The Issue Whether Respondents violated various provisions of the Florida Insurance Code, and, if so, what disciplinary action should be taken against them, if any.
Findings Of Fact At all times material hereto, Respondent The Administrators Corporation (hereinafter "TAC") has been an authorized administrator, and Respondent Charles N. Zalis (hereinafter "Zalis") has been licensed or eligible for licensure as a life insurance agent, a life and health insurance agent, and a legal expense insurance sales representative in the State of Florida. Zalis is the chief executive officer of TAC. TAC is not licensed in Florida as an insurer. An authorized administrator in Florida may engage in the solicitation, negotiation, transaction and/or sale of insurance in Florida if such activity takes place pursuant to an agreement between the authorized administrator and an authorized insurer. Life and Health Insurance Company of America (hereinafter "Life & Health"), which is not a party to this administrative proceeding, is an authorized insurer in Florida. On April 13, 1988, TAC entered into a contract with Life & Health to market and service group health insurance. The term of that contract was for four years and one month. Life & Health attempted to terminate its Administrator Agreement with TAC by letter dated March 16, 1989, effective immediately. The date on which the responsibilities under that Administrator Agreement terminated, if ever, is an issue in dispute between Life & Health and TAC. The Department takes no position on that issue. That issue is the subject of a civil lawsuit filed in Broward County, between Life & Health and TAC, which is currently being litigated. Although Life & Health's original position was that the contract between it and TAC terminated as of March 16, 1989, that position apparently changed because Life & Health continued paying claims up to July 1, 1989. TAC's position was that Life & Health's responsibilities under that contract did not terminate until September 26, 1989, when George Washington, an authorized group health insurance carrier in Florida, agreed to assume the risk for the block of business retroactive to July 1, 1989. TAC could have obtained a replacement carrier earlier than September 26, 1989, if the Department had advised TAC and Zalis as to the procedure involved to allow Summit Homes, an authorized property and casualty insurer, to broaden the scope of its certificate of authority to include group health insurance. The simple procedure could have been accomplished in as little as 24 to 48 hours. A group health insurance carrier remains on the risk to its policyholders until there has been a valid cancellation or termination of that coverage. In the pending Circuit Court litigation between Life & Health and TAC, the validity of the termination or cancellation and the date of same are ultimate issues in that law suit and have not yet been determined by the Court. On March 27, 1989, Life & Health sent a letter to agents informing them of its termination of its relationship with TAC and that it would not accept any new business written after March 16, 1989. The evidence in this cause, however, indicates that Life & Health did continue to accept new business after that date. The Department became aware of the dispute between Life & Health and TAC on June 8, 1989. The Department knew as of July 12, 1989, that TAC was continuing to write business on Life & Health "paper." At some point after the attempted March 16, 1989, termination of the contract by Life & Health, TAC and Life & Health informally agreed to a July 1, 1989, date after which Life & Health would no longer be responsible for any claims and TAC would have a replacement insurer in place to take over the block of business. That agreement was based upon TAC and Life & Health each agreeing to cooperate with each other and to take certain actions to facilitate the transfer of the book of business. Both the Department and the Circuit Court were aware of the informal agreement whereby Life & Health agreed to remain on the risk for the block of business at least through July 1, 1989, and Zalis and TAC would issue no further policies on Life & Health "paper" and would not remain involved in the processing or payment of claims after July 1, 1989. Prior to July 12, 1989, those matters required to take place in connection with the July 1, 1989, "cutoff" date had not been accomplished, and Zalis and TAC continued writing new business on Life & Health "paper" believing that Life & Health was still legally responsible. Zalis informed the Department's investigator on July 12, 1989, that he was writing and that he intended to continue to write new business on Life & Health "paper." No evidence was presented to show that the Department notified Zalis or TAC that they could not do so, and the Department took no action to stop that activity. Additionally, Life & Health took no action to enjoin TAC or Zalis from writing new business on Life & Health "paper." The evidence does suggest that Life & Health may have continued to accept the benefits and liabilities. The premiums for policies written by TAC on Life & Health "paper" after July 1, 1989, were not forwarded to Life & Health; rather, they were retained by TAC in a trust account. Zalis and TAC offered to deposit those monies with the Circuit Court in which the litigation between TAC and Life & Health was pending or to transmit those monies to the Department to insure that the monies would be available for the payment of claims. Pursuant to an agreement with the Department, the monies representing those premium payments were transmitted to the Department On September 26, 1989, George Washington Insurance Company, an authorized health insurance company in the State of Florida, agreed to take over the block of business from Life & Health, retroactive to July 1, 1989. Life & Health, however, had not yet signed the assumption agreement to transfer its responsibility to George Washington Insurance Company as of the time of the final hearing in this cause. TAC and Zalis did not place any Florida insurance business with any companies not authorized to do business in Florida. Respondent Zalis has been in the insurance business for 26 years and enjoys a good reputation for honesty and integrity. Zalis and TAC have never had prior administrative action taken against them. As of the date of the final hearing in this matter, there had been no Circuit Court determination of the effectiveness or ineffectiveness of Life & Health's termination of the Administrators Agreement nor of the date of that termination, if any.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered finding Respondents not guilty of the allegations contained in the Order to Show Cause and dismissing the Order to Show Cause filed against them. DONE and ENTERED this 9th day of July, 1990, at Tallahassee, Florida. LINDA M. RIGOT, 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 9th day of July, 1990. APPENDIX TO RECOMMENDED ORDER DOAH CASE NO. 89-5981 Petitioner's proposed findings of fact numbered 1-3, 6-9, 14-17, 20, 21, and 25-27 have been adopted either in substance or verbatim in this Recommended Order. Petitioner's proposed findings of fact numbered 4 and 5 have been rejected as not constituting findings of fact but rather as constituting conclusions of law or argument of counsel. Petitioner's proposed findings of fact numbered 10, 11, 13, and 22 have been rejected as being unnecessary for determination of the issues in this cause. Petitioner's proposed findings of fact numbered 12 and 19 have been rejected as being irrelevant to the issues under consideration in this cause. Petitioner's proposed findings of fact numbered 18, 23, and 24 have been rejected as not being supported by the weight of the evidence in this cause. Respondents' proposed findings of fact numbered 1-17 have been adopted either verbatim or in substance in this Recommended Order. COPIES FURNISHED: Peter D. Ostreich, Esquire Office of Treasurer and Department of Insurance 412 Larson Building Tallahassee, Florida 32399-0300 Jerome H. Shevin, Esquire Wallace, Engels, Pertnoy, Martin, & Solowsky, P.A. CenTrust Financial Center 21st Floor 100 Southeast 2nd Street Miami, Florida 33131 William M. Furlow, Esquire Katz, Kutter, Haigler, Alderman, Davis, Marks & Rutledge, P.A. Post Office Box 1877 Tallahassee, Florida 32302-1877 Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Don Dowdell, General Counsel Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, Florida 32399-0300
Findings Of Fact The Petitioner, at all times pertinent hereto was an employee of the Department of Health and Rehabilitative Services. The Respondent is an agency of the State of Florida charged with administering the group self-insurance health insurance program and other insurance programs such as life insurance and is the agency charged with accepting or rejecting applications for coverage under those programs, such as the application at issue. On January 11, 1980 the Petitioner commenced employment with the State of Florida, Department of Health and Rehabilitative Services as a District Intake Counselor in District eleven of the Department. Shortly after commencing employment the Petitioner attended an orientation meeting during which all insurance benefits and other benefits available for state employees were explained. Ernestine Thurston, the HRS employee who conducted the orientation session on January 11, 1980 informed all employees present at that orientation meeting, including the Petitioner, of the available benefits and the means by which they were to avail themselves by proper application, of those benefits, including the fact that the Petitioner had thirty days to enroll in the State Group Health Insurance Program without the necessity of obtaining medical approval for insurability. A second orientation meeting was held during which insurance benefits were explained for a second time to the employees whose names were depicted on the recruitment log, which names include the Petitioner 's. The Petitioner was present at both orientation sessions. At the first orientation session on January 11, 1980 the Petitioner received an HRS Employee Handbook which included the following language concerning insurance benefits: "Employees may enroll within 30 days of date of employment without evidence of insurability. "Application at a later date requires proof of insurability. Consult your supervisor, personnel manager, or district/central personnel office for additional information." The Petitioner admitted that she signed a receipt on January 11, 1980 acknowledging receipt of a complete copy of that Employee Handbook and which receipt included the following language: "I understand that it is my responsibility to review the pamphlet in detail and request any clarification needed from my supervisor or personnel office." Petitioner conceded that she did not read the pamphlet or handbook, but instead put it in her desk drawer at her office. On January 14, 1980, knowing of the need to apply for insurance benefits within 30 or 31 days of her employment during the open enrollment period, the Petitioner applied for various insurance -overages and submitted the pertinent enrollment forms through her District 11 personnel office. She applied for and received State Supplemental Health Insurance coverage through the Gulf Life Insurance Company (then called the "20/20" plan). This supplemental health insurance coverage was designed to complement the overall state group health insurance program or plan. The Petitioner at that time was covered under the overall state group health insurance plan (The Plan) through her husband's family coverage since he was an employee covered under that plan at the time. The Petitioner also timely applied for and received coverage under the state life insurance program as well. The Petitioner did not submit a new enrollee form requesting to participate in the State of Florida Employee's Group Health Self Insurance Plan within 31 calendar days of January 11, 1980. The Hearing Officer has considered the Petitioner's testimony as well as that of Ms. Thurston and the other evidence surrounding the circumstances of her initial employment, the explanation of insurance coverage benefits, including the time limit for the open enrollment without medical approval which the Petitioner did not avail herself of insofar as the group health self-insurance plan is concerned. The Petitioner did not apply for the overall group health self-insurance plan because she was already covered under that plan through her husband's coverage and not because, as Petitioner maintains, that it was never explained that she had 30, or actually 31, calendar days from January 11, 1980 to apply for that plan. Indeed it was explained to her as Ms. Thurston established and Respondent admits receiving the handbook further explaining the time limit to apply for that coverage without medical approval. She signed a receipt acknowledging her responsibility to read that pamphlet or manual and ask for clarification, if needed, concerning coverage benefits and she admitted that she did not read it. Thus it is found that at the time of her initial employment all pertinent insurance benefits and entitlements were explained to the Petitioner both verbally and in writing and she failed to avail herself of the automatic coverage provision referenced above in a timely way, for the reason stated above. In any event, on July 28, 1980 the Petitioner elected to submit a new enrollee form which was submitted with a medical statement form requesting participation in the State Plan. After correspondence with the State Plan administrator requesting additional medical information, on October 22, 1980 the Department of Administration, by letter, advised the Petitioner that she had not been approved by the plan administrator and she was denied coverage for medical reasons. Accordingly, on October 24, 1980 the Petitioner enrolled in the South Florida Group Health, Inc. Plan which is a health maintenance organization plan (HMO) and she was allowed enrollment in that plan without regard to her current medical condition. The Petitioner remained enrolled in the HMO and requested and was granted leave of absence without pay from her employment position commencing May 29, 1981. Her employing agency advised her that it was her individual responsibility to forward premium payments for the HMO health insurance premiums as well as the state life insurance coverage herself. In other words, she was to pay by cash or her own personal check for this coverage during the time she was not being paid by the state, that is, the premiums for that coverage were not being payroll deducted because she was temporarily off the payroll. Her employment with the State did not lapse during this period commencing May 29, 1981, rather she remained employed, but was on leave without- pay status. The Petitioner knew of her responsibility to pay the premiums for the HMO coverage and the state life insurance coverage itself during the period she was on leave of absence without pay as evidenced by the check she and her husband submitted in June 1981 to pay the premiums on her state life insurance coverage. The Petitioner and her husband moved from Miami to Fort Myers during early June 1981 and the Petitioner remained on leave of absence without pay. When her husband changed employment and moved to the Fort Myers area in June 1981 the Petitioner was a covered dependent under the health insurance coverage available to her husband through his new employment. I n August 1981 the South Florida Group Health, Inc., the HMO in the Miami are of which Petitioner was a member, terminated the Petitioner's health insurance coverage effective August 1, 1981 due to the Petitioner's failure to pay the premiums for that coverage. Shortly thereafter the Petitioner interviewed with personnel officials of HRS in District 8 in Fort Myers and obtained an employment position as a district intake counselor for District 8. She became an active payroll employee of HRS in District 8 by transfer in August 1981. Before the effective date of her transfer the Petitioner was interviewed by Judy Graham, an HRS employee assigned to process her transfer from her former active employment in District 11 in Miami. The Petitioner failed to advise Judy Graham at the time of the interview of her HMO coverage, merely inquiring of Ms. Graham concerning the details of continuation of her state life insurance coverage and concerning her credit union membership. Thereafter, more than 31 calendar days after the effective date of her transfer, (August 24, 1981), indeed, in excess of two years later, the Petitioner completed a new enrollee form again and applied for the state employee's group self- insurance plan benefits. The Department of Administration denied the Petitioner participation upon the determination that she was not medically approvable for insurability by the Plan's claims administrator, Blue Cross and Blue Shield of Florida, Inc. In any event, the Petitioner's continuous employment with the state and with HRS had never lapsed since she was initially hired January 11, 1980. She was merely on inactive/leave-without-pay status as a state employee from May 29, 1981 until August 24, 1981, as that relates to any right to a second 31-day open enrollment period.
Recommendation Having considered the foregoing Findings of Fact, 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 a final order be entered by the Department of Administration denying the Petitioner's requested enrollment in the State Group Health Insurance Plan without medical approval. DONE AND ORDERED this 31st day of December, 1985, in Tallahassee, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 31st day of December, 1985. APPENDIX The following specific rulings are made on the Proposed Findings of Facts submitted by the parties: Petitioner's Proposed Findings of Fact Accepted. Accepted, but subordinate and not material to disposition of the issues at bar. Accepted, but subordinate and not material to disposition of the issues at bar. Accepted, but subordinate and not material to disposition of the material issues at bar. Rejected as not being in accordance with the competent, substantial, credible testimony and evidence adduced. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Rejected as not being in accordance with the competent, substantial, credible testimony and evidence adduced. Accepted, but this Proposed Finding of Fact in itself is not dispositive of the material issues of fact and law resolved herein. Accepted. Rejected as not in accordance with the competent, substantial, credible evidence and testimony adduced. Accepted. Accepted. Respondent's Proposed Findings of Facts The Respondent failed to number its Proposed Findings of. Fact, therefore its Proposed-Findings of Fact will be specifically ruled upon in the order the various paragraphs containing its Proposed Findings of Fact were presented. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. COPIES FURNISHED: Gilda Lambert Secretary Department of Administration 435 Carlton Building Tallahassee, Florida 32301 Curtright C. Truitt, Esq. Post Office Box 2706 Ft. Myers, Florida 33902 Richard L. Kopel, Esq. Department of Administration 435 Carlton Building Tallahassee, Florida 32301
Findings Of Fact The Petitioner is an agency of the State of Florida charged with licensing insurance agents of all types, regulating the licensure status and enforcing the practice standards of licensed agents within the ambit of the powers granted it by the Legislature in Chapter 26, Florida Statutes. The Respondent at times pertinent hereto was a licensed health insurance agent in the State of Florida licensed and regulated as to her insurance agency practice by the Petitioner in accordance with the provisions of Chapter 626, Florida Statutes, and related rules. The Respondent, Ms. Blair, at times pertinent hereto was employed as a licensed health insurance agent by National Health Agency Associates, Inc. On June 25, 1985, Ms. Blair went to the home of Marguerite J. Kozloski in Gainesville, Florida, ostensibly for the purpose of delivering a United General Life Insurance Company hospital indemnity policy (number 0981039). That policy had been sold to Ms. Kozloski by a former National Health Agency Associates, Inc. agent, Mr. Donald Johnson. In the course of meeting with Ms. Kozloski, Ms. Blair informed her that she did not really need the particular policy that the Respondent had come to deliver (policy number 0979258) which had previously been sold to her by agent Johnson. Instead, the Respondent indicated to Ms. Kozloski that she really needed a different health insurance policy or program and took a new application for that insurance from Ms. Kozloski, a different policy. Upon taking the application for the new policy which she was selling to Ms. Kozloski, the Respondent collected Ms. Kozloski's check payable to "National Health Agency" in the amount of $781. That check represented the initial annual premium payment for the policy the Respondent was selling to Ms. Kozloski. Upon concluding this arrangement, Ms. Blair informed Ms. Kozloski that she would have policy number 0979258 and number 0981039 cancelled (the policies sold to Ms. Kozloski by agent Johnson) and would have the full premiums for those policies refunded to Ms. Kozloski. Later that same day the Respondent returned to her office and attempted to submit the application for the policy she sold to Ms. Kozloski to the insurer. Upon attempting to submit the application to the insurer, she was informed by an official of National Health Agency Associates, Inc. that the application could not be submitted to the insurer because it duplicated coverage on Ms. Kozloski. After being informed that the application would not be accepted, the Respondent filled out and executed, without Ms. Kozloski's knowledge or consent, two applications for supplemental medical-surgical expense insurance to be issued by the insurer, Atlantic American Life Insurance Company. She forged Ms. Kozloski's signature on these applications. The Respondent also indicated on these applications certain representations including that Ms. Kozloski did not have existing coverage and that the applied-for policy was not intended to replace existing insurance. These representations were false and the Respondent knew at the time of making them that they were false. She was also aware that in forging Ms. Kozloski's signature on the applications that Ms. Kozloski had no knowledge and had not consented to her placing her name on the applications for insurance, nor consented to the alternative applications being filled out and submitted. Ms. Blair never returned any refund or return premium to which they were entitled to the Kozloskis. She engaged in this scheme to seek to have the policies originally sold by Donald Johnson cancelled and to have the policies she attempted to sell to the Kozloskis replace the outstanding coverage in order for her to obtain the sales commissions attributable to them. The second "Kozloski application" was executed and forged by the Respondent when she learned from the insurer, (on July 8, 1985), that a second application to Atlantic American Life Insurance Company would be necessary to obtain the coverage requested in the first "replacement application" which had been completed by the Respondent and forged on June 25. The Respondent again falsely represented on that application that Ms. Kozloski had no existing or pending applications for Medicare supplement, hospital, medical or surgical insurance although the Respondent knew that to be a false representation. The Respondent also falsely represented, as to that second application, that the policy applied for would not replace any accident or sickness insurance presently applied for or already in force, although she knew that to be a false statement. Further, the Respondent failed to request that the original United General Life Insurance Company policy number 0979258 originally sold by Donald Johnson, be cancelled despite her representation to Ms. Kozloski that she would make such a request, which event would have entitled the policy holder to a refund of premium, which Ms. Kozloski never received. On April 5, 1985, the Respondent went to the home of George A. and Jewel C. Terwilliger in High Springs, Florida, for the purpose of selling Ms. Terwilliger a nursing home care insurance policy. On that occasion, Ms. Terwilliger informed the Respondent that she could not afford to buy more insurance and that her husband refused to pay for any more insurance. The Respondent, after discussing the matter with the Terwilligers, nevertheless obtained an unsigned check from George A. Terwilliger (check number 1314) and persuaded Ms. Terwilliger to sign an application for insurance. Thereafter, without the Terwilligers' knowledge or consent, the Respondent forged George A. Terwilliger's signature on that check and made the check out in the amount of $678. The Respondent thereafter submitted the check, together with Jewel C. Terwilliger's application, to National Health Agency Associates, Inc. The Respondent engaged in this scheme and transaction for the purpose of monetary benefit in the form of a sales commission she expected to earn for selling the Terwilligers the insurance policy based upon her misrepresentations.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, and the candor and demeanor of the witnesses, it is, therefore RECOMMENDED that a Final Order be entered by the State of Florida, Department of Insurance and Treasurer revoking the Respondent's licensure. DONE and ORDERED this 7th day of October, 1987, in Tallahassee, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 904/488-9675 FILED with the Clerk of the Division of Administrative Hearings this 7th day of October, 1987 COPIES FURNISHED: Wilbur W. Anderson, Esquire Richard E. Turner, Esquire Office of Legal Services Department of Insurance and Treasurer 413-B Larson Building Tallahassee, Florida 32399-0300 Theresa Gerarda Blair 4390 Northeast Second Court Ocala, Florida 32670 Honorable William Gunter Commissioner Department of Insurance and Treasury The Capitol, Plaza Level Tallahassee, Florida 32399-0300
The Issue The issue for determination in this case is whether Respondent's license as an insurance agent, and his eligibility for licensure as an insurance agent in Florida should be disciplined for violation of certain provisions of Chapter 626, Florida Statutes, and Rule 4-215.210, Florida Administrative Code, as set forth in the Administrative Complaint.
Findings Of Fact Petitioner, DEPARTMENT OF INSURANCE AND TREASURER, is the agency of the State of Florida vested with the statutory authority to administer the disciplinary provisions of Chapter 626, Florida Statutes. Respondent, ROBERT DARREN CARLSON, at all times material hereto, was eligible for licensure and was licensed in Florida as a life insurance agent, life and health insurance agent, and variable annuity contracts salesman. Respondent was initially licensed in 1992. Respondent's license is currently under emergency suspension as a result of the actions alleged in the Administrative Complaint filed in this case. Respondent is thirty years old, married with one son, and resides in St. Petersburg, Florida. In 1993 Respondent became a shareholder and vice-president of National Consultants International, Inc. (National), a Florida corporation operating as an insurance agency in Pinellas County, Florida. National was incorporated on November 29, 1993, and dissolved on August 24, 1994. The principal shareholder and president of National was Coreen McKeever. At National Coreen McKeever was also responsible for the administrative functions of the agency. Respondent became an agent for National in March 1994. Respondent's duties were to contact potential customers, discuss the customer's insurance needs, explain products that might address the customer's needs, and write policies if purchased by the customer. Respondent collected the premiums, but as a usual practice at National, would turn the premium checks over to Coreen McKeever for administrative processing. Respondent was also authorized to make deposits and withdrawals on National's premium trust account at Republic Bank in Seminole, Florida. Findings as to Count III - Ralph Cody Ralph Cody is an eighty-nine year old retired school maintenance worker from Kentucky. Mr. Cody retired to Florida in 1980, and currently lives with his wife, Edna, in Pinellas County. Mr. Cody is in good health, but has difficulty with his eyesight and hearing. Mr. Cody no longer drives. Mr. Cody first met the Respondent approximately two years ago. At that time Respondent sold Mr. Cody an insurance policy with a company called United American. Mr. Cody was satisfied with this insurance policy. Subsequent to his initial contact with Respondent, Mr. Cody became interested in obtaining an insurance policy which would provide for in-home health care. Mr. Cody was particularly interested in such an insurance policy because of his concern for his wife's deteriorating health, and his desire that health care be provided at home for him and his wife, and not in a nursing home. Because of his interest in obtaining an in-home health care insurance policy, Mr. Cody met with Respondent. Respondent suggested, and Mr. Cody agreed, to the purchase of a policy called Fortis Long Term Security Home Health Care (Fortis), which was underwritten by Time Insurance Company (Time) of Milwaukee, Wisconsin. Respondent was an agent with Time. Mr. Cody believed the Time policy would meet his insurance needs. On or about March 31, 1994, Respondent received from Mr. Cody a check for $3,164.40. This sum was intended by Mr. Cody to be the premium payment for the Fortis home health care insurance policy underwritten by Time. Pursuant to Respondent's directions, the check from Mr. Cody was made payable to Respondent's agency, National, not to Time Insurance Company. Respondent directed this procedure because at this time, National had limited experience with Time, and National did not have "netting" privileges. "Netting" privileges allow an insurance agency to deduct its commission prior to forwarding a premium check to the underwriting company. Because of National's limited experience with Time, and the lack of netting privileges, Respondent did not believe it was unusual to make the Cody check payable to National, or to deposit the Cody check into National's account. Time has a general policy requiring that premium checks be made payable directly to Time; however, Time, on occasion, will accept premium checks from agencies. Time also requires that an application and premium check be immediately sent to the company for processing. Respondent deposited the Cody check into National's account at Republic Bank. Respondent took the Cody application back to National, entered the information into the computer and delivered the Cody application for the issuance of the Fortis policy to Coreen McKeever. Neither the Cody check, nor the Cody application for issuance of the Fortis policy was received by Time. Within three weeks of depositing the check and delivering the application, Respondent inquired of Coreen McKeever as to the status of the Cody application. Respondent was informed by Coreen McKeever that the application had been denied by Time because of Mrs. Cody's health problems. Contrary to Ms. McKeever's report, Time did not consider nor decline the application for issuance of the Fortis policy to the Codys because of Mrs. Cody's health or any other reason. Respondent did not personally check on the Cody application, and did not contact Time regarding the issuance of the policy to the Codys. Respondent had no personal knowledge whether the Cody application had been declined and received no written notification regarding the Cody application. Respondent did not question the representations made by Coreen McKeever in this regard. Shortly thereafter, Respondent informed Mr. Cody that the application to Time had been declined. Respondent met with Mr. Cody and suggested that Mr. Cody consider purchasing a product offered by a company called Secure Care Home Services, Inc. (Secure Care), which also provided home health care and was approximately the same purchase price as the Fortis policy underwritten by Time. Respondent at that time represented to Mr. Cody, and Mr. Cody was under the belief, that the Secure Care product was substantially equivalent to the Fortis policy underwritten by Time. Mr. Cody was aware that the Secure Care product was not insurance. Secure Care is a corporation located in Seminole, Florida. Secure Care is not an insurance company, but offers "membership agreements" marketed primarily to elderly persons to contractually provide in-home health care services to its members. Coreen McKeever (a/k/a Coreen J. Morgan) is a director of Secure Care, and has an interest in Secure Care. Secure Care is currently under a Cease and Desist Order suspending its business operations. The Cease and Desist order was entered by the Petitioner on March 13, 1995. On or about May 18, 1994, Mr. and Mrs. Cody entered into a membership agreement with Secure Care. The initial cost of the membership for both of the Codys as reflected in the agreement was $3,027.00; however, the record reflects that the ultimate cost to the Codys for the Secure Care membership actually totalled $3098.40. Respondent signed the agreement as an authorized agent for Secure Care. On May 26, 1994, Respondent met with the Codys at their home. At this time Respondent offered to refund to Mr. Cody the purchase price of the Time policy. To this end, Respondent tendered check number 1191 drawn on National's account in the amount of $3,164.40 to Mr. Cody; however, because the purchase price of the Codys' membership in Secure Care which Mr. Cody had already agreed to purchase was almost as much as the Time policy, Mr. Cody requested that Respondent apply the check for the Time policy to the Secure Care membership, and refund Mr. Cody the difference. Respondent accordingly on May 27, 1994, issued a check number 1189 drawn on National's account to Mr. Cody the amount of $65.70, which represented the difference in the cost of the two products. Several months after his purchase of the Secure Care membership, Mr. Cody became aware that some of his neighbors were dissatisfied with the home health care provided by the company. Thereafter, Mr. Cody became concerned that the Secure Care membership would not meet his or his wife's needs. At this time Mr. Cody had no personal experience with Secure Care. Neither Mr. Cody nor his wife ever used, or sought to use their Secure Care membership. Mr. Cody complained to Petitioner regarding Secure Care. Mr. Cody also contacted Time and discovered that his application and check had not been received. Respondent learned of Mr. Cody's concerns with Secure Care after Mr. Cody complained to Petitioner and a departmental investigation of this matter had been undertaken. Respondent then contacted Mr. Cody who told Respondent he wanted a refund of the purchase price of the Secure Care membership. Respondent contacted Secure Care, but learned that the company was not giving refunds at that time. Respondent suggested that Mr. Cody then attempt to deal with Secure Care directly. Mr. Cody was unable to obtain a refund of the cost of the Secure Care membership. The Codys obtained no benefit from their Secure Care membership. The Secure Care membership was not substantially equivalent to the Fortis policy underwritten by Time. Secure Care was not an established company and did not have the resources or capability to provide the services offered by Time. Count II - Leila G. Smith Leila G. Smith is a widowed ninety-one year old retired first grade school teacher, originally from Georgia. Mrs. Smith currently resides with her niece, Miriam Enright, in Seminole, Florida. Brenda Blager is Miriam Enright's daughter, and Mrs. Smith's great-niece. Ms. Blager currently resides in Champagne, Illinois. Mrs. Smith receives a monthly income from her teacher's pension and Social Security benefits. Mrs. Smith is in generally good health for a person of her age, but has experienced a significant loss of vision, is totally blind in her left eye, and cannot read without the aid of a magnifying glass. Mrs. Smith moved to Florida approximately three years ago. Respondent was first introduced to Mrs. Smith by Mrs. Enright to whom Respondent had previously sold annuities. Respondent visited the Enright home and met with Mrs. Smith, Mrs. Enright, Ms. Blager, and also Mrs. Smith's nephew, Robert Smith, to discuss Mrs. Smith's insurance and investment needs. At that time Mrs. Smith purchased an annuity in the amount of $100,000 from Respondent. Approximately one month later Mrs. Smith purchased a second annuity in the amount of $100,000 from Respondent, and gave Robert Smith $60,000 for the purchase of an annuity. The interest payments from the second annuity purchased by Mrs. Smith were sent to Robert Smith. Brenda Blager usually reviewed and consulted Mrs. Smith regarding Mrs. Smith's personal finances; however, after moving to Florida and meeting Respondent, Mrs. Smith also began to rely on and trust Respondent with regard to advising her in her personal financial matters. Prior to moving to Florida, Mrs. Smith's investments consisted primarily of her home and certificates of deposit in banks and savings institutions in Georgia. Mrs. Smith was conservative in her investments, had never purchased stocks or bonds, and only wanted to place her savings in "safe" investments. Subsequent to her purchase of annuities, Mrs. Smith and Mrs. Enright contacted Respondent to discuss other financial concerns. Specifically, Mrs. Smith had sold her home in Georgia and was interested in moving her certificates of deposit to Florida, achieving a higher rate of return, addressing tax problems associated with the payment of the annuity interest to her nephew, and purchasing a new Cadillac automobile. Whenever Respondent met with Mrs. Smith to discuss her finances and investments, Mrs. Enright, or another member of Mrs. Smith's family was also present. Respondent reviewed several financial documents relating to Mrs. Smith's Georgia certificates of deposit. Mrs. Smith's financial records were disorganized. Respondent advised Mrs. Smith that there would be substantial penalties if she prematurely removed her funds and invested in certificates of deposit. Despite the penalties and Respondent's advice to the contrary, Mrs. Smith decided to cash in her Georgia certificates of deposit and relocate her funds to Florida. Respondent assisted Mrs. Smith in cashing in the Georgia certificates of deposit. Respondent also assisted Mrs. Smith in using some of these funds to purchase a Cadillac automobile. Mrs. Smith had initially been interested in leasing the automobile; however, Respondent reviewed the lease arrangement, and advised Mrs. Smith that a purchase was in her best interest. Mrs. Smith followed Respondent's advice in this regard. Mrs. Smith trusted Respondent. To assist Mrs. Smith in relocating her funds to Florida, and also achieve a higher rate of return, Respondent presented Mrs. Smith with proposals to invest in promissory notes with two local firms, Zuma Engineering and Allstate Finance. (Allstate Finance is not associated with Allstate Insurance Company). Zuma Engineering (Zuma), is a start-up company located in Largo, Florida, engaged in the business of recycling tires. The rubber in the tires is converted to crumb rubber to be resold and used in asphalt roads, playground resurfacing and other products. Respondent first became aware of Zuma at a seminar in July of 1994 through another agent, Michael Mann, who was then raising funds for Zuma. Mr. Mann took Respondent to the Zuma facility and introduced Respondent to the president of the company. Thereafter, Respondent regularly toured the facility, inspected Zuma's existing and revised business plans, attended business meetings, and reviewed the company's monthly financial reports. The Zuma physical facility consisting of a warehouse and processing plant appeared to be consistent with the business plan. Respondent also obtained documents from Zuma reflecting that the company had initiated a research and development program associated with the University of South Florida. Respondent observed independent auditors at the Zuma facility, and reviewed financial documents that indicated Zuma had made progress toward a private stock offering. Respondent took reasonable actions to examine the operational and fiscal soundness of Zuma. When Respondent met with Mrs. Smith he presented her with documents including the Zuma business plan, and explained the investment opportunity in Zuma. Mrs. Smith does not recall Respondent explaining the Zuma investment proposal, nor does Mrs. Smith recall reading any documents or other material relating to Zuma. Given Mrs. Smith's extremely poor vision and the technical nature of the Zuma business plan, it is highly unlikely that Mrs. Smith read the business plan or any other documents pertaining to Zuma. Mrs. Smith did not comprehend the nature of the investment opportunity in Zuma. Although Mrs. Smith did not comprehend the nature of the Zuma investment, between September 26, 1994 and May 31, 1995 she nonetheless made several purchases of promissory notes payable by Zuma. Specifically, Mrs. Smith signed checks payable to Zuma as follows: September 26, 1994, two checks, one in the amount of $10,000, and another in the amount of $20,000; December 6, 1994, in the amount of $70,000; March 10, 1995 in the amount of $10,000; March 29, 1995 in the amount of $10,000; and, May 31, 1995 in the amount of $90,000. Mrs. Smith did not actually write the checks. Because of her poor eyesight, Mrs. Smith signed the checks in blank, and Respondent filled in the date, payee, and amount. Respondent remitted Mrs. Smith's checks to Zuma. In exchange, Zuma issued promissory notes to Mrs. Smith. The Zuma promissory notes were not insurance products. No interest has been paid on the Zuma promissory notes, and several of the notes are now in default. Mrs. Smith has not received any of the principal of the promissory notes back from Zuma. The prospectus of Zuma states that securities in Zuma are speculative, carry a high degree of risk, and "...should not be purchased by anyone who cannot afford the loss of his or her entire investment." Mrs. Smith did not understand the high risk involved in purchasing securities in Zuma. In addition to Mrs. Smith, Respondent sold promissory notes issued by Zuma to approximately thirty other investors. Subsequent to selling the Zuma notes to Mrs. Smith, Respondent met with an investigator from the Florida Comptroller's Office, and was informed that due to fiscal irregularities at Zuma, Respondent should refrain from selling Zuma securities. Respondent was not aware of the problems with Zuma prior to his meeting with the Comptroller's investigator. At the same time that Respondent presented Mrs. Smith with the Zuma proposal, Respondent also presented Mrs. Smith with information from Allstate Finance. Allstate, which is not related to the Allstate Insurance Company, is a company located in Tampa, Florida, in the business of automobile financing. Mrs. Smith purchased at least one promissory note in the amount of $40,000 from Allstate. The Allstate promissory note purchased by Mrs. Smith was not an insurance product. Mrs. Smith has received, and continues to receive, monthly interest payments from Allstate. In June of 1995, Mrs. Smith allowed the Allstate promissory note to renew for another year. In July of 1995, Brenda Blager received a telephone call from her mother, Miriam Enright, requesting assistance in reviewing Mrs. Smith's investments. Ms. Blager has worked in a financial planning office, but is not a certified financial planner. Prior to that time Ms. Blager had no knowledge of Zuma. Ms. Blager obtained a Dunn & Bradstreet report on Zuma and became very concerned regarding Mrs. Smith's investment in Zuma. Ms. Blager then came to Florida from Illinois for the purpose of reviewing Mrs. Smith's investments. After reviewing the Zuma and Allstate promissory notes, Ms. Blager met with an attorney and attempted to recover Mrs. Smith's funds; however, Ms. Blager was unable to do so. As a result of Respondent's actions, Mrs. Smith has cashed in all of her certificates of deposit to purchase the Zuma and Allstate promissory notes, and her Cadillac automobile. Mrs. Smith has no other savings or investments. While Mrs. Smith did want to relocate her funds from Georgia, Respondent was aware that Mrs. Smith desired and intended to place her funds in safe, low risk, investments. Respondent's advice and assistance, which resulted in placing Mrs. Smith's funds in a high risk security such as a Zuma promissory note, was not appropriate for an elderly woman in Mrs. Smith's circumstances.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Petitioner DEPARTMENT OF INSURANCE AND TREASURER enter a final order finding Respondent, ROBERT DARREN CARLSON, in violation of the provisions of Chapter 626, Florida Statutes, as set forth above, and that Respondent's licenses and eligibility for licensure be SUSPENDED for a period of fifteen (15) months. DONE and ENTERED this 21st day of March, 1996, in Tallahassee, Florida. RICHARD HIXSON, 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 21st day of March, 1996. APPENDIX TO RECOMMENDED ORDER, CASE NO. 95-4947 To comply with the requirements of Section 120.59(2), Florida Statutes (1993), the following rulings are made on the parties' proposed findings of fact: Petitioner's Proposed Findings of Fact. 1.-4. Accepted and incorporated. Accepted as to Zuma was a start-up company, recycling tires. Rejected as to Mrs. Smith's knowledge and consent. Accepted as to Mrs. Smith wanting safe investments. Rejected as to Respondent being employed by Zuma. 7.-10. Accepted and incorporated. 11.-12. Accepted to the extent that Mrs. Smith desired safe investments. 13.-21. Accepted and incorporated. Respondent's Proposed Findings of Fact. 1.-6. Accepted and incorporated. 7.-13. Accepted and incorporated. 14.-16. Rejected as to Respondent's reasonable basis for believing the representations of Coreen McKeever. 17. Accepted, except to the extent that Mr. Cody was led to believe Secure Care was equivalent to Time. 18.-25. Accepted and incorporated. Rejected as not necessary. Accepted and incorporated. Rejected as not an accurate assessment of Mr. Cody's testimony. 29.-30. Accepted and incorporated. 31.-32. Accepted; Time's general policy allowed checks from agencies. 33.-35. Rejected as not supported by the weight of the evidence. 36.-43. Accepted and incorporated. 44. Accepted except to the extent that Zuma and Allstate promissory notes were not appropriate investments for Mrs. Smith. 45.-54. Accepted to the extent that Respondent investigated Zuma, reviewed fiscal reports, and believed Zuma to be a viable start-up company. 55.-57. Accepted and incorporated. 58. Accepted to the extent that Mrs. Smith had document relating to Zuma; rejected to the extent that Mrs. Smith understood the nature of the Zuma investment. 59.-63. Accepted and incorporated. Accepted to the extent that Mrs. Smith allowed the Allstate not to renew. Accepted to the extent that Mrs. Smith wanted her certificates of deposit moved from Georgia. Rejected to the extent that Respondent knew, or should have known, the investments were high risk. Accepted to the extent that Ms. Blager is not a certified financial planner. Rejected to the extent that Zuma has defaulted on several of Mrs. Smith's notes, and not returned any interest or principal. Rejected as not supported by the weight of the evidence. COPIES FURNISHED: James A. Bossart, Esquire Department of Insurance 200 East Gaines Street Tallahassee, Florida 32399-0333 Robert D. Newell, Jr., Esquire NEWELL & STAHL 817 North Gadsden Street Tallahassee, Florida 32303 Dan Sumner, Acting General Counsel Department of Insurance The Capitol, PL-11 Tallahassee, Florida 32399-0300 Bill Nelson State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300
