Findings Of Fact The Respondent is, and at all times material to the allegations in the Administrative Complaint, was a licensed ordinary life insurance salesman in the State of Florida. He first became licensed in 1977, and went to work initially for Occidental Life Insurance Company in Orlando, Florida. After approximately three to four weeks with Occidental Life, he went to work for Lincoln National Life and was transferred to St. Petersburg, where he worked for about three or four months selling health insurance and some life insurance as a rider to the health insurance policies. After leaving Lincoln National Life, he left the insurance business and went to work for a sign company. He worked for no further insurance companies before he joined Coordinated Planning Associates (hereinafter referred to as COPA). He went to work for COPA in April of 1979. In July, 1980, Mr. Wheeler was terminated by COPA and he then became employed by United Companies Life, his present employer. In June or July of 1979, Mr. Wheeler contacted James and Ruby Clinton about purchasing insurance from him. He met with them in their home to discuss his product. At that time, Mr. and Mrs. Clinton had four policies in effect. (See Petitioner's Exhibits 8, 9, 10, and 11.) One policy covered Mr. Clinton and had a rider for his wife, and the other three policies were on each of their three children. When there was an initial contact made by Mr. Wheeler with the Clintons, Mr. Clinton informed Mr. Wheeler that they had more insurance than they could afford. Prior to purchasing insurance from Mr. Wheeler, the Clintons showed Mr. Wheeler their policies, and he went through the policies and explained to the Clintons that he could obtain the same or better coverage from his company for less premium. He also informed them that they could obtain coverage for the children by paying a set premium per year per child per thousand dollars of coverage. After the Clintons purchased their policy from Mr. Wheeler, Mrs. Clinton actually requested insurance on the children, and Mr. Wheeler came by their home once again to pick up the $4.00 payment or deposit for the additional coverage for the children. At the time that Mr. Wheeler sold the new insurance policy to Mr. and Mrs. Clinton, no replacement form was prepared or shown to the Clintons. The Clintons were not knowledgeable in insurance matters and relied upon Mr. Wheeler's representations as to the comparative coverages of his company's policy and their existing policies. The coverage under the policy sold by Mr. Wheeler to the Clintons was not the same or better coverage than those which existed under the policies which were replaced. The policies replaced were whole life policies and covered the entire family. The program being sold by Mr. Wheeler was a retirement savings plan with a term insurance rider and was intended to only supplement and not replace existing coverage. Mr. Wheeler was aware that the Clintons intended to cancel their existing policies and replace them with the policy which he was selling. Mr. Wheeler testified regarding the Clintons on direct examination as follows: Q. Did they mention anything about re- placing their insurance? A. No. They insinuated that yes, they were going to drop it because they needed the money. The original reason we were there was because they needed money, and that's why we were there. And if they could get a good deal on their insurance, or if they could buy a good program and they could turn the other in and get money for it, that's what they were interested in. In fact, Mr. Wheeler's wife actually picked up the existing policies and took care of mailing them to the company after their cancellation. In October of 1979, Mr. Wheeler met with Gary and Darlene Davis of Orlando, Florida, for the purpose of attempting to sell life insurance to them. At the time that they were approached by Mr. Wheeler, Mr. and Mrs. Davis had three life insurance policies issued by Prudential Life Insurance Company in effect. Mr. Wheeler was made aware of these three policies. During the course of the sales presentation, the Respondent went through the existing policies and compared some of the benefits with those of the ITT policy he was attempting to sell. He represented to the Davises that the ITT policy would provide them with better coverage for the entire family for less premium than they were paying for the existing policies. Mr. Wheeler was informed by the Davises that they intended to cancel their existing policies when they purchased the ITT coverage. When Mr. Wheeler met with Mrs. Davis, she showed him the insurance policies on her and her husband. The policy on Mr. Davis had a rider for the children and Mrs. Davis's policy contained an IRA. Mr. Wheeler represented to Mrs. Davis that the COPA program would give her family these same benefits plus a cancer policy for less money. He explained to Mrs. Davis that he could charge a lower premium because he was not an insurance man per se and that because of this his company did not have to pay high commissions like Prudential. He also explained that he worked more with helping people with their finances than with selling insurance and was salaried. In fact, Mr. Wheeler was an insurance salesman working on commissions. The COPA program did not contain an IRA and the cheaper insurance was a term rider not whole life. The basic COPA program which Mr. Wheeler sold to the Davises also did not contain coverage for the Davis children. The true reason the premium was lower was because of the different coverage and different type of insurance. The ITT policy sold to the Davises in fact did not provide the same coverage as that of the policies which were cancelled by the Davises at the time of purchasing the ITT policy. The ITT policy specifically did not provide coverage for the Davis' children, and as a result of this lack of coverage, Mr. and Mrs. Davis were unable to recover any insurance proceeds after their daughter's death during the coverage period of the ITT policy. The ITT policy was a retirement plan designed to supplement existing life insurance and was not intended as a complete life insurance program for a family. Mrs. Davis understood the ITS policy to contain an IRA as part of the policy. The evidence was unclear as to whether Mr. Wheeler actually represented that it contained an IRA or whether he represented that there was a tax benefit within the retirement savings program which the Davises interpreted to mean an IRA. It was clear, however, that Mr. and Mrs. Davis were not knowledgeable in matters of insurance and relied upon the expertise and representations of Mr. Wheeler in cancelling their existing policies and replacing them with the ITT policy. No replacement form comparing the coverage of the existing policies and the ITT policy was prepared or presented to the Davises at the time that they purchased the ITT policy. Mr. Wheeler admitted that he filled out the applications on behalf of the Davises and the Clintons. Question No. Nine on the application forms for ITT of both the Clintons and the Davises asked whether the proposed policies were being issued in a replacement situation. This question on both applications was answered "No" by Mr. Wheeler. Question No. One of the agent's report reads: "Will insurance on any proposed insured now applied for replace or change any life insurance or annuity?" This question was answered "No" on the agent's report for both the Davises and the Clintons. The signature block of the agent's report reflected that they were prepared by Mr. Richard Wheeler. The Respondent admitted that he customarily intentionally avoided information from prospects which might reveal to him the fact that insurance was being replaced and did so in this instance. When Mr. Wheeler began with COPA, he received two weeks' training. The training was designed to teach the "canned" presentation which COPA salesmen were required to use. This presentation was prepared by the more experienced and more knowledgeable officers and managers of COPA. This same presentation was utilized by Mr. Wheeler in the sales presentation to the Clintons and Davises. There was no training regarding replacement of other insurance. Sometime in 1980, after the sales to the Clintons and Davises, Mr. Wheeler was informed by another COPA employee, Greg Gustin, as to particular representations within the canned presentation Mr. Gustin considered to be false. Sometime after this, Mr. Wheeler discussed this with Mr. Larry Taylor of COPA and an official of ITT Life Insurance Company. When Mr. Wheeler tried to change the presentation to eliminate the misrepresentations, he was fired. This occurred July 17, 1980. Mr. Wheeler claimed ignorance of the misleading nature of the canned presentation prior to his discussions with Mr. Gustin. However, Mr. Wheeler admitted that he had intentionally avoided getting information from customers which indicated they were going to cancel their existing policies. The sales presentation also stated "Let me assure you I am not here to sell you anything. Mr. Wheeler's only purpose for visiting these people was to sell them insurance. Mr. Wheeler sold approximately 250 policies while with COPA and has continued to sell life insurance since leaving COPA in July, 1980. The two complaints which are the subject of this administrative proceeding were the only two complaints made against Mr. Wheeler. Since going to work for United Companies Life, Mr. Wheeler has been trained in using replacement forms and now uses those forms whenever his policy replaces existing insurance.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED: 1. That the Department of Insurance enter a final order suspending Respondent's license for a period of 30 days. This case is more appropriately a case for a civil fine or probation. However, a violation of Florida Statute Section 626.611 involves a mandatory suspension. There are strong mitigating factors which justify that the mandatory suspension be of short duration. At the tinge the sales were made to Mr. and Mrs. Clinton and Mrs. and Mrs. Davis, the Respondent was relatively new in the insurance business. Upon being employed by COPA, he was given a prepared sales presentation to memorize and use in each sales contact. This presentation was prepared by the officers and managers of COPA who were more experienced and more knowledgeable than Mr. Wheeler about insurance matters. Mr. Wheeler later tried to change the presentation and was fired as a result. These incidents occurred in 1979 and since that time Mr. Wheeler has continued to work as a licensed insurance salesman with no complaints or evidence of violations of the Florida Statutes or Rules of the Department of Insurance. The circumstances giving rise to the violations and the fact that the Respondent was advised by more experienced and knowledgeable individuals clearly bear upon the appropriateness of the particular penalty assigned. See, Drew v. Insurance Commissioner and Treasurer, 330 So.2d 794 (Fla. 1st DCA 1976). RECOMMENDED this 11 day of April, 1983, in Tallahassee, Florida. MARVIN E. CHAVIS Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 12th day of April, 1983. COPIES FURNISHED: David A. Yon, Esquire Legal Division Department of Insurance 413-B Larson Building Tallahassee, Florida 32301 Paul H. Bowen, Esquire Swann & Haddock, P.A. Post Office Box 7838 Orlando, Florida 32854 Honorable William Gunter State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32301
The Issue The issue for consideration is whether Respondent's license or eligibility for licensure as an insurance agent in Florida should be disciplined because of the Administrative Complaint filed herein, and whether Respondent should be denied a resident license to represent various insurance companies in this state because of the misconduct alleged in the Administrative Complaint.
Findings Of Fact At all times pertinent to the allegations contained herein, Michael Eugene Best was either licensed or eligible for licensure as a life insurance agent, a life and health insurance agent, and a health insurance agent in the State of Florida, and was engaged in the sale and brokerage of insurance, doing business as M. E. Best Investments. The Department of Insurance is the state agency responsible for the monitoring and regulation of the insurance business in this state. Ms. Dorothy Clark, a 73 year old woman, has known and done business with Mr. Best in the insurance area for approximately ten years. In August, 1988, she met with him to discuss her possible purchase of some kind of insurance. She cannot recall what kind of insurance it was. She gave him some money to pay for the insurance in question, which was to be procured from some insurance company, the name of which she could not initially remember, but subsequently recalled to be American Sun Life Insurance Company. The premium payment which she gave to Mr. Best was in the amount of $1,200.00, but she cannot recall whether he was obliged to use that money for the purchase of insurance from that particular company, or whether he had the option to place the insurance with another company. To the best of her limited recollection, Mr. Best did get a policy for her from American Sun Life Insurance Company, but she cannot recall if she kept that policy or if it was changed to another company. She does not recall requesting him to change companies, however, but does recall that she ultimately received a policy issued by United American Life Insurance Company and that Mr. Best was the agent who procured it for her. At hearing she denied ever attempting to cancel the United American policy though she claims she did not want it. She claims that she never received a refund check from United American, however, a check payable to her in the amount of $799.90 was issued to her by that company with address shown as her home of record. The check bears what purports to be her endorsement on the back thereof, followed by the endorsement of Mr. Best's company, but at first she claimed she did not place it there. When shown the check at the hearing, however, she admitted the signature on the endorsement was hers and that she most likely signed it. This check was issued as a result of her unremembered direction to Mr. Best to cancel the policy. She claims she did not authorize Mr. Best to take the money it represented and use it for his purposes. She claims that the check was subsequently deposited by her to her account and that Mr. Best never got possession of it or the money. This is patently wrong, however, inasmuch as Mr. Best admits that he did have the check and placed his company's endorsement on it. He subsequently used the check, with her agreement, to apply toward a policy with another company, and to his recollection, she voluntarily endorsed the check to him. Ms. Clark also purchased a $30,000.00 annuity policy through Mr. Best with another company, the name of which she cannot recall, at about the same time as the first policy mentioned herein. To get this policy she issued a check to Mr. Best in the amount of $30,000.00. When the policy was issued, she requested that it be cancel led because by the time she received it, she had reconsidered and determined that she did not want it. She notified Mr. Best of her desires that the policy be cancelled, but claims she never communicated directly with the company. The company has a letter reputedly from her, however, which complains of Respondent's purported trickery and deceit. It is found that this latter letter was prepared for her signature by someone else. When Ms. Clark told Mr. Best she did not want the policy, and requested him to cancel it, he asked her to wait awhile, for some reason which was unclear to her. Instead, she indicated to him then that she did not want to do so but wanted her money back. Some time after this discussion, but before the policy was cancelled, Mr. Best came to see her and though she cannot recall if he got her to sign anything, she identified her signature on a letter to the company which had issued the annuity policy in question , which indicated that she was satisfied with the policy and withdrawing her request to cancel. She recalls Mr. Best requesting that she sign the letter, but cannot recall what he said at the time. As she remembers, he appeared normal when he came to see her, and she voluntarily signed the letter of her own free will. It is obvious, however, that Ms. Clark did not understand what was being said to her or what she was signing because, she claims, she still wanted the policy cancelled. Her recollection of the incident is shaky - and unsure. She cannot recall if Mr. Best made her sign the letter, and she cannot recall where she signed it. It may have been at her home or at some other location, but she does not know for certain. In addition, she cannot recall if the letter was typed when she signed it, or if the paper was blank. Though she contends Mr. Best tried to keep her from cancelling this annuity policy, at this time she cannot recall what he told her; what reasons he gave her; or why he wanted her to wait. Whenever she dealt with Mr. Best, he was not rude to her. She did not feel she was being forced by him to take out any insurance from him or to do any of the things or sign any of the documentation that she did. Ms. Clark filed the complaint against Mr. Best because she was told by someone that he had forged her name on a check. At the time she signed the complaint, and at the time of the hearing, she did not know whether he did it or not, nor does she know which check he is supposed to have forged. In fact, Ms. Clark finds it difficult to recall much of what had happened and is not sure of any of the facts to which she testified. She does know, and it is found, that all the money she paid to Mr. Best was reimbursed to her and she has lost nothing as a result of her dealing with him. Ms. Clark recalls that about this time, upon the advice of her attorney, Mr. Kanetsky, she engaged in dealings with another insurance agent who advised her to cancel the annuity policy and, in fact, wrote the letter of cancellation to the insurance company for her. Mr. Kanetsky, an attorney practicing in Venice, Florida, has worked with Ms. Clark for approximately ten years, primarily in the area of estate planning for her and her sister. Over the years, he has discussed with Ms. Clark various insurance policies and other financial products, and is aware of the insurance dealings involved in this case which he learned about from his discussions with his client. He claims that in August or September, 1988, Ms. Clark called his office and solicited advice from him as to how she could get rid of an insurance policy she did not want. He advised her to come in with all her papers to discuss it and at their first meeting, found that she had purchased the $30,000.00 annuity on the life of a niece, and also a health policy, from Respondent. The annuity policy was a single premium annuity, and the health policy had a $1,200.00 premium, for both of which, she had written checks. During this discussion Ms. Clark was quite sure that she did not want to keep the annuity policy. She was somewhat confused about the health policy, but was also satisfied that she didn't want it, though she could not elaborate why. Due to Ms. Clark's conditions, both financial and otherwise, Mr. Kanetsky felt she would be better off in a liquid position rather than having such a large annuity outstanding, and since she apparently wanted to cancel both policies, he agreed to help her. To do so, he first contacted an individual in the insurance business who was aware of Mr. Best and his operation. Upon advice of this individual, Mr. Kanetsky then contacted the insurance company on which the annuity policy had been written and requested that it be cancelled. Mr. Kanetsky also referred Ms. Clark to another insurance agent to get the health policy cancelled and a new policy issued. He also contacted Mr. Best to have him refund the $400.20 difference between the $1,200.00 which Ms. Clark had paid in as a premium on the health policy, and the $799.80 which had been refunded to her by the company when the first policy was cancelled. There is some misunderstanding as to how that first $799.80 check was handled. On its face, the check reflects it was sent to Ms. Clark who, in turn, endorsed it over to Mr. Best to be applied toward another policy. Mr. Kanetsky, on the other hand, indicates the check, though addressed to Ms. Clark, was actually sent to Mr. Best, who had Ms. Clark endorse it and who applied it to another policy. In any event, since Ms. Clark wanted that policy cancel led and apparently intended to do no further business with Mr. Best, Mr. Kanetsky requested that Best refund all monies paid. Mr. Best immediately issued his check for $400.20. The insurance company, apparently concluding it had sent the first check to Mr. Best by mistake, issued another check to Ms. Clark in the amount of $799.80, which represents the actual premium cost, with the balance being the agent's legitimate commission. Since Mr. Best had already forwarded his check for $799.80, when the second insurance company check was received it was immediately refunded to Mr. Best. The $30,000.00 paid in for the annuity policy was refunded to Ms. Clark directly by the insurance company. Mr. Kanetsky contends that notwithstanding he had written to Mr. Best to advise him to stay away from Ms. Clark, there is some indication that Best thereafter came to Ms. Clark's residence to discuss the annuity policy with her. Mr. Best does not deny having gone to Ms. Clark's home on several occasions; once to talk to her about the health and accident policy, and another time, to talk about the annuity. In both cases, however, this is a standard practice in the insurance industry, suggested by the company, to attempt to "conserve" the business by making a follow-up call in an effort to dissuade a policy holder from cancelling. It is found that no improper pressure was applied by Mr. Best in his efforts to conserve his sales. Over his years of experience with Ms. Clark, Mr. Kanetsky has found that she confuses easily, and though she is competent, she is extremely limited in business experience and understanding. She does not have a guardian of her property, but is clearly not equipped emotionally to handle many of her financial affairs. It is found that her recollection of the incidents in question here is so poor as to render her testimony almost irrelevant and without merit, and though she is quite sure she did not want the insurance she bought, and attempted to cancel it, she is totally unsure of the circumstances surrounding her relationship with Respondent and the details of any conversations and transactions she may have had with him. Consequently, her testimony, the only direct testimony regarding the issue of what transpired between her and Mr. Best, is, for all purposes here, worthless. Mr. Best denies threatening Ms. Clark or attempting to coerce her into purchasing insurance from him. When he saw her in August, 1988, it was the first time he had seen her for a while and had, in fact, forgotten about her until she came into his office to file a claim. At that point, he made an appointment with her for a review of her policy status. At that time Ms. Clark had no Medicare coverage, (she does now), and he offered to attempt to get her medical coverage, to which she agreed. She wrote a check for a policy to be issued by American Sun Life Insurance Company which, subsequently, rejected her. When the rejection came through, Mr. Best immediately notified her of that fact and told her then he would convert to another company, to which she agreed. Mr. Best is satisfied Ms. Clark understood he would apply the refund check he received from American Sun to the second policy issued by United American Life, and he did this. She thereafter cancelled that policy. After Mr. Best received notice of the cancellation, he went to her home to explain everything to her. At no time, however, did he threaten her, a fact to which she agrees. He claims she had received the initial refund from united American for $799.80, which she agreed he could apply toward a policy with another company, and she voluntarily endorsed the check over to him. She also cancelled this second policy. With regard to the annuity policy, when she notified the company that she was cancelling it, he received notice of this from the home office which suggested he do what he could to conserve the business. When he went to see her about it, she agreed, he claims, that she would keep the policy. At that time he wrote out, by hand, a note to be signed by her indicating her satisfaction with the policy and her desire it be maintained. When the company thereafter indicated it preferred a typed statement to that effect, he went to her with a typed notice which said the same thing, and which Ms. Clark signed. No threats were made, and Ms. Clark agrees to this. Mr. Best also sold an insurance policy to an Ann Ward, which she cancelled for a reason totally unrelated to the Respondent. When Mr. Best found out she had cancelled the policy, he went to see her to inquire as to her reasons. At that time, as in all her dealings with him over a period of time, he was not, and she has never found him to be, overbearing, unprofessional, or coercive. In all their transactions together, he has always fully explained his product, and on the basis of their relationship, she would be happy to deal with him again. When Ms. Ward cancelled her policy, the company wrote to Mr. Best and advised him of this fact and that he must refund a portion of the premium which it had paid to him as a commission. When he received this letter, he called the company and authorized it to withhold from the amount owed to him for renewal commissions, any amount the company claimed as reimbursement. He claims to have believed this procedure, a standard action within the industry, satisfied his obligation to the company. He was, therefore, quite surprised when the company complained and he immediately wrote a check to the company to cover the balance due it which is now paid in full. However, the evidence of record shows he was sent several notices of delinquency, even several for the balance after he authorized the company to take his earned commissions, without his taking any action and the company ultimately, on December 22, 1988, terminated his agency. His failure to pay over is found to be more negligent than willful, however. Mr. Best has been in the insurance business since 1979 and claims he has had no prior administrative complaints filed against him since that time. The Department showed none.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that Counts I and II of the Administrative Complaint relating to the Respondent, Michael Eugene Best, be dismissed; and that as to Count III, he pay an administrative fine of $500.00. It is further RECOMMENDED that Mr. Best's applications to represent World Insurance Company, Travellers Life Insurance Company, and American Integrity Insurance Company be denied, such denial to be without prejudice to re-filing of the applications at a later time to be set by the Department. RECOMMENDED this 15th day of February, 1990, in Tallahassee, Florida. ARNOLD H. POLLOCK, 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 15th day of February, 1990. APPENDIX TO RECOMMENDED ORDER The following constitutes my specific rulings pursuant to S 120.59(2), Florida Statutes, as to all of the Proposed Findings of Fact submitted in this case. FOR THE PETITIONER; 1. - 3. Accepted and incorporated herein. Accepted and incorporated herein. -10. Accepted and incorporated herein. 11.-14. Accepted and incorporated herein. 15.&16. Accepted and incorporated herein. 17. Accepted and incorporated herein, with the understanding that the failure to deal with American Sun Life was not due to any misconduct of Respondent but because of the Company's rejection of Ms. Clark. 18.-20. Rejected as not supported by the evidence. 21.-24. Accepted and incorporated herein. 25.-27. Rejected as not supported by the evidence. 28.-31. Accepted and incorporated herein. 32.&34. Accepted and incorporated herein. 35. Accepted and incorporated herein. COPIES FURNISHED: C. Christopher Anderson, III, Esquire Office of Legal Services Department of Insurance 412 Larson Building Tallahassee, Florida 32399-0300 Michael E. Sweeting, Esquire Pflaum, Dannheisser and Sweeting, P. A. 100 Wallace Avenue, Suite 210 Sarasota, Florida 34237 Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Don Dowdell General Counsel Department of Insurance The Capitol, Plaza Level Tallahassee, Florida 32399-0300
The Issue The issues are whether Respondents offered and sold securities in Florida, in violation of the registration requirements of Section 517.07(1), Florida Statutes; offered and sold securities in Florida while Respondents were unregistered, in violation of Section 517.12(1), Florida Statutes; or committed fraud in the offer, sale, or purchase of securities in Florida, in violation of Section 517.301(1)(a), Florida Statutes. If so, an additional issue is the penalty to be imposed.
Findings Of Fact At all material times, Respondent James A. Torchia (Respondent) held a valid life and health insurance license. Respondent was the president and owner of Respondent Empire Insurance, Inc. (Empire Insurance), a now-dissolved Florida corporation. Empire Insurance was in the insurance business, and Respondent was its sole registered insurance agent. At no material time has Respondent or Empire Insurance held any license or registration to engage in the sale or offer for sale of securities in Florida. At no material time were the investments described below sold and offered for sale by Respondent or Empire Insurance registered as securities in Florida. These cases involve viaticated life insurance policies. A life insurance policy is viaticated when the policy owner, also known as the viator, enters into a viatical settlement agreement. Under the agreement, the viator sells the policy and death benefits to the purchaser for an amount less than the death benefit--the closer the viator is perceived to be to death, the greater the discount from the face amount of the death benefit. The viatical industry emerged to provide dying insureds, prior to death, a means by which to sell their life insurance policies to obtain cash to enjoy during their remaining lives. As this industry matured, brokers and dealers, respectively, arranged for the sale of, and bought and resold, life insurance policies of dying insureds. Prior to the death of the viator, these viaticated life insurance policies, or interests in such policies, may be sold and resold several times. In these cases, viators sold their life insurance policies to Financial Federated Title & Trust, Inc. (FinFed). Having raised money from investors, American Benefit Services (ABS) then paid FinFed, which assigned viaticated policies, or interests in the policies, to various trusts. The trusts held the legal title to the policies, and the trust beneficiaries, who are the investors from whom ABS had obtained the funds to pay FinFed, held equitable title to the policies. Sometimes in these cases, a broker or dealer, such as William Page and Associates, intervened between the viator and FinFed. At some point, though, ABS obtained money from investors to acquire policies, but did not pay the money to FinFed to purchase viaticated life insurance policies. The FinFed and ABS investment program eventually became a Ponzi scheme, in which investor payouts were derived largely, if not exclusively, from the investments of other investors. ABS typically acquired funds through the promotional efforts of insurance agents, such as Respondent and Empire Insurance. Using literature provided by ABS, these agents often sold these investments to insurance clients. As was typical, Respondent and Empire Insurance advertised the types of claims described below by publishing large display ads that ran in Florida newspapers. Among the ABS literature is a Participation Disclosure (Disclosure), which describes the investment. The Disclosure addresses the investor as a "Participant" and the investment as a "Participation." The Disclosure contains a Participation Agreement (Agreement), which provides that the parties agree to the Disclosure and states whether the investor has chosen the Growth Plan or Income Plan, which are described below; a Disbursement Letter of Instruction, which is described below; and a Letter of Instruction to Trust, which is described below. The agent obtains the investor's signature to all three of these documents when the investor delivers his check, payable to the escrow agent, to purchase the investment. The Disclosure states that the investments offer a “High Return”: “Guaranteed Return on Participation 42% at Maturity.” The Disclosure adds that the investments are “Low Risk”: “Secured by a Guaranteed Insurance Industry Receivable”; “Secured by $300,000 State Insurance Guarantee Fund”; “Short Term Participation (Maturity Expectation 36 Months)”; “Principal Liquid After One Year With No Surrender Charge”; “State Regulated Participation”; “All Transactions By Independent Trust & Escrow Agents”; and “If policy fails to mature at 36 months, participant may elect full return of principal plus 15% simple interest.” The Disclosure describes two alternative investments: the Growth Plan and Income Plan. For the Growth Plan, the Disclosure states: “At maturity, Participant receives principal plus 42%, creating maximum growth of funds.” For the Income Plan, the Disclosure states: “If income is desired, participation can be structured with monthly income plans.” Different rates of return for the Growth and Income plans are set forth below. For investors choosing the Income Plan, ABS applied only 70 percent of the investment to the purchase of viaticated life insurance policies. ABS reserved the remaining 30 percent as the source of money to "repay" the investor the income that he was due to receive under the Income Plan, which, as noted below, paid a total yield of 29.6 percent over three years. The Disclosure states that ABS places all investor funds in attorneys’ trust accounts, pursuant to arrangements with two “bonded and insured” “financial escrow agents.” At another point in the document, the Disclosure states that the investor funds are deposited “directly” with a “financial escrow agent,” pursuant to the participant’s Disbursement Letter of Instruction. The Disbursement Letter of Instruction identifies a Florida attorney as the “financial escrow agent,” who receives the investor’s funds and disburses them, “to the order of [FinFed) or to the source of the [viaticated insurance] benefits and/or its designees.” This disbursement takes place only after the attorney receives “[a] copy of the irrevocable, absolute assignment, executed in favor of Participant and recorded with the trust account as indicated on the assignment of [viaticated insurance] benefits, and setting out the ownership percentage of said [viaticated insurance] benefits”; a “medical overview” of the insured indicative of not more than 36 months’ life expectancy; confirmation that the policy is in full force and effect and has been in force beyond the period during which the insurer may contest coverage; and a copy of the shipping airbill confirming that the assignment was sent to the investor. The Disclosure states that the investor will direct a trust company to establish a trust, or a fractional interest in a trust, in the name of the investor. When the life insurance policy matures on the death of the viator, the insurer pays the death benefits to the trust company, which pays these proceeds to the investor, in accordance with his interest in the trust. Accordingly, the Letter of Instruction to Trust directs FinFed, as the trust company, to establish a trust, or a fractional interest in a trust, in the name of the investor. The Letter of Instruction to Trust provides that the viaticated insurance benefits obtained with the investor's investment shall be assigned to this trust, and, at maturity, FinFed shall pay the investor a specified sum upon the death of the viator and the trustee's receipt of the death benefit from the insurer. The Disclosure provides that, at anytime from 12 to 36 months after the execution of the Disclosure, the investor has the option to request ABS to return his investment, without interest. At 36 months, if the viator has not yet died, the investor has the right to receive the return of his investment, plus 15 percent (five percent annually). The Disclosure states that ABS will pay all costs and fees to maintain the policy and that all policies are based on a life expectancy for the viator of no more than 36 months. Also, the Disclosure assures that ABS will invest only in policies that are issued by insurers that are rated "A" or better by A.M. Best "at the time that the Participant's deposit is confirmed." The Disclosure mentions that the trust company will name the investor as an irrevocable assignee of the policy benefits. The irrevocable assignment of policy benefits mentioned in the Disclosure and the Disbursement Letter of Instruction is an anomaly because it does not conform to the documentary scheme described above. After the investor pays the escrow agent and executes the documents described above, FinFed executes the “Irrevocable Absolute Assignment of Viaticated Insurance Benefits.” This assignment is from the trustee, as grantor, to the investor, as grantee, and applies to a specified percentage of a specific life insurance policy, whose death benefit is disclosed on the assignment. The assignment includes the "right to receive any viaticated insurance benefit payable under the Trusts [sic] guaranteed receivables of assigned viaticated insurance benefits from the noted insurance company; [and the] right to assign any and all rights received under this Trust irrevocable absolute assignment." On its face, the assignment assigns the trust corpus-- i.e., the insurance policy or an interest in an insurance policy--to the trust beneficiary. Doing so would dissolve the trust and defeat the purpose of the other documents, which provide for the trust to hold the policy and, upon the death of the viator, to pay the policy proceeds in accordance with the interests of the trust beneficiaries. The assignment bears an ornate border and the corporate seal of FinFed. Probably, FinFed intended the assignment to impress the investors with the "reality" of their investment, as the decorated intangible of an "irrevocable" interest in an actual insurance policy may seem more impressive than the unadorned intangible of a beneficial interest in a trust that holds an insurance policy. Or possibly, the FinFed/ABS principals and professionals elected not to invest much time or effort in the details of the transactional documentation of a Ponzi scheme. What was true then is truer now. Obviously, in those cases in which no policy existed, the investor paid his money before any policy had been selected for him. However, this appears to have been the process contemplated by the ABS literature, even in those cases in which a policy did exist. The Disbursement Letter of Instruction and correspondence from Respondent, Empire Insurance, or Empire Financial Consultant to ABS reveal that FinFed did not assign a policy, or part of a policy, to an investor until after the investor paid for his investment and signed the closing documents. In some cases, Respondent or Empire Insurance requested ABS to obtain for an investor a policy whose insured had special characteristics or a investment plan with a maturity shorter than 36 months. FinFed and ABS undertook other tasks after the investor paid for his investment and signed the closing documents. In addition to matching a viator with an investor, based on the investor's expressed investment objectives, FinFed paid the premiums on the viaticated policies until the viator died and checked on the health of the viator. Also, if the viator did not die within three years and the investor elected to obtain a return of his investment, plus 15 percent, ABS, as a broker, resold the investor's investment to generate the 15 percent return that had been guaranteed to the investor. Similarly, ABS would sell the investment of investors who wanted their money back prior to three years. The escrow agent also assumed an important duty--in retrospect, the most important duty--after the investor paid for his investment and signed the closing documents; the escrow agent was to verify the existence of the viaticated policy. Respondent and Empire Insurance sold beneficial interests in trusts holding viaticated life insurance policies in 50 separate transactions. These investors invested a total of $1.5 million, nearly all of which has been lost. Respondent and Empire Insurance earned commissions of about $120,000 on these sales. Petitioner proved that Respondent and Empire Insurance made the following sales. Net worths appear for those investors for whom Respondent recorded net worths; for most, he just wrote "sufficient" on the form. Unless otherwise indicated, the yield was 42 percent for the Growth Plan. In all cases, investors paid money for their investments. In all cases, FinFed and ABS assigned parts of policies to the trusts, even of investors investing relatively large amounts. On March 21, 1998, Phillip A. Allan, a Florida resident, paid $69,247.53 for the Growth Plan. On March 26, 1998, Monica Bracone, a Florida resident with a reported net worth of $900,000, paid $8000 for the Growth Plan. On April 2, 1998, Alan G. and Judy LeFort, Florida residents with a reported net worth of $200,000, paid $10,000 for the Growth Plan. In a second transaction, on June 8, 1998, the LeForts paid $5000 for the Growth Plan. In the second transaction, the yield is 35 percent, but the Participation Agreement notes a 36-month life expectancy of the viator. The different yields based on life expectancies are set forth below, but, as noted above, the standard yield was 42 percent, and, as noted below, this was based on a 36-month life expectancy, so Respondent miscalculated the investment return or misdocumented the investment on the LeForts' second transaction. On April 29, 1998, Doron and Barbara Sterling, Florida residents with a reported net worth of $250,000, paid $15,000 for the Growth Plan. In a second transaction, on August 14, 1998, the Sterlings paid $100,000 for the Growth Plan. The yield for the second transaction is 35 percent, and the Participation Agreement notes that the Sterlings were seeking a viator with a life expectancy of only 30 months. When transmitting the closing documents for the second Sterling transaction, Respondent, writing ABS on Empire Insurance letterhead, stated in part: This guy has already invested with us (15,000) [sic]. He gave me this application but wants a 30 month term. Since he has invested, he did some research and has asked that he be put on a low T-cell count and the viator to be an IV drug user. I know it is another favor but this guy is a close friend and has the potential to put at least another 500,000 [sic]. If you can not [sic] do it, then I understand. You have done a lot for me and I always try to bring in good quality business. If this inventory is not available, the client has requested that we return the funds . . . In a third transaction, on February 24, 1999, the Sterlings paid $71,973 for the Growth Plan. The yield is only 28 percent, but the Participation Agreement reflects the typical 36-month life expectancy for the viator. Although the investors would not have received this document, Respondent completed an ABS form entitled, "New Business Transmittal," and checked the box, "Life Expectancy 2 years or less (28%). The other boxes are: "Life Expectancy 2 1/2 years or less (35%)" and "Life Expectancy 3 years or less (42%)." On May 4, 1998, Hector Alvero and Idelma Guillen, Florida residents with a reported net worth of $100,000, paid $6000 for the Growth Plan. In a second transaction, on October 29, 1998, Ms. Guillen paid $5000 for the Growth Plan. In a third transaction, on November 30, 1998, Ms. Guillen paid $5000 for the Growth Plan. For this investment, Ms. Guillen requested an "IV drug user," according to Respondent in a letter dated December 1, 1998, on Empire Financial Consultants letterhead. This is the first use of the letterhead of Empire Financial Consultants, not Empire Insurance, and all letters after that date are on the letterhead of Empire Financial Consultants. In a fourth transaction, on January 29, 1999, Ms. Guillen paid $15,000 for the Growth Plan. On April 23, 1998, Bonnie P. Jensen, a Florida resident with a reported net worth of $120,000, paid $65,884.14 for the Growth Plan. Her yield was 35 percent, but the Participation Agreement reflects a 36-month life expectancy. On May 20, 1998, Michael J. Mosack, a Florida resident with a reported net worth of $500,000, paid $70,600 for the Income Plan. He was to receive monthly distributions of $580.10 for three years. The total yield, including monthly distributions, is $20,883.48, which is about 29.6 percent, and the Participation Agreement reflects a 36-month life expectancy. On May 27, 1998, Lewis and Fernande G. Iachance, Florida residents with a reported net worth of $100,000, paid $30,000 for the Growth Plan. On June 3, 1998, Sidney Yospe, a Florida resident with a reported net worth of $1,500,000, paid $30,000 for the Growth Plan. The yield is 35 percent, and the Participation Agreement reflects a 30-month life expectancy. On June 12, 1998, Bernard Aptheker, with a reported net worth of $100,000, paid $10,000 for the Growth Plan. The yield is 35 percent, but the Participation Agreement reflects a 36-month life expectancy. On June 10, 1998, Irene M. and Herman Kutschenreuter, Florida residents with a reported net worth of $200,000, paid $30,000 for the Growth Plan. The yield is 35 percent, but the Participation Agreement reflects a 36-month life expectancy. On June 9, 1998, Daniel and Mary Spinosa, Florida residents with a reported net worth of $300,000, paid $10,000 for the Growth Plan. The yield is 35 percent, but the Participation Agreement reflects a 36-month life expectancy. On June 5, 1998, Pauline J. and Anthony Torchia, Florida residents with a reported net worth of $300,000 and the parents of Respondent, paid $10,000 for the Growth Plan. The yield is 35 percent, but the Participation Agreement reflects a 36-month life expectancy. On June 29, 1998, Christopher D. Bailey, a Florida resident with a reported net worth of $500,000, paid $25,000 for the Growth Plan. The yield is 35 percent, but the Participation Agreement reflects a 36-month life expectancy. In a second transaction on the same day, Mr. Bailey paid $25,000 for the Growth Plan. Petitioner submitted documents concerning a purported purchase by Lauren W. Kramer on July 21, 1998, but they were marked "VOID" and do not appear to be valid. On July 22, 1998, Laura M. and Kenneth D. Braun, Florida residents with a reported net worth of $150,000, paid $25,000 for the Growth Plan, as Respondent completed the Participation Agreement. However, the agreement calls for them to receive $205.42 monthly for 36 months and receive a total yield, including monthly payments, of 29.6 percent, so it appears that the Brauns bought the Income Plan. In a second transaction, also on July 22, 1998, the Brauns paid $25,000 for the Growth Plan. On January 20, 1999, Roy R. Worrall, a Florida resident, paid $100,000 for the Income Plan. The Participation Agreement provides that he will receive monthly payments of $821.66 and a total yield of 29.6 percent. On July 16, 1998, Earl and Rosemary Gilmore, Florida residents with a reported net worth of $250,000, paid $5000 for the Growth Plan. In a second transaction, on February 12, 1999, the Gilmores paid $20,000 for the Growth Plan. The yield is 28 percent, but the Participation Agreement reflects a 36-month life expectancy. The New Business Transmittal to ABS notes a life expectancy of two years or less. On July 14, 1998, David M. Bobrow, a Florida resident with a reported net worth of $700,000 on one form and $70,000 on another form, paid $15,000 for the Growth Plan. The yield is 35 percent, but the Participation Agreement reflects a 36-month life expectancy. In a second transaction, on the same day, Mr. Bobrow paid $15,000 for the Growth Plan. On July 27, 1998, Cecilia and Harold Lopatin, Florida residents with a reported net worth of $300,000, paid $10,000 for the Growth Plan. On July 30, 1998, Ada R. Davis, a Florida resident, paid $30,000 for the Income Plan. Her total yield, including monthly payments of $246.50 for three years, is 29.6 percent. In a second transaction, on the same day, Ms. Davis paid $30,000 for the Income Plan on the same terms as the first purchase. On July 27, 1998, Joseph F. and Adelaide A. O'Keefe, Florida residents with a net worth of $300,000, paid $12,000 for the Growth Plan. On August 5, 1998, Thurley E. Margeson, a Florida resident, paid $50,000 for the Growth Plan. On August 19, 1998, Stephanie Segaria, a Florida resident, paid $20,000 for the Growth Plan. On August 26, 1998, Roy and Glenda Raines, Florida residents, paid $5000 for the Growth Plan. The yield is 35 percent, but the Participation Agreement reflects a 36-month life expectancy. The New Business Transmittal to ABS notes a life expectancy of 30 months or less. In a second transaction, on the same day, the Raineses paid $5000 for the Growth Plan. The yield is 35 percent, but the Participation Agreement reflects a 36-month life expectancy, although, again, the New Business Transmittal notes the life expectancy of 30 months or less. On November 24, 1998, Dan W. Lipford, a Florida resident, paid $50,000 for the Growth Plan in two transactions. In a third transaction, on January 13, 1999, Mr. Lipford paid $30,000 for the Growth Plan. On December 1, 1998, Mary E. Friebes, a Florida resident, paid $30,000 for the Growth Plan. On December 4, 1998, Allan Hidalgo, a Florida resident, paid $25,000 for the Growth Plan. On December 17, 1998, Paul E. and Rose E. Frechette, Florida residents, paid $25,000 for the Income Plan. The yield, including monthly payments of $205.41 for three years, is 29.6 percent. On December 26, 1998, Theodore and Tillie F. Friedman, Florida residents, paid $25,000 for the Growth Plan. On January 19, 1999, Robert S. and Karen M. Devos, Florida residents, paid $10,000 for the Growth Plan. On January 20, 1999, Arthur Hecker, a Florida resident, paid $50,000 for the Income Plan. The yield, including a monthly payment of $410.83 for 36 months, is 29.6 percent. On February 11, 1999, Michael Galotola, a Florida resident, paid $25,000 for the Growth Plan. In a second transaction, on the same day, Michael and Anna Galotola paid $12,500 for the Growth Plan. On November 3, 1998, Lee Chamberlain, a Florida resident, paid $50,000 for the Growth Plan. On December 23, 1998, Herbert L. Pasqual, a Florida resident, paid $200,000 for the Income Plan. The yield, including a monthly payment of $1643.33 for three years, is 29.6 percent. On December 1, 1998, Charles R. and Maryann Schuyler, Florida residents, paid $10,000 for the Growth Plan. Respondent and Empire Insurance were never aware of the fraud being perpetrated by FinFed and ABS at anytime during the 38 transactions mentioned above. Respondent attempted to verify with third parties the existence of the viaticated insurance policies. When ABS presented its program to 30-40 potential agents, including Respondent, ABS presented these persons an opinion letter from ABS's attorney, stating that the investment was not a security, under Florida law. Respondent also contacted Petitioner's predecessor agency and asked if these transactions involving viaticated life insurance policies constituted the sale of securities. An agency employee informed Respondent that these transactions did not constitute the sale of securities.
Recommendation RECOMMENDED that Petitioner enter a final order: Finding James A. Torchia and Empire Insurance, Inc., not guilty of violating Section 517.301(1), Florida Statutes; Finding James A. Torchia guilty of 38 violations of Section 517.07(1), Florida Statutes, and 38 violations of Section 517.12(1), Florida Statutes; Finding Empire Insurance, Inc., guilty of 38 violations of Section 517.07(1), Florida Statutes, and 38 violations of Section 517.12(1), Florida Statutes, except for transactions closed on or after December 1, 1998; Directing James A. Torchia and Empire Insurance, Inc., to cease and desist from further violations of Chapter 517, Florida Statutes; and Imposing an administrative fine in the amount of $120,000 against James A. Torchia. DONE AND ENTERED this 19th day of May, 2003, in Tallahassee, Leon County, Florida. ROBERT E. MEALE 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 19th day of May, 2003. COPIES FURNISHED: Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Fred H. Wilsen Senior Attorney Office of Financial Institutions and Securities Regulation South Tower, Suite S-225 400 West Robinson Street Orlando, Florida 32801-1799 Barry S. Mittelberg Mittelberg & Nicosia, P.A. 8100 North University Drive, Suite 102 Fort Lauderdale, Florida 33321
Findings Of Fact Edward Berk, Respondent, was at all times here relevant licensed as an ordinary life, including disability, insurance agent to represent Founders Life Assurance Company, Standard Security Life Insurance Company of New York, American Variable Annuity Life Assurance Company, Wisconsin Life Insurance Company, Columbian Mutual Life Insurance Company, and Lone Star Life Insurance Company. He is licensed as a disability insurance (2-40) agent to represent American Family Life Assurance Company of Columbus and an ordinary life (2-16) agent to represent Estate Life Insurance Company of America. (Exhibit 1). On April 12, 1979 Respondent pleaded guilty in the U. S. District Court for the Southern District of New York of violation of 18 USC 1341 and 1342 to wit: unlawfully, willfully and knowingly devising and intending to devise a scheme and artifice to defraud and to obtain money from The Travelers Insurance Company by means of false and fraudulent pretenses, representations , and promises. He was found guilty and sentenced to two years imprisonment on each of five counts, the sentences to run concurrently. The execution of the sentence was suspended and Respondent was placed on probation for a period of two years (Exhibits 2)
Findings Of Fact The Respondent, Teresa Jean Watson, at all times material to this proceeding was licensed as an ordinary life agent, a disability insurance agent and a general lines insurance agent. She was the only general lines agent licensed to sell insurance at the T. J. Watson Insurance Agency, Inc. and all insurance sold by that firm at times pertinent hereto was sold and issued under authority of her license. During times material to this proceeding, Teresa Jean Watson sold insurance coverage under authority of her general lines license either as direct agent for various insurance companies for whom she was general agent or, on behalf of MacNeill and Son, Inc. (MacNeill), her managing agency, which represented various insurance companies for whom the Respondent wrote coverage. Between February 1st and February 15, 1982, a homeowner's insurance policy was sold to Tony and Martha Williams by the Respondent's agency under the authority of the Respondent's general lines insurance agent's license. That homeowner's policy required a premium of $211.00. The policyholder, Tony Williams, wrote two checks to the T. J. Watson Agency dated January 22, 1982 and February 12, 1982. Those two checks totalled $174.00. The checks were cashed by the Respondent's agency on January 26, 1982 and on February 6, 1982. The Independent Fire Insurance Company issued the policy to Tony and Martha Williams and on August 4, 1982 a representative of the Independent Fire Insurance Company wrote the Respondent to advise her that she owed that company a balance of $179.35, as of May 1982. Petitioner asserts that the $179.35 represents the amount of Tony Williams' premium owed to the insurer, less the Respondent's commission, which if added together would equal the $211.00 premium on the Williams' policy. Although it was established that $179.35 was owed by the Respondent to the Independent Fire Insurance Company, and never paid, it was not established that it represented the premium due specifically for the Williams' policy as was charged in count 1 of the Administrative Complaint. For instance, the checks paid by the Williamses to the Watson Agency total $174.00 and therefore there is a discrepancy between the total of those checks and the $179.35 amount Independent Fire Insurance company was owed by the Respondent. This fact coupled with the fact that the dates on the checks from the Williamses (January and February) substantially predate the May 1982 billing date to Respondent from Independent Fire, renders it unproven that the checks written to the Watson Agency which Respondent negotiated and retained the benefit of, related to the amount of unremitted premium owed by Respondent to the Independent Fire Insurance Company. In short, it was established that $174.00 was paid the Respondent and her agency by the Williamses. But, it was not established that the premium paid by the Williamses became misappropriated fiduciary funds converted by the Respondent to her own use and benefit. It was merely established that as of May 1982 the Respondent owed the Independent Fire Insurance Company $179.35 as a past-due account It was not established that the Williamses ever suffered a lapse of insurance coverage or were otherwise harmed by the Respondent's failure to pay Independent Fire the $179.35. Indeed, the $179.35 figure was not proven to be more than a mere debt owed by Respondent to Independent Fire Insurance Company. The figure was not shown to have been related to any particular policy. The Respondent and her insurance agency in the regular course of business wrote insurance coverage for companies represented by MacNeill and Son, Inc., the Respondent's managing agency. The regular business practice between the Respondent and MacNeill was for the Respondent to write coverage on behalf of insurers represented by MacNeill and to remit on a regular open account" basis insurance premiums due MacNeill on behalf of its insurance company principals on a monthly basis. The Respondent became delinquent in submitting premiums to MacNeill and Son in November 1981. After unsuccessful efforts to collect the delinquent premium funds from the Respondent, MacNeill and Son, Inc. suspended T. J. Watson Insurance Agency and the Respondent from writing further coverage for companies they represented in January 1982. The Respondent purportedly sold her agency to one Thomas Zinnbauer in December 1981, but had already fallen into a pattern of failing to remit insurance premiums over to MacNeill before that time. In any event, the purported sale to Thomas Zinnbauer was a subterfuge to avoid collection of delinquent premiums inasmuch as the Respondent held herself out, in correspondence with MacNeill, (See Petitioner's Exhibit 4) to be the president of the agency at least as late as April 1982 and, at that time and thereafter, the agency continued to sell insurance under the aegis of the Respondent's license. After the Respondent made up the delinquency in premium remissions to the MacNeill Agency that agency restored her underwriting authority in January 1982. Shortly thereafter however, the Respondent and the T. J. Watson Agency again became delinquent in remitting insurance premiums to the MacNeill Agency and followed a quite consistent pattern of failing to forward these fiduciary funds to MacNeill for some months. Ultimately the Respondent and her agency failed to forward more than $6500.00 in premium payment funds to MacNeill and Son, Inc. as was required in the regular course of business. MacNeill and Son, Inc. made repeated futile attempts to secure the misappropriated premium payments from the Respondent and her agency. MacNeill made several accountings of the amount of the acknowledged debt to the Respondent. The Respondent communicated with MacNeill concerning the delinquent premium payments and acknowledged the fact of the debt, but sought to reach an amicable arrangement for a repayment schedule. Re- payment was never made, however, and ultimately the Petitioner agency was informed of the deficiencies and prosecution resulted. The Respondent knew that the premiums had been collected by herself and her agency and had not been forwarded to those entitled to them. She knew of and actively participated in the improper withholding of the premium payments. This withholding and diversion of premium payments from the agency and companies entitled to them was a continuing pattern of conduct and Respondent failed to take action to halt the misappropriation of the premium payments. Further, it is established by the testimony of Matthew Brewer, who investigated the delinquent premium accounts for MacNeill, that Ms. Watson failed to advise MacNeill of the purported sale of her agency until November of 1982, almost a year after it is supposed to have occurred and then only in response to Brewer's investigation. When confronted by Mr. Brewer concerning the ownership of her agency Ms. Watson refused to tell him to whom she had sold the agency. When Mr. Brewer learned that Thomas Zinnbauer had apparently bought the agency from the Respondent Mr. Brewer conferred with him and he refused to release the agency records unless Ms. Watson gave her permission. This fact, together with the fact that Ms. Watson held herself out as president of the agency some four months after she had purportedly sold the agency to Zinnbauer, establishes that Respondent, by representing to Brewer and other personnel of MacNeill and Sons, Inc. that she had sold her agency, was attempting to evade liability for failure to forward the fiduciary premium funds obtained under the authority of her agent's license. As a result of the failure to forward the above- mentioned premium payments some of the insureds who had paid those premiums suffered lapses in coverage and cancellations of policies because MacNeill and Company and the insurers they represented believed that no premiums had ever been paid. Ultimately, MacNeill and Company learned that the premiums had been paid by the policyholders, but not remitted by the Respondent and her agency and undertook steps to reinstate coverage, but those policyholders in some instances had substantial periods of time when their coverage was lapsed due to the Respondent's failure to remit the premium funds to the managing agency and the insurance companies involved. MacNeill and Company ultimately reimbursed the appropriate insurers and insureds at its own expense, incurring substantial financial detriment as a result of the Respondent's failure to have premium payments obtained under her licensed authority properly forwarded. Had the insureds who had their policies cancelled suffered losses for which claims could have been filed during the period of the lapses of coverage, they could have encountered substantial financial difficulty.
Recommendation Having considered the foregoing Findings of Fact and Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses and the pleadings and arguments of the parties, it is therefore recommended that the General Lines Insurance Agent's license of Respondent Teresa Jean Watson be revoked. DONE and ORDERED this 27th day of December, 1985, in Tallahassee, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway Tallahassee, Florida 32301 (904)488-9675 FILED with the Clerk of the Division of Administrative Hearings this 27th day of December, 1985. APPENDIX RULING OF PETITIONER'S PROPOSED FINDINGS OF FACT: Accepted. Accepted, although the amount represented by the two subject checks totalled $174.00 instead of $175.00. Accepted. Rejected as not comporting with the competent, substantial credible evidence adduced. Rejected inasmuch as it was not established that the amount of $179.35 owed the Independent Fire Insurance Company represented the premium on the Williamses' insurance policy. Accepted. Accepted. Accepted. Accepted, although the last sentence in that Proposed Finding constitutes, in reality, mere argument of counsel. Accepted. Rejected as not comporting with the competent, substantial credible testimony and evidence actually before the Hearing Officer. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. RULINGS ON RESPONDENT'S PROPOSED FINDINGS OF FACT: Respondent submitted a post-hearing document entitled "Proposed Findings of Fact." There are few actual Proposed Facts in that one-and-a-half page pleading which is interlaced throughout with argument of counsel. However, to the extent the six paragraphs of that document contain Proposed Findings of Fact they are ruled on as follows: This Proposed Finding is rejected, but for reasons delineated in the above Conclusions of Law, Count 1 has been recommended to be dismissed anyway. This Finding is accepted but is immaterial and irrelevant to, and not necessary to, the Findings of Fact reached herein and the Conclusions of Law based thereon. Paragraph Number 3 does not really constitute a Proposed Finding of Fact or even multiple Proposed Findings of Fact in the same paragraph. In reality, it constitutes argument of Respondent's counsel concerning admissibility of certain documents into evidence which have already been ruled to be admissible by the Hearing Officer during the course of the hearing. To the extent that the last two sentences in the third paragraph of the Respondent's Proposed Findings of Fact are proposed findings of fact, they are accepted, but are immaterial, irrelevant and unnecessary to the findings of fact made herein and the conclusions predicated thereon and recommendation made herein. Rejected as not being in accordance with the competent, substantial credible testimony and evidence adduced. Rejected as constituting mere argument of counsel and not being in accordance with the competent, substantial, credible evidence adduced. Rejected as not in accordance with the competent, substantial, credible evidence presented as to Count 2. In reality, counsel obviously intended to refer to the two checks referenced in Count 1 of the complaint which has been recommended to be dismissed anyway. COPIES FURNISHED: Dennis Silverman, Esquire Department of Insurance 413-B Larson Building Tallahassee, Florida 32301 Mark A. Steinberg, Esquire Post Office Box 2366 Ft. Myers, Florida 33902 Bill Gunter Insurance Commissioner and Treasurer The Capitol Tallahassee, Florida 32301
The Issue Should discipline be imposed by Petitioner against Respondent's insurance agent licenses alleged as life including variable annuity (2-14), general lines (2-20), and health (2-40), pursuant to Chapters 624 and 626, Florida Statutes?
Findings Of Fact Petitioner issued license E125386 to Respondent. At present the license is valid in the following categories: life including variable annuity (2-14) and general lines (2-20). At present Respondent has appointments with American Family Life Assurance Company of Columbus in the categories life including variable annuity and health (2-15) and general lines (2-20). February 9, 2005, is the relevant date in this case. On that date Respondent held a license in categories (2-14) and (2-20). The category (2-14) was for an appointment with Direct Life Insurance Company. The category (2-20) was an appointment with Direct General Insurance. At the time Respondent worked at an office in Tallahassee, Florida, referred to as the Case Register Insurance Agency, that sold life insurance offered by Direct Life Insurance Company, among other products. On February 9, 2005, Denise Daley Turnbull worked at Case Register. She was a customer representative category (4- 40), appointed by Direct General Insurance Agency, Inc. Respondent worked with Ms. Turnbull. On February 9, 2005, Patrician Ann Brown came to the Cash Register Insurance Agency to purchase personal injury protection (PIP) automobile insurance mandated by the State of Florida. Ms. Turnbull dealt with the customer. In doing so, Ms. Turnbull followed a script which in relevant part stated: * * * How did you hear about Cash Register? Are you currently insured? Have you had the policy for at least 6 months with no more than a 7-day lapse in coverage? If they say yes, say . . . Great! We will need you to bring in a copy of your renewal offer or a letter from your current company when we write the policy. This will make you eligible for a discount. Are you buying, leasing or do you own your vehicle? Is the vehicle registered or titled in your name? * * * What coverage will you be purchasing with us? Inform the customer about the work loss option. Under the mandatory Personal Injury Protection, there is a work loss option should you be involved in an accident that will pay up to 60% of your lost wages. Would you like to include this option? Quote only PIP/PD unless the client asks for BI. Always quote $750.00 deductible for Comp/Coll and $1000 deductible NI or NIRR for PIP. Other deductibles are available upon request. * * * What is your date of birth? Are you married or single? If married, get spouses information) What tickets, accidents, or suspensions have you had in the last 3 years? (Do you need an SR-22?) Who else living in your household is 14 years or older? Are there other drivers who do not live in the house? * * * What is the year, make and model of your vehicle? Does it have air bags, anti-lock brakes or an anti-theft device? Is the vehicle used for personal, business or commercial use? Is your vehicle customized in any way? (remember, we do not cover any customization) Mr/Mrs. I have quoted you with the State Mandatory liability limits up to $10,000 dollars Property Damage, Personal Injury Protection up to $10,000 dollars with a $1,000 deductible, Comprehensive and Collision with $750 deductibles and offered with this quote are the optional policies for Accident Medical Coverage, Rental Reimbursement and a $10,000 term life benefit. You will need only $ to start your policy and have 12 payments of only $ . How does that sound? (Always quote 20/27 day pay plan-can offer 10 day plan when client comes into office) (emphasis added) How does that compare to other quotes you have received? * * * Mr./Mrs. , Direct is now offering to our customers, a Direct Visa Debit Card for a special low price of only $699. This requires no bank account, no credit check and is valid wherever Visa is accepted! Only $699, so be sure to bring that amount in with your down payment so you can take advantage of this special offer. Ms. Patricia M. Brown purchased automobile insurance from Direct General Insurance Company, including PIP and property damage liability (PD) totaling $848.00 with fees assigned. In addition, Ms. Brown purchased a policy through American Banking Travel Protection Plan for one year. The cost for that policy was $60.00. Ms. Brown purchased from Lloyds Accident Medical Protection Plan an individual accident medical protection plan. The cost was $110.00. Ms. Brown bought life insurance with a one-year period, that was renewable, $10,000.00 coverage, with a premium charge of $108.00. In making her purchases, Ms. Brown signed a form titled Explanation of Policies, Coverages and Cost Breakdown (including non-insurance products). The total cost for all purchases was $1,133.99. Ms. Brown signed a form that referred to American Bankers Insurance Company of Florida, Travel Protection Plan- Florida Declarations. That form was counter-signed by Ms. Turnbull. Ms. Brown signed another form referred to as American Bankers Insurance Company Optional Travel Protection Plan. Ms. Brown and Ms. Turnbull signed a form entitled Accident Medical Protection Plan Application. Ms. Brown signed a related form referred to as 100% Certain Underwriters @ Lloyds/London (DB/33) ACCIDENT MEDICAL PROTECTION PLAN. Ms. Turnbull signed a page referred to as a Scan Cover Sheet Life Policy Policy No. FLAD162704741:1627016705. In that connection Ms. Brown completed an application for life insurance with Direct Life Insurance Company by initialing information in the application form about her insurability for such things as heart trouble or high blood pressure, cancer, tumors, etc. Ms. Brown signed the application. Although Respondent had no direct participation with Ms. Brown in relation to the details of the life insurance policy, leaving the task to explain the policy to Ms. Turnbull, Respondent placed his name on the application in two places. He printed his name as agent and wrote his license ID number E125386 and he signed it with his agent signature on that same page. In conversation, Ms. Turnbull asked Ms. Brown about possible medical problems such as high blood pressure or stroke or seizure as part of the process of initialing those questions on the application form. Ms. Turnbull told Ms. Brown that the life insurance policy was optional and that it was a $10,000.00 term life benefit.
Recommendation Upon consideration of the facts found and the conclusions of law reached, it is RECOMMENDED: That Petitioner enter a final order suspending Respondent's license for six months for the violations. DONE AND ENTERED this 27th day of March, 2007, in Tallahassee, Leon County, Florida. S CHARLES C. ADAMS 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 27th day of March, 2007.
