Conclusions For Claimant: Daniel Harwin, Esquire Freedland Harwin Valori, P.L. 110 Southeast 6th Street, Suite 2300 Fort Lauderdale, Florida 33301 For Defendant: S. William Fuller, Jr., Esquire Hall Booth Smith, P.C. 200 West Forsyth Street, Suite 400 Jacksonville, Florida 32202
Other Judicial Opinions A party who is adversely affected by this Final Order is entitled to judicial review pursuant to section 120.68, Florida Statutes. Review proceedings are governed by the Florida Rules of Appellate Procedure. Such proceedings are commenced by filing the original notice of administrative appeal with the agency clerk of the Division of Administrative Hearings within 30 days of rendition of the order to be reviewed, and a copy of the notice, accompanied by any filing fees prescribed by law, with the clerk of the district court of appeal in the appellate district where the agency maintains its headquarters or where a party resides or as otherwise provided by law.
The Issue The issue for determination is whether Proposed Rule 69O-204.101 is an invalid exercise of delegated legislative authority.
Findings Of Fact Respondent, Office of Insurance Regulation (hereinafter referred to as "OIR"), is an agency of the State of Florida, created within the Financial Services Commission (hereinafter referred to as "Commission"). § 20.121(3)(a)1., Fla. Stat. (2007).2 Pursuant to Subsection 21.121(3)(a), the OIR is responsible for all activities concerning insurers and other risk-bearing entities, including licensing, rates, policy forms, market conduct, claims, issuance of certificates of authority, solvency, viatical settlements, premium financing, and administrative supervision, as provided under the Florida Insurance Code or Chapter 636. The Florida Insurance Code includes Chapters 624 through 632. The Commissioner of Insurance Regulation is the agency head of the OIR. However, the Commission is the agency head for purposes of rulemaking. § 20.121(3)(c). The matter at issue in this proceeding is Respondent's Proposed Rule 69O-204.101 entitled, "Disclosures to Viator of Disbursement" (the "Proposed Rule"). The Commission advertised the text of the Proposed Rule on November 30, 2007, in Volume 33, Number 48, of the Florida Administrative Weekly, and, subsequently, filed a Notice of Change to the Proposed Rule on February 15, 2008, and, again, on February 22, 2008. A final public hearing regarding the Proposed Rule was conducted by the Commission on March 25, 2008, at which time the Commission approved the Proposed Rule for final adoption. According to the published notice, the purpose and effect of Proposed Rule 69O-204.101 is "to establish disclosures to viators of reconciliation of funds." The text of the Proposed Rule, as noticed for final adoption, reads as follows: 69O-204.101 Disclosures to Viator of Disbursement. Prior to or concurrently with a viator's execution of a viatical settlement contract, the viatical settlement provider shall provide to the viator, in duplicate, a disclosure statement in legible written form disclosing: The name of each viatical settlement broker who receives or is to receive compensation and the amount of each broker's compensation related to that transaction. For the purpose of this rule, compensation includes anything of value paid or given by or at the direction of a viatical settlement provider or person acquiring an interest in one or more life insurance policies to a viatical settlement broker in connection with the viatical settlement contract; and A complete reconciliation of the gross offer or bid by the viatical settlement provider to the net amount of proceeds or value to be received by the viator related to that transaction. For the purpose of this rule, gross offer or bid shall mean the total amount or value offered by the viatical settlement provider for the purchase of an interest in one or more life insurance policies, inclusive of commissions, compensation, or other proceeds or value being deducted from the gross offer or bid. The disclosure statement shall be signed and dated by the viator prior to or concurrently with the viator's execution of a viatical settlement contract with the duplicate copy of the disclosure statement to be retained by the viator. If a viatical settlement contract has been entered into and the contract is subsequently amended or if there is any change in the viatical settlement provider's gross offer or bid amount or change in the net amount of proceeds or value to be received by the viator or change in the information provided in the disclosure statement to the viator the viatical settlement provider shall provide, in duplicate, an amended disclosure statement to the viator, containing the information in paragraphs (1)(a) and (b). The amended disclosure statement shall be signed and dated by the viator with the duplicate copy of the amended disclosure statement to be retained by the viator. The viatical settlement provider shall obtain the signed and dated amended disclosure statement. Prior to a viatical settlement provider's execution of a viatical settlement contract, the viatical settlement provider must have obtained the signed and dated disclosure statement and any amended disclosure statement required by this rule. In transactions where no broker is used the viatical settlement provider must have obtained the signed and dated disclosure statement from the viator. The documentation required in this rule shall be maintained by the viatical settlement provider pursuant to the provisions set forth in Subsection 626.9922(2), Florida Statutes, and shall be available to the office at any time for copying and inspection upon reasonable notice to the viatical settlement provider. The Proposed Rule cites Subsection 624.308(1) and Section 626.9925 as specific authority for the Proposed Rule. The Proposed Rule cites Sections 626.9923, 626.9924, and 626.9925 as the law implemented by the Proposed Rule. The Proposed Rule involves regulation of viatical settlement providers pursuant to Florida's Viatical Settlement Act, Part X, Chapter 626 (hereinafter referred to as the "Act"). The Act regulates both viatical settlements and life settlements. The Act does not define "viatical settlement" or "life settlement." However, both types of transactions involve the sale of the ownership interest in life insurance policies. A "viatical settlement" involves the sale of an ownership interest in a life insurance policy by a person who is expected to live for less than two years. A "life settlement" involves the sale of the ownership interest in a life insurance policy by a person who is expected to live longer than two years after the date of the sale. Viatical settlements and life settlements are regulated in essentially the same manner and each of the foregoing transactions are included in the definition of "viatical settlement contract" as defined in the Act. Therefore, references to "viatical settlements" under Florida law refer to both life settlements and viatical settlements. Subsection 626.9911(10) defines "viatical settlement contract" as follows: (10) "Viatical settlement contract" means a written agreement entered into between a viatical settlement provider, or its related provider trust, and a viator. The viatical settlement contract includes an agreement to transfer ownership or change the beneficiary designation of a life insurance policy at a later date, regardless of the date that compensation is paid to the viator. The agreement must establish the terms under which the viatical settlement provider will pay compensation or anything of value, which compensation or value is less than the expected death benefit of the insurance policy or certificate, in return for the viator's assignment, transfer, sale, devise, or bequest of the death benefit or ownership of all or a portion of the insurance policy or certificate of insurance to the viatical settlement provider. A viatical settlement contract also includes a contract for a loan or other financial transaction secured primarily by an individual or group life insurance policy, other than a loan by a life insurance company pursuant to the terms of the life insurance contract, or a loan secured by the cash value of a policy. In a viatical settlement transaction, the "viatical settlement provider" is the purchaser of the ownership interest in a life insurance policy, including the right to receive the policy proceeds upon the death of the insured. Also see § 626.9911(12).3 The "viator" is the owner of an insurance policy who sells the ownership interest in the policy. Also see § 626.9911(14).4 The term "viatical settlement broker" is defined in Subsection 626.9911(9), as follows: (9) "Viatical settlement broker" means a person who, on behalf of a viator and for a fee, commission, or other valuable consideration, offers or attempts to negotiate viatical settlement contracts between a viator resident in this state and one or more viatical settlement providers. Notwithstanding the manner in which the viatical settlement broker is compensated, a viatical settlement broker is deemed to represent only the viator and owes a fiduciary duty to the viator to act according to the viator's instructions and in the best interest of the viator. The term does not include an attorney, licensed Certified Public Accountant, or investment adviser lawfully registered under chapter 517, who is retained to represent the viator and whose compensation is paid directly by or at the direction and on behalf of the viator. Pursuant to Subsection 626.9911(9), the "viatical settlement broker" is an agent of the viator and, as such, owes a fiduciary duty to the viator to obtain the best price for the insurance policy. Thus, typically, the viatical settlement broker solicits bids from multiple viatical settlement providers on behalf of the viator. The Proposed Rule requires viatical settlement providers to furnish viators with a detailed accounting of all funds involved in viatical settlement transactions and to ensure that viators are aware of the accounting. The issues of disclosures required for viatical settlement contracts and transactions are addressed in two provisions of the Act, Sections 626.99181 and 626.9923. Section 626.99181, Florida Statutes, requires a viatical settlement broker to disclose its compensation and states, "[a] viatical settlement broker shall disclose to a prospective viator the amount and method of calculating the broker's compensation." That provision states the "compensation" includes "anything of value paid or given to a viatical settlement broker for the placement of a policy." Section 626.9923 addresses viatical settlement contracts and required disclosures to viators and states that: Viatical settlement contracts; required disclosures.--The viatical settlement broker, or the viatical settlement provider in transactions in which no broker is used, must inform the viator by the date of application for a viatical settlement contract: That there are possible alternatives to viatical settlement contracts for persons who have a catastrophic or life-threatening illness, including, but not limited to, accelerated benefits offered by the issuer of a life insurance policy. That proceeds of the viatical settlement could be taxable, and assistance should be sought from a personal tax advisor. That viatical settlement proceeds could be subject to the claims of creditors. That receipt of viatical settlement proceeds could adversely affect the recipient's eligibility for Medicaid or other government benefits or entitlements, and advice should be obtained from the appropriate agencies. That all viatical settlement contracts entered into in this state must contain an unconditional rescission provision which allows the viator to rescind the contract within 15 days after the viator receives the viatical settlement proceeds, conditioned on the return of such proceeds. The name, business address, and telephone number of the independent third- party escrow agent, and the fact that the viator may inspect or receive copies of the relevant escrow or trust agreements or documents. Petitioner is an established trade association in the life settlement industry and is comprised of over 175 member companies, some of which include Florida-licensed viatical settlement providers who would be subject to the Proposed Rule. Petitioner's members would be substantially affected by the Proposed Rule because it would require them to make disclosures to viators in addition to the disclosures required by the Act.
The Issue Whether the Florida Office of Insurance Regulation (OIR or Respondent) should approve the application submitted by Abacus Settlements, LLC (Abacus or Petitioner), for a license to operate as a viatical settlement provider in Florida.
Findings Of Fact On February 2, 2004, Abacus was formed as a limited liability company under the laws of the State of New York to operate as a viatical settlement provider. A viatical settlement provider is a licensed entity that buys existing life insurance policies from policy owners in a regulated market. The life or viatical market, also known as the secondary market, allows the consumer to sell their policy to investors for a much greater value, often three to five times their surrender value. Presently, Abacus is licensed to do business in 30 states as a viatical settlement provider by each respective state’s regulatory insurance agency. Since Abacus’s inception in 2004 through the present date, there have never been any consumer complaints filed against Abacus. Since its inception through the present date, Abacus has never had any regulatory complaints or administrative actions taken against it by any of the states where it is licensed to do business. From 2004 through the present date, Abacus has purchased life insurance policies with an aggregate face value of over $2 billion dollars and paid the owners of those policies nearly $250 million dollars in compensation. Of the 1,000 or so policies that Abacus has purchased since its inception in 2004, none of those policies has ever been the subject of any litigation filed by an insurance carrier seeking rescission of the policy for fraud or other malfeasance. Prior to the formation of Abacus, K. Scott Kirby, T. Sean McNealy, and Matthew Ganovsky (the “Principals”) owned and operated Advanced Settlements, LLC (Advanced), which they founded on December 19, 2000. Advanced was a viatical/life settlement broker licensed to do business in 35 states. The Principals have been participants in the viatical settlement/life insurance settlements industry since 1998, and have served as board members of the industry’s leading trade association, the Life Insurance Settlement Association. Advanced maintained a valid viatical settlement broker license from OIR from 2000 through its dissolution in 2014. The Principals maintained valid life insurance producer licenses from OIR from 2000 through the present date, and those licenses remain in good standing. The Principals are still licensed as life insurance producers and hold viatical settlement broker appointments with the State of Florida. From Abacus’s inception in 2004 through 2011, Abacus was operated on a day-to-day basis by its CEO/COO Craig Seitel, and the Principals were not involved in the day-to-day business of Abacus or in the company’s decisions regarding compliance or policy acquisition parameters. Due to health concerns related to Mr. Seitel’s wife, Mr. Seitel left the company and the Principals appointed Samantha Butcher in 2011 to manage the day- to-day business of Abacus. Since 2011, Samantha Butcher has operated Abacus as the director of operations from the company’s Tennessee office. On February 26, 2015, Abacus filed the Application with OIR for licensure as a viatical settlement provider under section 626.9912. The Application itself was in excess of 550 pages. On March 6, 2015, OIR transmitted a letter to Abacus detailing purported technical deficiencies in the Application. On March 31, 2015, OIR transmitted a letter to Abacus wherein OIR confirmed that the Application was formally received and complete, and would be routed to the proper unit within OIR for processing. Jan Hamilton from OIR was tasked with reviewing the Application. Ms. Hamilton has reviewed approximately 50 viatical settlement provider applications in her 20 years of experience at OIR, and has never reviewed an application that was approved without additional requirements added through the consent order process. Upon being notified on March 31, 2015, that Abacus had filed the Application, the head of OIR’s Life and Health Division communicated with Ms. Hamilton via an email stating "here we go." Ms. Hamilton sent a response noting that a "strategy meeting" would be convened amongst OIR staff regarding the Application. According to Ms. Hamilton’s notes, on March 31, 2015, the Application was accepted and assigned to an examiner, and was “under review.” On April 6, 2015, six days after the Application was filed, Ms. Hamilton’s notes state that the “Application is being prepared for denial due to lack of trustworthiness of principals/owners of Applicant which cannot be cured.” Included within the Application were the following: (a) Abacus’s proposed anti-fraud plan; (b) Abacus Plan of Operations; (c) Abacus Organizational (Employee) Chart; (d) Sworn Biographical Affidavits for each Principal and employee required; (e) Management Information Forms; (f) all organization documents and bylaws of Abacus; (g) all forms that were to be used by Abacus in Florida; (h) fingerprint cards for each Principal and key employee; (i) records retention policies for Abacus; and (j) a general description of how Abacus intended to use life-expectancy providers. Abacus also made the required $100,000.00 deposit with the Florida Department of Financial Services, Division of Treasury, Bureau of Collateral Management. Abacus’s proposed forms were approved by OIR on May 28, 2015, and Abacus’s Anti-Fraud Plan was approved by the Department of Financial Services on May 28, 2015. Subsequent to OIR’s acceptance of the Application, and over a month after Ms. Hamilton notes reflecting that the Application was being prepared for denial, OIR issued two clarification letters to Abacus that sought additional information or documents relative to the Application. The first clarification letter was dated May 28, 2015, and contained 60 additional requests for information or documents. The second clarification letter was dated June 29, 2015, and contained 12 additional requests for information or documents. Abacus responded to both clarification letters in a timely fashion. After Abacus filed its Application, OIR sent out emails to the various states where Abacus was already licensed as a viatical/life settlement provider inquiring as to the standing of Abacus’s license, and whether any administrative action had been taken against Abacus, among other things. Those states that responded confirmed that no administrative fines or penalties had been assessed against Abacus, and that Abacus was licensed in good standing. OIR thereafter asked Abacus to produce detailed spreadsheets with information relative to each policy that Abacus had purchased in its entire history of doing business, nationwide, as well as the same information for Advanced, which was no longer in business and was not the applicant for the Application. OIR requested that the spreadsheets include, among other things, the date of viatication, viator information, insured information, and life insurance policy information. Abacus provided the requested spreadsheets to OIR. On June 29, 2015, the Principals of Abacus traveled to Tallahassee, Florida, to meet with key individuals at OIR, including Belinda Miller, Jan Hamilton, Janice Davis, and others to discuss the status and progress of the Application. At this meeting and as part of the Application process, OIR requested that Abacus undergo a pre-licensing examination by OIR's market conduct examiner Janice Davis, who would travel to Abacus’s Tennessee offices to examine files. No one from Abacus was aware that Jan Hamilton had noted over two months before that the Application was going to be denied. On June 30, 2015, Ms. Hamilton contacted the Illinois Department of Insurance (the IDOI) to inquire about a market conduct examination that the IDOI had conducted on Abacus in February of 2015. On July 1, 2015, the IDOI contacted Ms. Hamilton and advised her that their market conduct examination had been concluded as to Abacus, and no issues were discovered. Ms. Hamilton did not deem Abacus’s positive market conduct examination result to be “at the top of the list of most important factors” relative to the Application. Ms. Hamilton did not disclose or otherwise inform Janice Davis or anyone else at OIR that Abacus had passed the IDOI market conduct examination in February of 2015 without any issues. The first time that Ms. Davis learned that Abacus had passed the IDOI examination was at the final hearing in this case. During the week of August 3-7, 2015, OIR sent Ms. Davis to Abacus’s Tennessee office to conduct the pre-licensing examination. During the examination, OIR was granted access to Abacus’s and Advanced’s database of files and Ms. Davis was able to view the Abacus and Advanced files that were available and in the possession of Abacus or Advanced. Some of the files had been routinely destroyed pursuant to the records retention policies of Abacus and Advanced, respectively, which are governed by the statutes of each state where each company conducted business. In total, during the five-day examination at Abacus’s Tennessee offices and an additional seven days of examination that occurred through granting Ms. Davis remote access to the database, OIR was able to review 315 policy transactions from Abacus, and 1,000 policy transactions for Advanced. During the course of the pre-licensure examination, OIR did not adhere or use the recognized National Association of Insurance Commissioners audit methodology standards. Rather, OIR utilized their “own standards.” OIR stated that their standards were grounded in sections 624.319 and 626.9922, Florida Statutes. However, neither statutory citation contains audit or examination standards or methodologies. In accordance with section 626.9922, Abacus was required to pay for all costs incurred by OIR for the pre- licensure examination. Abacus paid OIR approximately $6,000.00 for the pre-licensure examination. Subsequent to the pre-licensure examination, OIR, through Ms. Davis, prepared a summary memorandum (the Memorandum) that outlined the results of the pre-licensure examination. The findings in the Memorandum were also contained within the Denial Letter and the findings in the Memorandum were the basis for OIR's preliminary denial of the Application. On September 23, 2015, OIR denied the Application and issued the Denial Letter which delineated the grounds for denial of the Application. In both the Denial Letter and the Memorandum, two grounds for denial were asserted, as well as additional “areas of concern” and related issues for the principals of Abacus. The two grounds for denial were based on a total of eight of the approximately 1,000 polices that Abacus has transacted since its inception. In its first ground for denial, the Denial Letter states: As a result of the pre-licensure examination, OIR finds that the Applicant purchased policies that were obtained fraudulently via either non-disclosure of material facts or misstatements of material facts. OIR further finds that Mr. Kirby, part owner of the Applicant, previous co- President of Advanced, and a licensed life agent in Florida, acted as the viatical settlement broker in some of these transactions. As justification for its first ground for denial, OIR relied upon six policies identified in the pre-licensing examination and the provisions of section 626.99275(1)(a), which states: It is unlawful for any person: (a) To knowingly enter into, broker, or otherwise deal in a viatical settlement contract the subject of which is a life insurance policy, knowing that the policy was obtained by presenting materially false information concerning any fact material to the policy or by concealing, for the purpose of misleading another, information concerning any fact material to the policy, where viator or the viator’s agent intended to defraud the policy’s issuer. (Emphasis added). In support of its first ground for denial, OIR did not apply the "knowingly" or "knowing" standard recited in section 626.99275. Rather, in evaluating the policies in the pre- licensure examination, OIR applied a “knew or should have known” standard. As Ms. Davis conceded at final hearing, section 626.99275 does not contain the language or words “knew or should have known. Ms. Davis’s “cheat sheet” that she created to assist in her preparation of the Memorandum and Denial Letter references what Abacus “knew or should have known,” instead of relying on facts to support an allegation that Abacus knowingly transacted a fraudulently obtained policy. The policies that were allegedly fraudulently obtained were all transacted by Abacus prior to 2012 and can be found at Respondent’s Exhibits 1.3 through 1.8, and the compliance review. The ultimate decision to purchase those policies was not made by the current principals of Abacus, but instead by a former partner in Abacus, Craig Seitel, and the former general counsel of Abacus, Ed Gonzalez. From 2012 through the date of the pre-licensing examination, OIR did not identify any policies purchased by Abacus that were problematic in regards to potential fraudulent activity. Abacus was not involved in the initial application, underwriting, or issuance process for any of the six referenced policies. Abacus only came into contact with the policies as a viatical settlement provider interested in purchasing the policies at least two years after they were issued. During Abacus’s transaction of the six policies at issue, Abacus’s anti-fraud plan, similar to the one that was approved by OIR as part of the Application, was, and still is, in place to specifically ensure that Abacus does not acquire any policies that were fraudulently obtained. The documents relative to the first policy, the Marignoli policy, can be found at Respondent's Exhibit 1.3. When asked to identify which documents within Respondent's Exhibit 1.3 supported the first ground for denial, OIR responded by referencing loan documents that were executed after the policy was issued to the insured and that therefore, Abacus “knew or should have known” that the policy was obtained fraudulently. Abacus, however, purchased the policy almost four years after it was initially issued by the insurance carrier. The premium financing was taken out by the insured after the policy was issued and the insurance carrier accepted all premium payments from both the insured and the lender. To date, the insurance carrier has not made any claims that the policy was issued fraudulently. OIR never talked to the insured and could not confirm what the insured was thinking at the time the policy was applied for or issued. While OIR asserts that there was “suspected fraud” regarding the Marignoli policy, it did not provide evidence or testimony that Abacus knowingly transacted the policy knowing it was obtained fraudulently. The documents relative to the second policy, the Bakall policy, which was a part of the first ground for denial, can be found at Respondent’s Exhibit 1.4. OIR alleges that because the insured entered into a loan for the payment of premiums on the policy, Abacus transacted a policy that was fraudulently obtained. The Bakall insurance application, however, included a statement by the insured that the trustee had the ability to borrow money if necessary. The premium financing was undertaken after the policy was issued, and no one from Abacus or Advanced was involved in the issuance or subsequent financing of the policy. The evidence did not establish that Abacus knowingly transacted the policy knowing that it was fraudulently obtained. Instead, at the final hearing, OIR, through Ms. Davis, asserted that Abacus transacted this policy that they “knew or should have known” was fraudulently obtained. During her testimony, Ms. Davis admitted that the Bakall policy was reviewed by other OIR licensed viatical settlement providers and/or brokers, and no one else reported the Bakall policy as being fraudulently obtained. The documents relative to the third policy as part of the first ground for denial, the Cord policy, can be found at Respondent’s Exhibit 1.5. Again, OIR asserts that because the premiums for the policy were financed, the policy was fraudulently obtained. However, the documents within Respondent’s Exhibit 1.5 reveal that the policy application was completed on January 21, 2010, the policy was issued on February 5, 2010, and the loan documents were signed 40 days later on March 22, 2010. OIR was unable to identify any statutes or regulations that prohibit or otherwise make it illegal to have non-recourse premium financing for life insurance policies, or to finance the premiums of a life insurance policy after the policy is issued. When asked for proof that the insured had an arrangement, a plan, or a conspiracy to sell his policy at the time it was issued, OIR did not produce any evidence to meet the "knowingly" and "knowing" requirements of section 626.99275, and instead stated that there was “reason to suspect.” The documents relative to the fourth policy as part of the first ground for denial, the Mezey policy, can be found at Respondent’s Exhibit 1.6. As it pertains to the Mezey policy, OIR argues that the insured’s use of premium financing after the issuance of the policy demonstrates that the policy was fraudulently obtained. The original application for the Mezey policy was completed in May of 2008, the premium financing at issue was completed in October of 2008, and the insurance carrier issued an endorsement to the policy after the lender had paid the first premium saying the policy was effective. The loan was not secured by the insurance policy. Rather, the insured utilized the value of her securities account to obtain a loan to pay for the premiums of the policy. The evidence did not establish that Abacus knowingly transacted the Mezey policy knowing that it was fraudulently obtained. The documents relative to the fifth and six policies, the Davis policies, which were a part of the first ground for denial, can be found at Respondent's Exhibits 1.7 and 1.8. With regard to the Davis policies, OIR argues that the insured’s use of premium financing after the issuance of the policy demonstrates that the policy was fraudulently obtained. The Davis policies were issued by the insurance carrier on October 21, 2008, the first premium was paid by the policy owner, and the policy owner decided to obtain premium financing for the policies on November 20, 2009. OIR did not speak to the original policy owner and produced no evidence or proof outside of the documents contained within Respondent’s Exhibits 1.7 and 1.8 with regard to the Davis policies. The evidence was insufficient to establish that Abacus knowingly transacted these policies, or any of the other four policies at issue for the first ground for denial, knowing they were fraudulently obtained. As to OIR’s second ground for denial, the Denial Letter states: As a result of the pre-licensure examination, the Office finds that the Applicant viaticated policies from Florida viators without being licensed as a viatical settlement provider in Florida. Mr. Kirby acted as the viatical settlement broker in some of these transactions. OIR’s second ground for denial alleges violations of section 626.9912(1) which provides: A person may not perform the functions of a viatical settlement provider as defined in this act or enter into or solicit a viatical settlement contract without first having obtained a license from OIR. OIR alleges that Abacus transacted two viatical settlements with residents of Florida without having obtained a license from OIR. Ms. Davis identified the two policies at issue during her pre-licensure examination, and alleged that “Abacus knew or should have known that each of these policies was owned by a Florida resident, and they continued to process and subsequently purchase the policy in violation of Florida Statute.” In making her allegation that Abacus transacted two viatical settlements with Florida residents, Ms. Davis did not review the Florida Statutes for direction as to how to legally determine a viator’s residency, nor did she consult with legal counsel from OIR for assistance or a determination as to how to legally determine the residency of a viator. The first policy referenced in the second ground for denial is the Wyatt policy. The Wyatt policy was presented to both Advanced and Abacus over a four-year period of time. Abacus reviewed the file and all documents submitted to it by the viator, and determined, with the assistance of its compliance team and counsel, that the transaction was an Illinois transaction because Ms. Wyatt appeared to reside permanently in Illinois. In support of this conclusion, Abacus relied upon the following information: (a) the viatical settlement application completed by Wyatt in 2014 listed her address as being in Lake Forest, Illinois; (b) the same Illinois address was listed on related transaction forms; (c) the compliance packet completed by Wyatt’s broker/agent who submitted the policy to Abacus listed Wyatt’s state of residence as being Illinois; (d) the policy was issued to Wyatt in Illinois on December 15, 1999; (e) although Wyatt maintained a house in Florida, her agent confirmed it was a vacation home and that Wyatt resided in Illinois at the address she listed on the contract forms; (f) the contract forms were notarized by a notary in Illinois and were forms approved by the Illinois Department of Insurance; (g) the majority of the medical records for Ms. Wyatt were located in Illinois; and (h) it was only after the transaction documents were signed that Abacus learned of Wyatt’s intent to relocate from Illinois to Florida. The aforementioned information was provided to Abacus during the transaction and Abacus determined, based upon a totality of the circumstances, that Wyatt was a resident of Illinois and not a resident of Florida. In addition to the foregoing, other factors show that Ms. Wyatt’s permanent residence was Illinois at the time of the transaction. Ms. Wyatt did not provide, or otherwise have, a Florida driver’s license, voter’s registration card, or vehicle tag, and, to Abacus's knowledge, had not filed a formal declaration of domicile in Florida. To show Ms. Wyatt was a resident of Florida, OIR pointed to insurance verification forms in Abacus’s files filled out by Mr. Kirby while brokering the Wyatt transaction for Advanced. The forms listed Ms. Wyatt’s address as Wellington, Florida. It was also evident, however, that, over the course of the transaction, Advanced and Abacus were aware that Ms. Wyatt had a vacation home in Florida and that she was planning to eventually transition to Florida. In addition, in an expanded scope of the pre-licensure examination that gathered information that was not in Abacus’s files, OIR obtained evidence that Ms. Wyatt claimed homestead exemption in Florida in tax years 2013 and 2014. There was no evidence showing that Abacus was aware of the claimed homestead exemption. While OIR presented evidence indicative of Florida residency, that evidence, when considered in light of evidence in support of Illinois residency in Abacus's files, does not demonstrate by a preponderance of the evidence that Ms. Wyatt was a resident of Florida at the time of the transaction. Rather, the evidence shows that the Wyatt policy transaction involved an Illinois viator who was “transitioning” to Florida residency. The second policy referenced in the second ground for denial was the Martin policy. When the Martin policy was presented to Abacus for purchase, the compliance team at Abacus, as well as their legal counsel, determined that the policy was not a Florida transaction. In support of this conclusion, Abacus relied upon the following: (a) Martin’s medical records were located in Ohio; (b) the name affidavit executed by Martin listed her address as being in Ravenna, Ohio; (c) while the name affidavit and other related forms were notarized in Florida, that occurred because Martin was on a trip visiting her son who lives in Florida when she signed the documents; (d) all forms utilized for the transaction were on forms approved by the Ohio Department of Insurance; (e) the viatical settlement purchase agreement listed Martin’s address as Ravenna, Ohio; (f) transaction documents, including records releases and a durable power of attorney for Martin, listed her address as being in Ravenna, Ohio; (g) Martin’s driver’s license at the time of the transaction was issued by the State of Ohio; (h) a google search of Martin’s name includes a result of her address being in Ravenna, Ohio; (i) in the transaction disbursement form, Martin requested that the proceeds from the sale of the policy be paid to her Key Bank account in Rootstown, Ohio; (j) the voided check provided by Martin along with the transaction disbursement form listed her address as being in Ravenna, Ohio; (k) the funds for the transaction were wired to a Key Bank account in Cleveland, Ohio, in accordance with the bank wiring information provided by Martin; and (l) the policy was issued and delivered to Martin in Ohio. Abacus relied upon the aforementioned information that it was provided during the transaction to determine that Martin was a resident of Ohio and not a resident of Florida, and completed the transaction with Martin as an Ohio transaction based upon a totality of the circumstances. In further support of the Abacus's determination that Ms. Martin was not a resident of Florida, the evidence showed that Ms. Martin did not provide or otherwise have a Florida driver’s license and instead provided an Ohio driver’s license; she did not have a Florida voter's registration card or vehicle tag; and, to Abacus's knowledge, had not filed a formal declaration of domicile for Florida. In an attempt to show that Ms. Martin was a Florida resident at the time of the transaction, OIR relied on evidence uncovered in an expanded investigation beyond the scope of the audit of Abacus's files. While some evidence uncovered by OIR was suggestive of Florida residency, considering the evidence from Abacus’s files relied upon by Abacus in determining that Ms. Martin was a resident of Ohio, it is found that OIR failed to prove by a preponderance of the evidence that Ms. Martin was a resident of Florida at the time of the transaction. In paragraph 3(a)-(d) of the Denial Letter, OIR alleges that the pre-licensure examination revealed certain “areas of concern.” These “areas of concern” were not listed as the specific grounds for denial and did not reference any statutory or regulatory violations. Section 3(a) does not allege specific misconduct or violations of law or regulations, but recites that Abacus maintained a records retention policy and destroyed records in accordance therewith. In fact, OIR did not find any violations of the policy or state laws by Abacus with regard to records retention. In paragraph 3(b) of the Denial Letter, OIR alleges that the presence of blank signed annuity forms in a policy file invalidated the attestation clause relative to the accuracy of the annuity application. OIR, however, did not allege any specific statutory or regulatory violations. Annuities are often times used by viatical settlement providers to offset premium costs once a policy is purchased, and there is nothing illegal or nefarious about their use. In paragraph 3(c), OIR, without specificity, asserts that it found “inconsistencies between the level of control actually exhibited by the members over the Applicant and representations made to OIR regarding the same.” The testimony of Scott Kirby, Sean McNealy, and Samantha Butcher (via deposition) refutes this assertion, and shows that Samantha Butcher operated the day-to-day business of Abacus. Section 3(d) references an Assurance of Discontinuance that was entered into between Advanced and the New York Office of the Attorney General in 2010. While the parent company of Advanced entered into the Assurance of Discontinuance, it contained no admission of liability or wrongdoing, and from 2010 through its dissolution in December of 2014, Advanced and its principals remained licensed and in good standing with OIR and with the New York Department of Insurance as life agents and viatical settlement brokers. Abacus remains licensed and in good standing as a viatical settlement provider in New York, and no state has refused licensure to Abacus on the basis of the Assurance of Discontinuance. In paragraph 4 of the Denial Letter, OIR alleges that a prior review of the history of the three owners of Abacus revealed the following: (a) Letters of Guidance were sent by the Department of Financial Services to Advanced and the principals of Advanced in 2002 regarding possible fraudulent activity that was not reported; (b) an Order to Show Cause was issued in 2007 to another viatical settlement provider that is licensed in Florida by OIR, and Advanced was mentioned; (c) a letter of guidance was issued to Advanced and its principals in 2007; and (d) the Assurance of Discontinuance was entered into in 2010 with the New York Office of the Attorney General. As it pertains to the Letter of Guidance referenced in paragraphs 4(a), OIR was made aware of facts via a letter from the reporting company three months prior to the letter of guidance being issued that demonstrated that Advanced and its principals were unaware of the alleged fraudulent activity. The evidence showed that Advanced did not have the documents in their possession that revealed the alleged fraud. Nevertheless, the Department of Financial Services elected to issue the Letter of Guidance. Further, Letters of Guidance are non-probable cause actions, and do not constitute formal regulatory action. The letter of guidance referenced in paragraph 4(c) was guidance from OIR to Advanced and its principals, and subsequent to both letters of guidance, Advanced and its principals remained licensed and in good standing with the state of Florida as life agents. As it pertains to items 4(b) and 4(d), these matters pertain to Coventry First, LLC and not Abacus. OIR offered no evidence of misconduct by Abacus with regards to either of these issues.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that, consistent with the foregoing Findings of Fact and Conclusions of Law, the Office of Insurance Regulation enter a final order approving the Application and granting Abacus Settlements, LLC, a viatical settlement provider’s license under section 626.9912. Jurisdiction to adjudicate Abacus Settlements, LLC’s, pending Motion for Attorney’s Fees pursuant to section 57.015, Florida Statutes, is hereby retained. DONE AND ENTERED this 25th day of July, 2016, in Tallahassee, Leon County, Florida. S JAMES H. PETERSON, III Administrative Law Judge Division of Administrative Hearings The DeSotoBuilding 1230 Apalachee Parkway Tallahassee, Florida32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 25th day of July, 2016.
Findings Of Fact By Stipulated Settlement and Mutual Release executed December 22, 1988, (Ex. 1) signed by Mike Gresham, Director, Division of Administration, Department of Insurance and John Machules, the parties agreed to settle all issues and conclude the litigation and all claims in this case. The Deputy Commissioner approved the agreement on December 28, 1988, making it final with respect to both parties. In consideration of the Department agreeing to pay Machules the salary he would have earned plus compensation for the leave he would have earned between February 1, 1935 and December 31, 1988, in the gross amount of $76,713.33, Machules agreed to: Waive any and all present or future claims against the Department concerning the abandonment action; Waive the right to hearing in this matter and to dismiss with prejudice the case currently pending before the Division of Administrative Hearings; Voluntarily tender his resignation from employment with the Department effective at 5:00 p.m. on December 31, 1988; and Release the Department from all acts or omissions alleged or which could have been alleged in this cause of action or any derivative or collateral action at law or in equity. On December 22, 1988, Machules tendered his resignation effective 5:00 pm. December 31, 1988, (Ex. 1). On December 22, 1988, Machules, in consideration of the sum of $76,71.33 minus standard deductions (Ex. 1) executed a RELEASE releasing the Department from all claims arising from the termination of his employment with the Department. By letter dated December 9, 1988, (Ex. 2) Machules was advised by the Department that all details of the settlement had to be accepted and approved prior to the end of December 1988, that the Department could not credit him with an additional year of credible service (to qualify Machules for retirement) and if this was a condition he insisted upon, the case would proceed to hearing. By letter dated January 4, 1989, (Ex. 3) from the Department to Petitioner's then acting attorney, Machules was advised that the Comptroller's office needed a new W-4 form from Machules and affidavit of his earnings during the period the Department had agreed to pay him. By letter dated February 1, 1989, (Ex. 4) from the Department to Petitioner's attorney, Machules was advised of an IRS levy on Machules' salary and requested documentation that the delinquent taxes had been paid. By letter dated February 27, 1989, (Ex. 4) from the Department to Petitioner's attorney, the attorney was advised that Machules had telephoned the Department lawyer regarding the IRS lien and that he had advised Machules that his attorney should make the contact and further advised Machules that the information on this lien could be obtained from the Comptroller's office. The attorney was also advised that Machules had requested subpoenas for the earlier scheduled March 1, 1989, hearing. By letter dated March 17, 1989, (Ex. 5) the Comptroller's office advised the Department that all issues in the Machules' back pay award had been resolved except for Machules' interim earnings during the back pay period. By letter dated March 21, 1989, (Ex. 6) the Department forwarded a copy of the Comptroller's letter (Ex. 5) to Machules' attorney requesting income tax returns for the years 1986, 1987 and 1988 or W-2 forms for those years, either of which would be acceptable to the Comptroller. By letter dated March 31, 1989, (Ex. 8) the Department forwarded to Machules' attorney a copy of a letter and affidavits received by the Comptroller's office from Machules and advised the attorney that more specific information was required by the Comptroller before Machules' claim could be paid. By letter dated April 3, 1989, (Ex. 9) Machules wrote to Respondent's attorney acknowledging receipt of a copy of Exhibit 8 and stating, among other things, that since he had not received the $76,000.00 by December 31, 1988, "The tentative settlement agreement was NULL and VOID." However, he included a list of one place "employed from 1971 to present" and part-time employment at other places in 1987 and 1988. No specific earnings were provided. By letter dated April 12, 1989, (Ex. 10) the Department replied to Exhibit 9 emphasizing to Machules that it was the Comptroller that needed to be satisfied about Machules' interim earnings before it could pay his claim and he would not be paid until he satisfied the Comptroller on this point. By letter dated April 13, 1989, (Ex. 11) Machules forwarded to the Department copies of 1099-MISC and W-2's for 1987 and 1988. Receipt of this letter which provided the information previously requested was acknowledged by Respondent on April 18, 1989 (Ex. 12). By letter dated April 20, 1989, (Ex. 13) the Department forwarded to Machules' attorney a warrant dated 4/19/89 in the amount of $50,572.33 payable to John J. Machules with a Retroactive Payment Schedule showing a deduction for interim earnings, withholding tax and social security tax. By separate letter dated April 20, 1989, (Ex. 14) the Department advised Machules that the check settling his claim for back pay had been forwarded to Machules' attorney. By letter dated May 11, 1989, (Ex. 15) to Machules' attorney, the Department inquired if Machules had received payment so this case could be closed. By letter dated May 9, 1989, (Ex. 17) Machules was advised by AFSCME that the check being held for him would be returned to the Department if he did not pick it up before May 22, 1989. By letter dated May 13, 1989 (Ex. 17) Machules requested AFSCME to forward the check to him. This was done on May 25, 1989, (Ex. 17). On June 1, 1989, (Ex. 17) Machules acknowledged receipt of the check "as part payment for a future settlement." By letter dated June 23, 1989, (Ex. 16) AFSCME legal counsel advised that the union would not provide legal counsel at an abandonment hearing but would provide a representative to assist him at such a hearing. On the witness stand Petitioner acknowledged signing the settlement agreement and his letter of resignation from the Department; and that he received and cashed a check in the amount of $50,572.33. He also received an accounting of all deductions from the $76,717.33 noted in the stipulated settlement. Petitioner contends that because he didn't receive $76,717.33 in December 1988 the settlement stipulation became void as well as did his resignation. He could point to no line of either document indicating the stipulated settlement was void or voidable if all conditions were not met by December 31, 1988. In fact, Petitioner testified that he really didn't expect to get the check until January 1989, at the earliest. Delays in cutting the warrant and paying Petitioner the funds due under the settlement was due to Petitioner's failure to promptly provide proof to the Comptroller of his other earnings between February 1985 and December 1988. Respondent has fully complied with the terms of the settlement stipulation.
Recommendation It is recommended that all claims of John J. Machules resulting from the charges of abandonment of position in February, 1985, be dismissed. ENTERED this 19th day of July, 1989, in Tallahassee, Leon County, Florida. K. N. AYERS 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 19th day of July, 1989. COPIES FURNISHED: John Zajac AFSCME 1703 Tampa Street, Suite 1 Tampa, Florida 33602 John Hale, Esquire 200 East Gaines Street 4l3-B Larson Building Tallahassee, Florida 32399-0300 Honorable Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Don Dowell, Esquire General Counsel Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, Florida 32399-0300
The Issue The issue to be decided in this proceeding is whether the Reimbursement Dispute Dismissal issued by Respondent, Department of Financial Services, Division of Workers’ Compensation (the “Department”), should be reversed due to equitable tolling or some other recognized excuse for untimely submission of the reimbursement dispute.
Findings Of Fact Petitioner is a business operating in Daytona Beach, Florida. The nature of Petitioner’s business was not made part of the record. In approximately June 2017, Petitioner submitted a claim to the Department, claiming payment for certain (undisclosed) services or expenditures. The Department issued an Explanation of Bill Review (“EOBR”) in response to Petitioner’s claim. The EOBR set forth the amount of reimbursement the Department would allow for Petitioner’s claim. The EOBR was received by Petitioner on July 10, 2017. Upon receipt of the EOBR, Petitioner had 45 days, i.e., until August 24, 2017, to challenge the Department’s determination of the reimbursement amount. Not satisfied that the amount allowed by the Department was correct, Petitioner challenged the determination by submitting a Petition for Resolution of Reimbursement Dispute (the “Petition”) on DFS Form 3160-0023. The Petition was signed on August 8, 2017. However, Petitioner did not immediately submit the Petition on that date, despite being aware of the 45-day time limit for submitting such forms for relief. Petitioner did not mail the Petition until August 25, 2017, one day after the deadline for doing so. The Certified Mail Receipt for Petitioner’s mailing is clear and unambiguous, clearly showing the date. Petitioner did not present any evidence as to factors which might excuse the late filing of its Petition. The only reasons cited were that Petitioner was awaiting information from two claims management services, Sedgwick and Foresight, before submitting its Petition. Petitioner, through its witness at final hearing, admitted its error in failing to timely file the Petition.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that Respondent, Department of Financial Services, Division of Workers’ Compensation, enter a Final Order upholding its Reimbursement Dispute Dismissal. DONE AND ENTERED this 11th day of January, 2018, in Tallahassee, Leon County, Florida. S R. BRUCE MCKIBBEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 11th day of January, 2018. COPIES FURNISHED: Taylor Anderson, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399 (eServed) Barbara T. Hernandez East Coast Surgery Center 1871 LPGA Boulevard Daytona Beach, Florida 32117 (eServed) Thomas Nemecek, Esquire Department of Financial Services Division of Workers' Compensation 200 East Gaines Street Tallahassee, Florida 32399 (eServed) Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed)
