "pre-approach" letter had given Ward notice that she was being solicited for life insurance, she would have disregarded it. She already had all the life insurance she wanted. However, she was interested in saving and investing for retirement, so she responded by requesting more information. Under the marketing scheme, responses from recipients of the "pre- approach" letter ordinarily would be referred to the MetLife insurance agent who mailed the letter. The agent would telephone to schedule an appointment. Ward's response was referred to the Respondent as the agent who signed the "pre- approach" letter to her. The Respondent was trained in MetLife's Career Success School (CSS) to telephone nurses responding to "pre-approach" letters to schedule an appointment. No information was intended to be imparted during this telephone contact; certainly, the agent was not to reveal that whole life insurance was being solicited. In accordance with his CSS training, the Respondent telephoned Ward during the spring of 1992 and scheduled an appointment to meet with her at her home in Fort Worth. If the Respondent had revealed to Ward that he was soliciting for life insurance, she would not have agreed to the appointment. However, as planned by the MetLife Tampa office and the Respondent, she agreed to an appointment to learn more about the "nurses' retirement savings" plan. CSS also trained the Respondent and other MetLife agents in how to deliver a scripted presentation to a nurse at the scheduled appointment. The script was carefully worded to entice the nurse to apply to be accepted in the "nurses' retirement savings" plan or program without revealing that it consisted of nothing more than a whole life insurance policy. Whole life insurance was not mentioned in the script; once in the eleven page script, it was mentioned that "the retirement account provides an insurance benefit to protect it." Otherwise, the script gave no indication that life insurance was involved. The script never mentioned insurance premiums; instead, it referred only to "deposits," "contributions," or "savings." While the "optional disability benefit" referred to in the "pre-approach" letter was nothing more than the standard life insurance "disability waiver of premium," those words were not used; instead, the script described how, in the event of a disability, "Met will keep saving for you." The word "policy" was not mentioned; instead, the script offered to have MetLife "open an account" for the prospect. One of the big selling points emphasized in the script was MetLife's reputation, assets and security. Another big selling point was flexibility. While informing the prospect that the retirement savings plan is meant for long- term investment, the plan is contrasted with IRA's and other investments that penalize withdrawal of cash before retirement. CSS trained the Respondent and other MetLife agents to use a "Track Book" for illustrative purposes while delivering the scripted presentation. Life insurance was mentioned in parts of the "Track Book," but the "Track Book" was to be shown to prospects during the course of a presentation in a manner designed to preserve the disguise of the nature of the "nurses' retirement savings" plan or program. When the Respondent met with Ward in the spring of 1992 at her home in Fort Worth, he followed the CSS scripted presentation exactly, and it worked as designed. When Ward agreed to "apply," she had no idea that she was applying for a whole life insurance policy; she thought she was opening a retirement savings and investment account. Had she known that the Respondent was soliciting life insurance, she would have declined. When Ward agreed to apply, the Respondent took information from Ward and filled out the application for her, as he was trained to do in CSS. Some of the information for the application--e.g., the names of beneficiaries--was consistent with a life insurance application, but also not inconsistent with information required for opening a retirement savings account. Other information was less consistent with opening a retirement savings account, such as health history; but that type of information may not have been considered to be inconsistent with the "insurance protection" and "disability option" the plan was supposed to have. After completing the information on the application, the Respondent had Ward sign. Under the marketing scheme, it was hoped that the nurse would sign the application without reading it to determine that it was an application for life insurance. On the other hand, a nurse who read the application and determined that it was a life insurance application might assume that it was an application for the "insurance protection" and "disability option" the plan was supposed to have. In Ward's case, the scheme worked to perfection. While the Respondent did not prevent Ward from reading the application, he did not encourage her to, and she did not read it. She did not know it was an application for life insurance. Had Ward known that it was an application for life insurance, and that the "retirement savings" program was nothing more than a whole life insurance policy, she would not have applied. In accordance with the CSS marketing scheme, the Respondent left a brochure with Ward before he returned to Tampa. The brochure reiterated the major selling points of the "Nurses Insured Retirement Plan." Like the other marketing literature, the brochure was worded so as not to reveal that the "retirement plan" consisted of nothing more than a whole life insurance policy. In accordance with the CSS marketing scheme, after the Respondent's return to Tampa, a letter was sent to Ward signed by the Respondent as "Account Representative," dated August 13, 1992, congratulating Ward on her "foresight in starting an insured retirement savings program." (The Respondent denied that he signed the letter or authorized it to be signed for him by someone else. But the Respondent knew the substance of the congratulatory letter sent to a prospect at this stage of the sales process, and he did not protest when he learned that one had been sent to Ward over his signature.) As with prior communications with Ward, the letter was worded so as not to alert her to the nature of the "program"--i.e., that it was nothing more than a whole life insurance policy. It never mentioned life insurance. In accordance with the CSS marketing scheme, the Respondent's manager also sent Ward a letter of congratulation later in August, 1992, advising her that her "plan" had been approved and that her "Account Representative" (the Respondent) would be telephoning to make an appointment to "review the benefits and flexibility of your Retirement Program in detail." As with the Respondent's August 13 letter, the manager's letter was worded so as not to alert Ward to the nature of the "program"--i.e., that it was nothing more than a whole life insurance policy. It never mentioned life insurance. When Ward received a whole life insurance policy in the mail, she filed it away without reading it. Had she read it, she probably would have been able to determine what it was. If she had made this determination within ten days of receipt of the policy, she might have been able to cancel it and get a full refund; on the other hand, she might have assumed that it was the "insurance protection" her "retirement savings plan" was supposed to have. After about a year of making her monthly payments as they came due, Ward changed jobs, and her new employer gave her the opportunity to begin a Section 401K retirement account. When she attempted to transfer her MetLife funds into it, she learned for the first time that her MetLife retirement "account" consisted of a whole insurance policy that had no cash value yet. Ward tried to contact the Respondent to complain but he did not return her calls. When she pursued it further with MetLife, MetLife initially refused to refund her money. MetLife asked for the Respondent's version of what had happened, and the Respondent reported essentially that he had followed the CSS training. The Respondent let MetLife handle the matter from there. It was not until after Ward requested the assistance of the Texas Insurance Commissioner that MetLife finally refunded her money. The Respondent did not question the legality of the marketing scheme devised by the Tampa office of MetLife. He assumed that MetLife and the Florida Department of Insurance had approved it. There was no evidence that the Department or even MetLife had in fact approved the scheme. The Respondent sold many whole life insurance policies using the CSS methods. (He received MetLife's Leader's Conference Award for high sales.) No customer other than Ward has filed a complaint against him.
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 the Respondent guilty of the violations charged and suspending his licenses and eligibilities for six months. DONE and ENTERED this 7th day of August, 1996, in Tallahassee, Florida. J. LAWRENCE JOHNSTON, 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 7th day of August, 1996. APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-2220 To comply with the requirements of Section 120.59(2), Florida Statutes (1995), the following rulings are made on the parties' proposed findings of fact: Petitioner's Proposed Findings of Fact. 1.-37. Accepted and incorporated to the extent not subordinate or unnecessary. Cumulative. Cumulative and argument. Respondent's Proposed Findings of Fact. 1.-2. Accepted and incorporated. 3. Conclusion of law. 4.-5. Accepted and incorporated to the extent not subordinate or unnecessary. 6. Accepted but subordinate and unnecessary. 7.-10. Accepted and incorporated. Rejected as contrary to the greater weight of the evidence that the Track Book "consistently referred to life insurance" or that it was used as a "visual aid." It contained some references to life insurance but did not, and was not used so as to, make it clear that what the Respondent was selling was a whole life insurance policy. Accepted and incorporated. Rejected as contrary to the greater weight of the evidence in that the entire marketing scheme gave him reason to believe it was illegal; accepted and incorporated that MetLife did not indicate to him that its scheme was illegal. In part, rejected as contrary to the greater weight of the evidence. See 13., above. In part, accepted and incorporated. See Finding 21, above. Cumulative. Rejected as contrary to the greater weight of the evidence. Accepted and incorporated. Accepted but subordinate and unnecessary. Rejected as contrary to the greater weight of the evidence that he gave her "every opportunity"; otherwise, accepted and incorporated. Rejected as contrary to the greater weight of the evidence that all were sent out by MetLife management or that any were approved by the Department. Otherwise, accepted and incorporated. it.) Accepted but subordinate and unnecessary. (The Respondent identified Rejected as contrary to the greater weight of the evidence. Accepted and incorporated. Accepted and incorporated. However, it was MetLife's explanation as to why she could not transfer funds from her MetLife "retirement account" that finally revealed to her that it was nothing more than a whole life insurance policy. Accepted but subordinate and unnecessary. Accepted and incorporated. COPIES FURNISHED: Willis F. Melvin, Jr., Esquire Department of Insurance and Treasurer 612 Larson Building Tallahassee, Florida 32399-0333 Stacey L. Turmel, Esquire Maney, Damsker, Harris and Jones, P.A. Post Office Box 172009 Tampa, Florida 33672 Bill Nelson State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Dan Sumner Acting General Counsel Department of Insurance and Treasurer The Capitol, PL-11 Tallahassee, Florida 32399-0300
