The Issue The issue in the case is whether Respondent received an insurance premium payment from a client and failed to remit it to the insurer in order to obtain insurance for the client, in violation of Sections 626.611(4), (5), (7), (8), (9), (10), and (13), 626.621(2) and (6), 626.9561, 626.9521, and 626.9541(1)(e)1. and (o)1.
Findings Of Fact At all material times, Respondent has been licensed as a Surplus Lines Agent, Life and Health (debit) Agent, Life Agent, Life and Health Agent, and General Lines Insurance Agent. On July 22, 1988, Charles M. Wilks visited the office of Respondent to purchase insurance on his automobile. Respondent quoted him a premium of $1257 for a one-year term commencing August 19, 1988. Mr. Wilks decided to purchase the insurance at the quoted premium. Accordingly, he gave Respondent a check in the amount of $1257 payable to Respondent's insurance agency. The same day, Respondent gave Mr. Wilks an agency receipt and Temporary Binder and Receipt effective from August 19, 1988, through August 19, 1989. The temporary binder showed the insurer as Dairyland Insurance Company. Respondent caused the check to be promptly cashed and credited to his agency's account. However, Mr. Wilks never received a policy. His wife called the agency every week after the policy did not arrive promptly. But she was unsuccessful in obtaining the policy despite promises by employees of the agency that they would mail the policy to the Wilkses. Upset because the automobile was no longer covered by insurance, Mr. Wilks visited Respondent at his office in November and demanded a policy. Respondent stated that Dairyland could not insure the type of car for which Mr. Wilks sought insurance because the car was a special customized model. In fact, Respondent had never submitted the application for insurance or the premium to Dairyland for issuance of a policy. Respondent convinced Mr. Wilks to purchase the insurance from a different company. Refunding one-half of the previously paid premium, Respondent issued Mr. Wilks a certificate of insurance that purportedly reflects coverage for the automobile from November 7, 1988, through November 7, 1989, from Clarindon National. Respondent again failed to submit the policy application to the insurer. When Mr. Wilks had still not obtained a policy by January, 1989, he went to Respondent's office, but learned that he had moved. After some effort, Mr. Wilks tracked down Respondent and demanded the return of the remaining premium payment that he had previously made. Respondent finally gave Mr. Wilks a check for the balance. Taking the check immediately to the bank, Mr. Wilks received payment on it. Dairyland was less fortunate with Respondent's checks. By letter dated October 19, 1988, the insurer informed Respondent that his authority to write insurance for the company was withdrawn effective December 12, 1988. As of February 14, 1990, the sum owed to Dairyland by Respondent's agency totalled $1049.43 in nonsufficient funds checks.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the Department of Insurance enter a Final Order revoking all of Respondent's above-described licenses. DONE and ORDERED this 29 day of March, 1989, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 29 day of March, 1989. Copies to: Hon. Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, FL 32399-0300 Don Dowdell General Counsel Department of Insurance The Capitol, Plaza Level Tallahassee, FL 32399-0300 Nancy S. Isenberg, Attorney Division of Legal Services Department of Insurance 412 Larson Building Tallahassee, FL 32399-0300 Anthony Brooks 500 E. Semoran Blvd., Suite 32 Casselberry , FL 32707
The Issue Whether or not Petitioner's application for examination as a general lines agent should be approved.
Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, documentary evidence received, and the entire record compiled herein, I hereby make the following relevant factual findings: On or about September 2, 1989, Petitioner, Kimberly L. Strayer, formerly known as Kimberly Lindsay, filed an application for examination as a general lines agent with Respondent, Department of Insurance. Since January 1988, Petitioner has been the sole owner and president of Central Florida Insurance Agency (Central). On or about December 28, 1989, Respondent informed Petitioner, by letter, that her application for examination as a general lines agent was denied for the following reasons: Petitioner operated Central Florida Insurance Agency without a licensed general lines agent in the full-time active charge of that agency from January 1, 1988 through August 31, 1988. During January 1988 Petitioner accepted applications and down payments from the following insureds: Robert Smallwood, Annelle Jones, Mickey Lawson, Donald Johnson, Thomas Jones, Manning O'Callahan and Christopher Stevens. Petitioner issued a binder and an automobile identification card for each insured indicating that coverage was bound with State Farm Mutual Insurance Company, as servicing carrier for the Florida Joint Underwriting Association (FJUA). At the time Petitioner had no authority to accept either applications or premiums on behalf of State Farm. Petitioner failed to forward such applications and premiums to the insurer until April 12, 1988. During January 1988, Petitioner accepted an application and premium payment of $274.00 from Tammy Clay. Petitioner issued a binder indicating that coverage was bound with State Farm and Union American Insurance Companies. Petitioner failed to forward either the application or the premium payment to any insurer. Petitioner issued a fictitious policy number to Ms. Clay and after nearly four months, submitted a money order to State Farm payable to Tammy Clay, on or about May 1989. At the hearing, Petitioner admitted that she did not have a licensed general lines agent in full-time active charge of her agency; that she accepted applications and premium payments from the above-named insureds for auto insurance to be bound with State Farm Mutual Insurance Company and that she accepted an application for premium payment for automobile insurance from Tammy Clay in the amount of $274.00 for coverage to be bound by State Farm Mutual Insurance Company. Petitioner was first employed in the insurance sales industry during the summer of 1987. At the time, she was only seventeen years old and had completed the eleventh grade. Petitioner's first employment in the insurance industry was with Friendly Auto Insurance (Friendly) which had several offices throughout Polk County, Florida. Friendly was owned by Petitioner's now husband, Larry Lindsay when she was hired. Petitioner formed Central during late 1987 and began operating Central on or about January 1, 1988. Petitioner received her supervision and training while employed with Friendly, primarily through on the job experiences. During late 1987, Petitioner's husband encountered problems with one of his business partners which resulted in strained relations. The resultant strained relations prompted Petitioner to organize Central. Central purchased several of Friendly's agencies of which her now husband had an interest, with Petitioner paying a nominal amount for the "book of business" that Friendly had generated. When Central commenced operations during January of 1988, Bob Seese was the licensed insurance agent who was authorized under the rules of the FJUA to accept applications and bind coverage through one of the FJUA servicing carriers, State Farm. Friendly and its successor, Central, generated a substantial volume of so-called high risk auto insurance business for drivers who could not obtain insurance through the regular market. Bob Seese had been associated with and served as the licensed agent for the Friendly agency in Lakes Wales which Central purchased in January 1988. At the time Petitioner commenced operating Central, she hired Bob Seese as the licensed general lines agent. She considered that Central was authorized to accept applications and continue to bind FJUA insurance coverage through State Farm. Petitioner forwarded all of the FJUA insurance applications which were bound by Bob Seese to State Farm within a period ranging from one week to approximately one month. State Farm refused to accept the applications submitted by Petitioner based on its contention that initially, Bob Seese was not authorized to bind coverage through Central, as he had not transferred his license to Central and Seese could only operate out of the Friendly agency of Lake Wales. 1/ Bob Seese was formally authorized by State Farm to conduct business through Central during February 1988. As a result of that authorization, all of the above-named insureds obtained insurance and none of the insureds suffered any monetary loss as a result of Seese's belated authorization. All of the premium payments that Petitioner received were, in time, forwarded to the respective carriers. Petitioner properly gave new insureds binder numbers which were serially dispensed in the order that premium payments were received. During January 1988, Petitioner accepted an application and premium payment for auto insurance from Tammy Clay for coverage to be bound by State Farm. Petitioner submitted Clay's application and premium payment to State Farm and it was returned on one occasion based on the fact that a facsimile stamp was used by the purported licensed agent (Seese). Petitioner resubmitted it and State Farm again returned it based on State Farm's contention that Seese was not authorized to conduct business through Central. Petitioner has now completed the required formal educational courses to demonstrate her eligibility to sit for the general lines agent's examination. Petitioner is now knowledgeable about insurance matters and is aware of the proper procedures for operating as a general lines agent. When Petitioner formed Central, she had less than one year's experience in the insurance business and was ineligible to sit for the general lines agent exam as she was not of majority age.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: Respondent enter a Final Order granting Petitioner's application for examination as a general lines insurance agent. DONE and ENTERED this 31st day of October, 1990, in Tallahassee, Leon County, Florida. JAMES E. BRADWELL 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 31st day of October, 1990.
Findings Of Fact Respondent holds a property and casualty insurance license, life and health insurance license, and life insurance license for the State of Florida. She has held her property and casualty license for about 20 years. In 1976, she was employed as an agent for the Orlando office of Commonwealth insurance agency, which she purchased in 1977 or 1978. She continues to own the Commonwealth agency, which is the agency involved in this case. Respondent has never previously been disciplined. In 1979 or 1980, Respondent was appointed to the board of directors of the Local Independent Agents Association, Central Florida chapter. She has continuously served on the board of directors of the organization ever since. She served as president of the association until September, 1991, when her term expired. During her tenure as president, the local association won the Walter H. Bennett award as the best local association in the country. Since May, 1986, Commonwealth had carried the insurance for the owner of the subject premises, which is a 12,000 square foot commercial block building located at 923 West Church Street in Orlando. In July, 1987, the insurer refused to renew the policy on the grounds of the age of the building. Ruth Blint of Commonwealth assured the owner that she would place the insurance with another insurer. Mrs. Blint is a longtime employee of the agency and is in charge of commercial accounts of this type. Mrs. Blint was a dependable, competent employee on whom Respondent reasonably relied. Mrs. Blint contacted Dana Roehrig and Associates Inc. (Dana Roehrig), which is an insurance wholesaler. Commonwealth had done considerable business with Dana Roehrig in the past. Dealing with a number of property and casualty agents, Dana Roehrig secures insurers for the business solicited by the agents. Dana Roehrig itself is not an insurance agent. In this case, Dana Roehrig served as the issuing agent and agreed to issue the policy on behalf of American Empire Surplus Lines. The annual premium would be $5027, excluding taxes and fees. This premium was for the above- described premises, as well as another building located next door. The policy was issued effective July 21, 1987. It shows that the producing agency is Commonwealth and the producer is Dana Roehrig. The policy was countersigned on August 12, 1987, by a representative of the insurer. On July 21, 1987, the insured gave Mrs. Blint a check in the amount of $1000 payable to Commonwealth. This represented a downpayment on the premium for the American Empire policy. The check was deposited in Commonwealth's checking account and evidently forwarded to Dana Roehrig. On July 31, 1987, Dana Roehrig issued its monthly statement to Commonwealth. The statement, which involves only the subject policy, reflects a balance due of $3700.86. The gross premium is $5027. The commission amount of $502.70 is shown beside the gross commission. Below the gross premium is a $25 policy fee, $151.56 in state tax, and a deduction entered July 31, 1987, for $1000, which represents the premium downpayment. When the commission is deducted from the other entries, the balance is, as indicated, $3700.86. The bottom of the statement reads: "Payment is due in our office by August 14, 1987." No further payments were made by the insured or Commonwealth in August. The August 31, 1987, statement is identical to the July statement except that the bottom reads: "Payment is due in our office by September 14, 1987." On September 2, 1987, the insured gave Commonwealth a check for $2885.16. This payment appears to have been in connection with the insured's decision to delete the coverage on the adjoining building, which is not otherwise related to this case. An endorsement to the policy reflects that, in consideration of a returned premium of $1126 and sales tax of $33.78, all coverages are deleted for the adjoining building. The September 30 statement shows the $3700.86 balance brought forward from the preceding statement and deductions for the returned premium and sales tax totalling $1159.78. After reducing the credit to adjust for the unearned commission of $112.60 (which was part of the original commission of $502.70 for which Commonwealth had already received credit), the net deduction arising from the deleted coverage was $1047.18. Thus, the remaining balance for the subject property was $2653.68. In addition to showing the net sum due of $944.59 on an unrelated policy, the September 30 statement contained the usual notation that payment was due by the 12th of the following month. However, the statement contained a new line showing the aging of the receivable and showing, incorrectly, that $3700.86 was due for more than 90 days. As noted above, the remaining balance was $2653.68, which was first invoiced 90 days previously. Because it has not been paid the remaining balance on the subject policy, Dana Roehrig issued a notice of cancellation sometime during the period of October 16-19, 1987. The notice, which was sent to the insured and Commonwealth, advised that the policy "is hereby cancelled" effective 12:01 a.m. October 29, 1987. It was the policy of Dana Roehrig to send such notices about ten days in advance with two or three days added for mailing. One purpose of the notice is to allow the insured and agency to make the payment before the deadline and avoid cancellation of the policy. However, the policy of Dana Roehrig is not to reinstate policies if payments are received after the effective date of cancellation. Upon receiving the notice of cancellation, the insured immediately contacted Mrs. Blint. She assured him not to be concerned and that all would be taken care of. She told him that the property was still insured. The insured reasonably relied upon this information. The next time that the insured became involved was when the building's ceiling collapsed in June, 1988. He called Mrs. Blint to report the loss. After an adjuster investigated the claim, the insured heard nothing for months. He tried to reach Respondent, but she did not return his calls. Only after hiring an attorney did the insured learn that the cancellation in October, 1987, had taken effect and the property was uninsured. Notwithstanding the cancellation of the policy, the October 31 statement was identical to the September 30 statement except that payment was due by November 12, rather than October 12, and the aging information had been deleted. By check dated November 12, 1987, Commonwealth remitted to Dana Roehrig $3598.27, which was the total amount due on the October 30 statement. Dana Roehrig deposited the check and it cleared. The November 30 statement reflected zero balances due on the subject policy, as well as on the unrelated policy. However, the last entry shows the name of the subject insured and a credit to Commonwealth of $2717 plus sales tax of $81.51 minus a commission readjustment of $271.70 for a net credit of $2526.81. The record does not explain why the net credit does not equal $2653.68, which was the net amount due. It would appear that Dana Roehrig retained the difference of $125.87 plus the downpayment of $1000 for a total of $1125.87. It is possible that this amount is intended to represent the earned premium. Endorsement #1 on the policy states that the minimum earned premium, in the event of cancellation, was $1257. By check dated December 23, 1987, Dana Roehrig issued Commonwealth a check in the amount of $2526.81. The December 31 statement reflected the payment and showed a zero balance due. The record is otherwise silent as to what transpired following the issuance of the notice of cancellation. Neither Mrs. Blint nor Dana Roehrig representatives from Orlando testified. The only direct evidence pertaining to the period between December 31, 1987, and the claim the following summer is a memorandum from a Dana Roehrig representative to Mrs. Blint dated March 24, 1988. The memorandum references the insured and states in its entirety: Per our conversation of today, attached please find the copy of the cancellation notice & also a copy of the cancellation endorsement on the above captioned, which was cancelled effective 10/29/87. If you should have any questions, please call. Regardless of the ambiguity created by the monthly statements, which were not well coordinated with the cancellation procedure, Mrs. Blint was aware in late March, 1988, that there was a problem with the policy. She should have advised the insured, who presumably could have procured other insurance. Regardless whether the June, 1988, claim would have been covered, the ensuing litigation would not have involved coverage questions arising out of the cancellation of the policy if Mrs. Blint had communicated the problem to the insured when she received the March memorandum. Following the discovery that the policy had in fact been cancelled, the insured demanded that Respondent return the previously paid premiums. Based on advice of counsel, Respondent refused to do so until a representative of Petitioner demanded that she return the premiums. At that time, she obtained a cashiers check payable to the insured, dated June 1, 1990, and in the amount of $2526.81. Although this equals the check that Dana Roehrig returned to Commonwealth in December, 1987, the insured actually paid Commonwealth $1000 down and $2885.16 for a total of $3885.16. This discrepancy appears not to have been noticed as neither Petitioner nor the insured has evidently made further demands upon Respondent for return of premiums paid. The insured ultimately commenced a legal action against Commonwealth, Dana Roehrig, and American Empire. At the time of the hearing, the litigation remains pending.
Recommendation Based on the foregoing, it is hereby recommended that the Department of Insurance and Treasurer enter a final order finding Respondent guilty of violating Sections 626.561(1) and, thus, 626.621(2), Florida Statutes, and, pursuant to Sections 626.681(1) and 626.691, Florida Statutes, imposing an administrative fine of $1002.70, and placing her insurance licenses on probation for a period of one year from the date of the final order. If Respondent fails to pay the entire fine within 30 days of the date of the final order, the final order should provide, pursuant to Section 626.681(3), Florida Statutes, that the probation is automatically replaced by a one-year suspension. RECOMMENDED this 5th day of February, 1992, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 5th day of February, 1992. COPIES FURNISHED: Hon. Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, FL 32399-0300 Bill O'Neil, General Counsel Department of Insurance The Capitol, Plaza Level Tallahassee, FL 32399-0300 James A. Bossart Division of Legal Affairs Department of Insurance 412 Larson Building Tallahassee, FL 32399-0300 Thomas F. Woods Gatlin, Woods, et al. 1709-D Mahan Drive Tallahassee, FL 32308
Findings Of Fact On September 8, 1987, the Department of Insurance received a letter dated September 1, 1987, from Joseph F. Kinman, Jr., which stated: Another insurance agent (Daniel Bruce Caughey) from Pensacola, Florida and his incorporated agency (Caughey Insurance Agency, Inc.) are refusing to forward premium payments on to Jordan Roberts & Company, Inc. despite a final judgment for such amounts here in Hillsborough County Circuit Court. Enclosed is a copy of the Final Judgment entered August 13, 1987, as well as a copy of the Complaint. We represent Jordan Roberts & Company, as well as Poe & Associates, Inc. here in Tampa, Florida. In approximately August of 1982, Daniel Bruce Caughey and Caughey Insurance Agency, Inc. entered into a brokerage agreement with Jordan Roberts & Company, Inc. wherein Mr. Caughey and the Agency were to collect premiums on behalf of Jordan Roberts & Company, Inc. and in turn, Mr. Caughey and the Agency were to receive commissions. Mr. Caughey signed an Individual Guarantee Agreement on October 21, 1983, guaranteeing that Brokerage Agreement with Caughey Insurance Agency, Inc. Mr. Caughey and the Agency failed to forward the insurance premiums collected on behalf of Jordan Roberts & Company, Inc. despite repeated demands and inquiries. Finally, a lawsuit was filed against Mr. Caughey and the Agency in the Circuit Court of the Thirteenth Judicial Circuit of the State of Florida, in and for Hillsborough County in December of 1986. Final judgment for Jordan Roberts & Company, Inc. against Mr. Caughey and the Agency was entered on August 13, 1987, for an amount of $6,595.94. Mr. Caughey and his Agency have unlawfully withheld monies belonging to an insurer, Jordan Roberts & Company, Inc. and, accordingly, appear to be in violation of Florida Statutes 626 et seq. Jordan Roberts & Company, Inc. has a judgment for unpaid insurance premiums against Mr. Caughey and the Agency, however, Mr. Caughey and the Agency refuse or fail to pay over to Jordan Roberts & Company, Inc. premium funds rightfully belonging to Jordan Roberts & Company, Inc. Accordingly, we would respectfully request that your office conduct an investigation of Mr. Caughey and the Caughey Insurance Agency, Inc. Enclosed with this letter were copies of the complaint and final judgment in the circuit court case, Case No. 86-21454. As found in the main administrative case, Case No. 89-2651: In Count 1, JORO's complaint [in Case No. 86-21454] alleges the existence of a brokerage agreement between JORO and Caughey Insurance Agency, Inc., entered into "[o]n or about April 27, 1982"; execution and delivery of respondent's guarantee "[o]n or about October 21, 1983"; and the agency's indebtedness "for premiums on policies underwritten by [JORO] for the sum of $20,975.36." Petitioner's Exhibit No. 3. In Count II, the complaint also alleges execution and delivery of a promissory note "[o]n or about October 21, 1983," without, however, explicitly indicating its relationship (if any) with the guarantee executed the same date. Petitioner's Exhibit No. 3. The final judgment does not specify which count(s) JORO recovered on. Petitioner's Exhibit No. 4. Attached to the complaint are copies of the promissory note, executed by "CAUGHEY INSURANCE AGENCY, INC., By: D B Caughey Vice President"; the guarantee, executed in the same way; and the brokerage agreement, executed on behalf of Caughey Insurance Agency by "William C. Caughey, President." Although the Individual Guarantee Agreement names respondent as guarantor in the opening paragraph, the corporation is shown as guarantor on the signature line. The complaint does not allege and the judgment does not recite that respondent personally failed to remit premiums but says he is responsible as an officer of the agency. Without any further investigation, as far as the record shows, the Department of Insurance filed a complaint amended on April 24, 1989, to allege, inter alia, that "[o]n or about August 19, 1982 Caughey Insurance Agency, Inc. entered into a brokerage agreement with Jordan Roberts and Company, Inc. . . . requir[ing] Caughey Insurance Agency, Inc. to remit premiums, unearned commissions and additional premiums to Jordan Roberts and Company, Inc."; and that respondent "personally guaranteed the [agency's] obligation under this agreement in" writing, but "failed to remit five thousand five dollars and forty-four cents due under th[e] agreement" for which sum Jordan Roberts and Company, Inc. obtained judgment. After a formal administrative hearing, a recommended order was entered on April 2, 1990, recommending dismissal of the administrative complaint, because "ambiguities in the court papers do not clearly and convincingly rule out the possibility that the court's judgment rests on the dishonored promissory note . . . [rather than] a breach of respondent's [here petitioner's] fiduciary responsibilities." In its final order, the Department dismissed the administrative complaint; Daniel Bruce Caughey was the prevailing party in that case. The parties have stipulated that "Daniel B. Caughey qualifies as a small business party as defined in Section 57.111(3)(d), Florida Statutes." The parties also stipulated that the "total value of the reasonable attorney's fees and costs at issue is $2,830."
The Issue The issue for determination is whether Respondent committed the offenses set forth in the administrative complaint, and, if so, what action should be taken.
Findings Of Fact At all times material hereto, Peter Gregory Santisteban (Respondent) was licensed as a general lines agent by the State of Florida. At all times material hereto, Southern Associates Insurance Agency (Southern Associates) was a licensed general lines insurance agency by the State of Florida. Southern Associates was incorporated. At all times material hereto, Respondent was the owner, sole stockholder, president, and corporate director of Southern Associates. At all times material hereto, Respondent had sole responsibility for the financial affairs of Southern Associates and had sole signatory authority on Southern Associates’ checking account. AAPCO is a premium finance company. At all times material hereto, Respondent and AAPCO had an arrangement in which policies written by Respondent, which needed financing, would be financed by AAPCO. The arrangement between Respondent and AAPCO was executed as follows: Respondent maintained AAPCO drafts and had signatory authority on APPCO drafts. If a client needed financing, Respondent would receive a down payment from the client on the insurance premium. The down payment was approximately thirty-three percent of the premium. Respondent would receive a commission of approximately fifteen percent. His commission would be taken from the down payment. Respondent would execute an APPCO draft payable to the insurance company for the total premium less his commission. Respondent would forward the down payment less his commission (net) to AAPCO, the premium finance company. In or around 1990 or 1991, the execution of the arrangement changed in that, instead of writing a check to AAPCO for each insured’s net, Respondent would use transmittal forms which permitted Respondent to write one check for the net of multiple insureds. On or about March 25, 1994, Respondent issued check number 1503 from the account of Southern Associates payable to AAPCO in the amount of $1,215.14 for payment of multiple nets due to AAPCO. The check was deposited in the account of AAPCO but was returned for insufficient funds. On or about May 26, 1994, Respondent issued check number 1517 from the account of Southern Associates payable to AAPCO in the amount of $2,706.73 for payment of multiple nets due to AAPCO. The check was deposited in the account of AAPCO but was returned due to the account being closed. On or about July 13, 1994, AAPCO made demand for Respondent to pay the moneys due it. Respondent did not and has not paid AAPCO the moneys due. The total amount owed by Respondent to AAPCO is $3,921.87. Respondent attempted to reach an agreement with AAPCO wherein he would make monthly payments until the moneys due had been paid in full. AAPCO rejected Respondent’s offer and instead requested that Respondent make a lump sum payment of $2,000 and pay the remainder in monthly installments. Due to financial difficulty, Respondent was unable to agree to AAPCO’s payment option.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Insurance and Treasurer enter a final order Suspending the license of Peter Gregory Santisteban, as a general lines agent, for nine months; and Conditioning the reinstatement of his license after the expiration of the suspension upon his payment of $3,921.87 to AAPCO. DONE AND ENTERED this 28th day of February, 1997, in Tallahassee, Florida. ERROL H. POWELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 28th day of February, 1997. COPIES FURNISHED: Bob Prentiss, Esquire Division of Legal Services 612 Larson Building Tallahassee, Florida 32399-0300 Miguel San Pedro, Esquire 825 Southeast Bayshore Drive Suite 1541 Miami, Florida 33131 Bill Nelson State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Daniel Y. Sumner General Counsel The Capitol, LL-26 Tallahassee, Florida 32399-3100
The Issue The issue in this case is whether Respondent, David Randall Woodard ("Woodard"), violated provisions of Chapter 626, Florida Statutes (2008),1 and, if so, what penalty or sanction should be imposed.
Findings Of Fact The Department is the government agency responsible for enforcing the statutory provisions of Chapter 626, Florida Statutes, relating to general lines insurance agents. Woodard, at all times relevant to this proceeding, was a general lines insurance agent and was operating an insurance business known as Trinity Insurance, Inc. ("Trinity"). Woodard was the responsible agent for Trinity. On April 26, 2006, Joseph Perez purchased a workers' compensation insurance policy (through Trinity) from Summit Insurance Company. Perez paid Trinity a down payment of $3,327.20 by way of a check. Woodard remitted a check from Trinity to Summit Insurance Company in connection with Perez' workers' compensation insurance. The check from Trinity was returned for insufficient funds. As a result, Perez did not have the workers' compensation coverage he believed he had purchased. Thereafter, Woodard repaid Perez the premium that Perez had initially paid to Trinity. However, the first repayment check sent from Woodard to Perez was also returned for insufficient funds. Ultimately, Woodard repaid all of Perez' premium down payment. On May 14, 2007, Senia Lewis purchased homeowners' insurance (through Trinity) from Citizens Property Insurance Corporation ("Citizens"). The insurance premium invoice received by Lewis included a processing fee of $60. The processing fee was a charge, by Woodard, of $20 per page for notarizing Lewis' signature on three forms. The processing fee was retained by Woodard and was not made part of the premium payment made to Citizens. In October 2006, Denise and Steven Russell obtained a mortgage from Wells Fargo Financial. A Wells Fargo employee, Matt Jackson, arranged for the purchase of homeowners' and flood insurance from Citizens (through Trinity). Wells Fargo gave Trinity a check in the amount of $3,178 as payment of the premium for the insurance. However, in December 2006, the Russells were notified that their insurance had been rescinded because Citizens had not received a premium payment from Trinity. Woodard was arrested and plead nolo contendere to a misdemeanor charge relating to the transaction with the Russells. As part of his plea, Woodard repaid the Russells the amount of their premium. In July 2006, Lance and Cindy Bundy paid $1,576 to Trinity to acquire homeowners' insurance on their new home. Woodard sent Citizens a check in the sum of $1,226 to secure the desired insurance. In October 2006, the Bundys were notified that their insurance policy was being cancelled for non-payment of the premium. Trinity had not paid Citizens on a timely basis, resulting in cancellation of the policy. Woodard made restitution to the Bundys, but not for the entire amount of their premiums. However, inasmuch as the Bundys had insurance for a short period of time, they were generally satisfied with the amount of the reimbursement from Woodard. Woodard does not dispute the basic facts surrounding each of the above-described transactions. He says none of the cancellations or rescissions of insurance policies was intended. Rather, Woodard failed to properly manage the accounts of Trinity and allowed checking accounts to be overdrawn. However, when a check was drawn on an overdrawn account, the result would be detrimental to clients who had placed their trust in Woodard. Woodard says that out of 350 clients handled by his company, these four are the only complaints that have been made. Nonetheless, each of the complaints is legitimate. Woodard has a fiduciary responsibility to his clients and is bound by law to provide all services for which the clients pay. It is not acceptable to violate the fiduciary relationship by failing to procure insurance coverage as contracted for by a client. Woodard is not currently engaged in the practice of insurance sales. His license is active, but is currently in a pending status awaiting payment of fees or completion of continuing education courses. Woodard is presently not using his license actively in the sale of insurance, but uses the license in order to access certain information he may not otherwise be able to obtain. At this time, Woodard is working for a company as a software developer. Trinity Insurance, Inc., is no longer engaged in business.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by Petitioner, Department of Financial Services, revoking the general lines insurance agent's license of Respondent, David Randall Woodard. DONE AND ENTERED this 15th day of April, 2009, in Tallahassee, Leon County, Florida. R. BRUCE MCKIBBEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of April, 2009.
The Issue The issues are whether Respondent is guilty of various violations of the Insurance Code and, if so, what penalty should be imposed.
Findings Of Fact At all relevant times, Respondent has been licensed as a Life & Variable Annuity Agent (2-14), Life, Health and Variable Annuity Agent (2-15), Life Agent (2-16), Life and Health Agent (2-18), General Lines, Property and Casualty Agent (2-20), and Health Agent (2-40). Respondent holds license number A164221. Petitioner has disciplined Respondent on two prior occasions. By Consent Order filed November 28, 2000, Petitioner imposed an administrative fine of $7500 against Respondent and placed her licenses on probation for two years. The Consent Order arose out of allegations that Respondent failed to place insurance coverage and failed to supervise adequately her employees. By Consent Order filed April 30, 2002, Petitioner imposed an administrative fine of $2000 against Respondent. The Consent Order does not describe the underlying allegations. At all relevant times, Respondent has been a director, officer, and sole owner of AIA. She has owned the corporation since 1993. At all relevant times, Respondent was the only signatory on the AIA bank accounts. Customarily, Respondent markets the insurance and then sends customers to one of the AIA customer service representatives. A high-volume agency with over 15,000 active clients, AIA, which employs 10 persons, has issued about 50,000 policies since November 2001. For most, if not all, of the relevant period, AIA employed Tony Decambre as the primary agent, and customer service representatives performed much of the work in processing insurance applications. Petitioner attempted to prove that Respondent was the primary agent. Rather than produce copies of forms by which Respondent may have designated herself as the primary agent, Petitioner offered only copies of prints of screens of data maintained by Petitioner. The Administrative Law Judge excluded from evidence these data compilations. Respondent testified that Mr. Decambre was the primary agent. Petitioner's investigator testified that Respondent was the primary agent, at least the last time that he had checked. The investigator's testimony failed to establish by clear and convincing evidence that Respondent was the primary agent. On December 28, 2001, Fernando Gomez visited AIA to pay for a workers' compensation insurance policy to be issued by Florida United Businesses Association/Workers Compensation (FUBA). Respondent met with Mr. Gomez, who required the presence of another employee to translate into and from Spanish. As the producer, Respondent signed the application. FUBA bound the coverage on December 31, 2001. Among the three persons present on December 28, only Respondent testified. The application bears the date "December 28, 2001," although this handwriting is lighter than the remainder of the handwriting on the application and could have been written at a date subsequent to the date on which the application was taken. Petitioner contends that Respondent took the application on November 6, 2001, or somehow tried to bind FUBA as of November 6, 2001. The sole evidentiary basis for this contention is Petitioner Exhibit 9, which purports to be a certificate of liability insurance, bearing a date of December 28, 2001, but showing effective dates for general liability and workers' compensation coverage for Mr. Gomez of November 6, 2001. The certificate holder is stated to be Universal Drywall & Plastering, and the producer is stated to be AIA. The workers' compensation insurer is stated to be FUBA. Petitioner Exhibit 9 was admitted solely to prove what Universal Drywall & Plastering sent to FUBA to confirm the existence of Mr. Gomez's workers' compensation coverage. The certificate is false because it confirms workers' compensation insurance as of a date that neither FUBA nor AIA contends is correct. However, the failure to obtain testimony from Mr. Gomez, the AIA employee who translated, or an employee of Universal Drywall & Plastering who could explain how he or she obtained a copy of the certificate precludes a determination that Respondent is in any way responsible for the production or transmission of this false certificate. The certificate suggests that the person responsible for its preparation may not have had Respondent's presumed level of familiarity with FUBA. The person preparing the false certificate used a policy number that is not of a type used by FUBA to identify the workers' compensation policies that it issues. The false certificate bears an expiration date of November 6, 2002. In fact, the actual coverage issued by FUBA ended on April 1, 2002, because all of its workers' compensation policies expire each year on April 1. It appears that Universal Drywall & Plastering presented the false certificate to FUBA on January 2, 2002, so, as of that date, Mr. Gomez had workers' compensation coverage from FUBA. The record also fails to disclose why Mr. Gomez might have desired an earlier effective date. The information might have facilitated a determination of who was responsible for the fraudulent preparation of the certificate. Petitioner has failed to prove the material allegations of Count I. On October 25, 2002, AIA issued an Evidence of Property Insurance to Meryl Levin, showing an effective date of October 25, 2002 for homeowners and flood insurance in the amount of $114,000. The document states that "United" would provide the homeowners insurance at $910 per year and flood insurance at $247 per year. On October 30, 2002, AIA received a check in the amount of $910 from Stephen J. Allocco, P.A., and AIA deposited that check into its noninterest-bearing bank account at Wachovia Bank. On November 8, 2002, United Property & Casualty Insurance Company (United) sent Mr. Levin a notice that he owed $810 for his insurance policy, which bore an effective date of November 8, 2002. The due date is "upon receipt." On January 14, 2003, United canceled the insurance because it never had received the $810. United received a check for $810 on February 26, 2003, but the accompanying package failed to contain a "no loss" statement, which would have assured United that the insured had not suffered a loss between the purported coverage date and the date of receipt of the premium check. Absent such an assurance, United routinely declines to provide coverage because it will not cover losses retroactively. United thus returned the check. Mr. Levin did not testify as to this transaction, nor did anyone from AIA except Respondent, who disclaimed any direct involvement with the matter. There is no evidence of any loss suffered by Mr. Levin, nor is there any evidence of any intentional wrongdoing by Respondent. The determination as to whether Respondent negligently failed to satisfy all applicable duties imposed on her is frustrated by Petitioner's failure to call an expert witness who could have explained office practices in insurance agencies and proved what is reasonable and unreasonable to expect of Respondent. The record does not establish that United sent a copy of its November 8 statement to AIA. Count II portrays a single case in which AIA failed to pay a premium to an insurer for over three months--nothing more. The determination of whether Respondent has demonstrated unfitness for this omission is impossible absent a basis for determining an appropriate minimum standard of agency office practice. Petitioner has failed to prove the material allegations of Count II. On October 9, 2002, Respondent sent a letter to Gerald Kirby bearing the letterhead of AIA stating that "we" have reviewed your homeowner needs and "determined the best possible rate for you." Showing homeowners coverage of $518,000, as well as associated coverages, the letter quotes a total policy premium of $3278. The letter warns that "this quotation is an estimate and is not legally binding." At the bottom of the letter is: "Thanks!!!Joanne." The record reveals no other persons employed at AIA named "Joanne" besides Respondent. On the same date, AIA produced an evidence of property insurance, which shows homeowners and flood insurance with the same effective date of October 11, 2002, in the respective amounts of $518,000 and $250,000, and bearing respective premiums of $3278 and $411 annually. On October 11, 2002, AIA received a check in the amount of $3278 from Capital Abstract & Title and deposited that check into its noninterest-bearing bank account at Wachovia. AIA was to use these funds to purchase homeowners insurance from United, with coverage of $518,000 and an effective date of November 11, 2002 (according to the parties' stipulation, which misstates the year as "2001"). However, the premium for $518,000 of coverage from United was $1890 at the time. The proper amount of premium due for $518,000 of coverage was mooted by the fact that AIA, like all of United's agents at the time, lacked authority to bind United to more than $300,000 coverage without specific approval from a United representative. Such approval required, among other things, documentation of the value of the insured property. AIA sent United a check for $1777, which United received on November 12, 2002. This check was the proper premium for $300,000 of coverage. At the same time, AIA sent paperwork for the issuance of coverage to $587,000, but failed to send the documentation that United required. Thus, United issued only $300,000 of coverage, and Mr. Kirby was due a refund of $1501, which is the difference between the premium that he paid and the cost of the insurance that he received. AIA paid Mr. Kirby $1501 on February 24, 2003. After AIA or a United marketing representative submitted the required documentation, United approved on February 19, 2003, the increase of coverage to $518,000. It is unclear who paid the additional premium--AIA or Mr. Kirby. For the same reasons discussed in Count II, Petitioner has failed to prove the material allegations of Count III. Although AIA's handling of the Kirby transaction was flawed, again, the acts and omissions are not so stark as to eliminate the necessity of expert testimony to establish the minimum standard, against which to measure Respondent's performance of her duties. Mr. Kirby appears to have suffered no loss, and there is no evidence of intentional wrongdoing. Even though, as to this transaction, Respondent clearly had some personal involvement, it is impossible to determine her degree of responsibility for the uneven handling of the insurance transaction and short delay in sending the refund to Mr. Kirby or even whether these two aspects of the transaction demonstrate unfitness to transact insurance business. The remaining counts involve refunds from Pro Premium Finance Company (Pro Premium) to AIA and refunds from AIA to its customers. Pro Premium provides financing to persons purchasing insurance. Several customers of AIA borrowed money from Pro Premium to pay for insurance they were buying through AIA. For various reasons--typically, the cancelation of coverage--Pro Premium refunded portions of the premium to AIA, which subsequently refunded the unearned portion of the commission to the customer. Every two weeks, Pro Premium sends AIA refunds and statements, which clearly identify the insured, date of cancelation, amount of refund, and amount due the insured. The time that elapsed from when AIA received the refunds from Pro Premium to when AIA sent the customers their share of the refunds ranged from two to twelve months. AIA received the refunds from Pro Premium between April 15, 2003, and February 15, 2004, and AIA sent its customers their shares of the refunds between April 5, 2004, and May 12, 2004. The customer refunds are concentrated in a relatively short period of time because AIA discovered all of the unrefunded monies during a self-audit that it conducted during this six-week period. AIA performed the self-audit due to an audit underway at Pro Premium. Except as noted below, Respondent was not personally involved in any of these refund transactions. At the time of all of the Pro Premium transactions described in this recommended order, the policy of AIA was for the customer service representative to write the client within one week of receiving the refund from Pro Premium and ask for directions whether to apply the refund to new or existing insurance or to pay it to the customer. The customer service representatives were supervised by the agency manager, not Respondent. It is unclear what AIA's policy was if the customer did not respond. When AIA paid refunds, its policy at the time was for the agency manager to prepare the refund check, which Respondent would sign. In May 2004, AIA changed its handling of refunds by directing all Pro Premium refunds directly to the bookkeeper, who expedites the preparation of the refund checks, which can now be signed by Respondent or one of two other employees. As to Count IV, on April 15, 2003, Pro Premium sent AIA a check in the amount of $1361.03, which AIA deposited on May 7, 2003, into its noninterest-bearing account at Wachovia. Part of these funds--$117.21--represented unearned commission, which was due the insured, Erikna Guzman. By letter sent within one week of obtaining the Pro Premium refund, AIA informed Ms. Guzman of the refund and asked her to instruct AIA as to whether to apply it to new insurance or send her a refund. Ms. Guzman did not respond. On May 10, 2004, AIA sent Ms. Guzman a check for $117.21. Twelve months elapsed from when AIA received the refund and when it sent Ms. Guzman the money due her. As to Count V, on May 31, 2003, Pro Premium sent AIA a check in the amount of $1538.36, which AIA deposited on June 10, 2003, into its noninterest-bearing account at Wachovia. Part of these funds--$43.83--represented unearned commission, which was due the insured, Shannon Campbell. By letter sent after obtaining the Pro Premium refund, AIA informed Ms. Campbell of the refund and asked her to instruct AIA as to whether to apply it to new insurance or send her a refund. Ms. Campbell did not respond. On April 17, 2004, AIA sent Ms. Campbell a check for $43.83. Ten and one-half months elapsed from when AIA received the refund and when it sent Ms. Campbell the money due her. As to Count VII, on an unspecified date, Pro Premium sent AIA a check in the amount of $720.38, which AIA deposited on July 8, 2003, into its noninterest-bearing account at Wachovia. Part of these funds--$347.35--represented unearned commission, which was due the insured, Marie Philippe. By letter sent within one week of obtaining the Pro Premium refund, AIA informed Ms. Philippe of the refund and asked her to instruct AIA as to whether to apply it to new insurance or send her a refund. Ms. Philippe did not respond. On April 5, 2004, AIA sent Ms. Philippe a check for $347.35. At least nine months elapsed from when AIA received the refund and when it sent Ms. Philippe the money due her. As to Count VIII, on June 30, 2003, Pro Premium sent AIA a check in the amount of $1729.80, which AIA deposited on July 8, 2003, into its noninterest-bearing account at Wachovia. Part of these funds--$380.40--represented unearned commission, which was due the insured, Fernando Garcia. By letter sent within one week of obtaining the Pro Premium refund, AIA informed Mr. Garcia of the refund and asked him to instruct AIA as to whether to apply it to new insurance or send her a refund. The first letter was returned by the postal service as undeliverable. Mr. Garcia had sold his house and moved. However, on April 7, 2004, AIA sent Mr. Garcia a check for $380.40. Nine months elapsed from when AIA received the refund and when it sent Mr. Garcia the money due him. As to Count IX, on August 31, 2003, Pro Premium sent AIA a check in the amount of $1552.84, which AIA deposited on September 9, 2003, into its noninterest-bearing account at Wachovia. Part of these funds--$102.07--represented unearned commission, which was due the insured, Girline Reid. By letter sent within one week of obtaining the Pro Premium refund, AIA informed Ms. Reid of the refund and asked her to instruct AIA as to whether to apply it to new insurance or send her a refund. Respondent testified that Ms. Reid instructed AIA to apply the refund to insurance issued to her husband, which AIA did. However, Respondent did not testify when AIA applied the refund to the account of Ms. Reid's husband. On May 7, 2004, AIA sent Ms. Reid a check for $102.07. Eight months elapsed from when AIA received the refund and when it sent Ms. Reid the money due her. As to Count X, on August 31, 2003, Pro Premium sent AIA a check in the amount of $1552.84, which AIA deposited on September 9, 2003, into its noninterest-bearing account at Wachovia. Part of these funds--$169.06--represented unearned commission, which was due the insured, Guillermo Diaz, who is a significant customer of AIA. Respondent spoke with him shortly after AIA received the refund, and he instructed her to apply the refund to other insurance issued to him. Again, Respondent did not testify when Mr. Diaz instructed her to apply the refund to other insurance, but, given his importance as a repeat customer, he probably spoke with her shortly after AIA received the refund. However, on April 17, 2004, AIA sent Mr. Diaz a check for $169.06, to which he may not have been entitled. Eight and one-half months elapsed from when AIA received the refund and when it sent Mr. Diaz the refund check. As to Count XI, on November 30, 2003, Pro Premium sent AIA a check in the amount of $4994.25, which AIA deposited on December 9, 2003, into its noninterest-bearing account at Wachovia. Part of these funds--$143.18--represented unearned commission, which was due the insured, Bernardo Archibald. By letter sent within one week of obtaining the Pro Premium refund, AIA informed Mr. Archibald of the refund and asked him to instruct AIA as to whether to apply it to new insurance or send her a refund. Respondent testified that Mr. Archibald directed AIA to keep the money to apply to insurance for which he owed additional premium because he had not yet obtained a four-point inspection (heating, wiring, roofing, and plumbing) of an older home, so as to be entitled to a reduced premium. However, Respondent did not testify when AIA received this direction from Mr. Archibald, although only five months elapsed from AIA's receipt of the refund from Pro Premium to its issuance, on May 7, 2004, of a check to Mr. Archibald for $143.18. As to Count XII, on an unspecified date, Pro Premium sent AIA a check in the amount of $3881.67, which AIA deposited on January 13, 2004, into its noninterest-bearing account at Wachovia. Part of these funds--$488.83--represented unearned commission, which was due the insured, Danette Piscopo. By letter sent within one week of obtaining the Pro Premium refund, AIA informed Ms. Piscopo of the refund and asked her to instruct AIA as to whether to apply it to new insurance or send her a refund. Respondent testified that AIA sent a refund check, but Ms. Piscopo never cashed it. However, Respondent did not testify when it sent the earlier check, although only about three months elapsed from AIA's receipt of the refund from Pro Premium to its issuance on April 15, 2004, of a check to Ms. Piscopo for $488.83. As to Count XIII, on December 31, 2003, Pro Premium sent AIA a check in the amount of $1988.58, which AIA deposited on January 13, 2004, into its noninterest-bearing account at Wachovia. Part of these funds--$294.60--represented unearned commission, which was due the insured, Allam Masief. Respondent testified that AIA mistakenly issued two policies to Mr. Masief for the same coverage from two insurers and mistakenly paid Pro Premium twice, even though Mr. Masief paid only one premium. Both policies were canceled. Mr. Masief asked AIA to reinstate one policy, but it was unable to do so. Respondent did not testify when these discussions with Mr. Masief took place, but only four and one-half months elapsed from AIA's receipt of the refund from Pro Premium and to its issuance, on May 12, 2004, of a check to Mr. Masief for $294.60. As to Count XIV, on January 31, 2004, Pro Premium sent AIA a check in the amount of $3260.03, which AIA deposited on February 10, 2004, into its noninterest-bearing account at Wachovia. Part of these funds--$886.74--represented unearned commission, which was due the insured, Geraldine DeStefanis. By letter sent within one week of obtaining the Pro Premium refund, AIA informed Ms. DeStefanis of the refund and asked her to instruct AIA as to whether to apply it to new insurance or send her a refund. Respondent testified that Ms. DeStefanis "probably" asked AIA to try to reinstate the canceled policy, but AIA was unable to do so. On May 7, 2004, AIA sent Ms. DeStefanis a check for $886.74. Three months elapsed from when AIA received the refund and when it sent Ms. DeStefanis the money due her. As to Count XV, on an unspecified date, Pro Premium sent AIA a check in the amount of $4750.53, which AIA deposited on March 9, 2004, into its noninterest-bearing account at Wachovia. Part of these funds--$343.38--represented unearned commission, which was due the insured, Leslie Ramrattan. By letter sent within one week of obtaining the Pro Premium refund, AIA informed Ms. Ramrattan of the refund and asked her to instruct AIA as to whether to apply it to new insurance or send her a refund. Respondent testified that Ms. Ramrattan asked AIA to try to reinstate the policy, but AIA was unable to do so. On May 7, 2004, AIA sent Ms. Ramrattan a check for $343.38. About two months elapsed from when AIA received the refund and when it sent Ms. Ramrattan the money due her. Petitioner has failed to prove the material allegations of Counts IV-V and VII-XV, with one exception each as to Counts VI, V, and VII. In general, there is no evidence of any intentional wrongdoing by anyone at AIA, nor is there evidence that Respondent should have known of the failure of her staff to promptly refund the monies due their insureds. In several of these transactions in which AIA held the customers' refunds for relatively long periods of time, the record demonstrates that this was in accordance with the customers' directions or otherwise justified. For the shorter periods-- five months or less--the record provides no basis for determining that Respondent should have known of this failure within this relatively short period of time. In several counts, AIA failed to meet its obligation, under Florida Administrative Code Rule 69O-196.010(2)(b), which is cited below, to refund or apply the unearned commissions within 15 days of receipt of the refund and statement from Pro Premium. These are Counts IV, V, VII, XIV, and XV. It is impossible to determine if AIA violated this rule in Count VIII, where the insured had moved; Counts IX-XI, where the insureds told AIA to apply the refunds to new or other insurance and presumably AIA did so, perhaps within the required 15 days; and Count XIII, where AIA appears to have paid for one policy out of its own funds and the insured may have received a windfall. As to Counts IV, V, VII, XIV, and XV, the question is whether Respondent is professionally responsible for the violations by AIA. These counts fall into two groups. In Counts IV, V, and VII, AIA wrongfully retained the refunds for long periods--12 months, 10 and one-half months, and at least nine months, respectively. In Counts XIV and XV, AIA wrongfully retained the refunds much shorter periods--less than three months and less than two months, respectively. Perhaps expert testimony could have established that Respondent should have detected, within a period of less than 90 days, the wrongfully retained funds, but, absent such testimony, an inference to this effect is impossible, especially when the standard is clear and convincing evidence. However, expert testimony is unnecessary to establish Respondent's professional responsibility for failing to detect this situation for 9-12 months. Given the long durations of time, the clarity of the Pro Premium's refund statements, the relatively small number of employees, Respondent's integral involvement in the daily operations of AIA as the only person authorized to sign checks, and the importance of restoring funds of customers to customers promptly, it is a reasonable inference that Respondent should have known that AIA staff had wrongfully failed to send these refunds to its customers for 9-12 months. Any suggestion by Respondent that the absence of a response from these customers justified retaining these moneys fails to account for the fact that AIA later sent the refund checks to the customers, even though they had still not contacted AIA, according to the record. Thus, for Counts IV, V, and VII, Petitioner has proved by clear and convincing evidence that Respondent has demonstrated her unfitness to transact insurance business.
Recommendation It is RECOMMENDED that the Department of Financial Services enter a final order dismissing Counts I-III and VIII-XV of the Administrative Complaint; finding Respondent guilty of three violations (Counts IV, V, and VII) of demonstrating unfitness to engage in the insurance business, in violation of Section 626.611(7), Florida Statutes; and suspending her insurance licenses for 30 days. DONE AND ENTERED this 15th day of November, 2006, in Tallahassee, Leon County, Florida. S ROBERT E. MEALE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of November, 2006. COPIES FURNISHED: Honorable Tom Gallagher Chief Financial Officer Department of Financial Sevices The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Carlos G. Muñiz, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307 Robert Alan Fox Department of Financial Services Division of Legal Services 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0333 Thompkins W. White White & Chang, P.A. 1650 Summit Lake Drive, Suite 1013 Tallahassee, Florida 32317
Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, documentary evidence received and the entire record filed herein, I hereby make the following relevant factual findings: During times material, Respondent was licensed and/or qualified for licensure as a General lines (2-20), Ordinary Life, and Health Insurance (2-18) Agent in Florida (Petitioner's Exhibit 1). During times material to the allegations herein, 1/ Respondent was an officer and director of White Insurance Agency, Inc. (White Insurance). (Petitioner's Exhibit 2). On June 20, representatives of Great Wall Chinese Restaurant (Great Wall) entered into a premium finance agreement with Crown Premium Finance, Inc., (Crown), through White Insurance, which indicated the insurance coverage for Great Wall would be provided and issued through Service Insurance Company and Corporate Group Services. (Petitioner's Exhibit 3, sub. "a"). On June 20, Respondent signed the premium finance agreement as broker- agent. (Petitioner's Exhibit 3, sub "a"). On June 22, pursuant to the premium finance agreement, Crown issued a check made payable to White Insurance in the amount of eight hundred ninety-four dollars ($894.00) which was subsequently deposited into Respondent's bank account. (Petitioner's 3, sub B). On July 13, a representative of Service Insurance Company notified Crown that they had not received the full annual premium for Great Wall and a binder charge of $81.00 was sent to White Insurance. (Petitioner's Exhibit 3 sub C). On July 13, representatives of Service Insurance Company notified Respondent that coverage was bound for Great Wall's risk for only 33 days and a charge of $81.00 was sent to White Insurance. (Petitioner's Exhibit 3, sub D). On July 13, representatives of Service Insurance Company mailed a cancellation notice to Great Wall and Crown indicating an $81.00 charge as due and owing. (Petitioner's Exhibit 3, sub) On September 14, Crown sent a standard cancellation notice to both Corporate Group Services and Service Insurance Company. (Petitioner's Exhibit 3, sub H & I). On November 8, representatives of Corporate Group Services notified Crown that an application for insurance was received but was rejected and returned to the agent's (Respondent) office. (Petitioner's Exhibit 3, sub F). Neither Service Insurance Company nor Corporate Group Services issued a policy for the consumer, Great Wall. Respondent refuses to return the premium monies received for the Great Wall coverage to Crown. Respondent owes Crown for the premium monies submitted by Crown. COUNT II On July 8, representatives of Chateau Madrid, Inc., a restaurant, entered into a premium finance agreement with Crown, through Respondent, which indicated the insurance coverage would be issued through Casualty Indemnity Exchange. (Petitioner's Exhibit 4, sub A). On July 8, Respondent signed the premium finance agreement as broker/agent. On July 25, pursuant to the premium finance agreement, Crown issued a check made payable to Respondent in the amount of three thousand five hundred eight dollars (3,508.00). The check was deposited into White Insurance's bank account. (Petitioner's Exhibit 4, sub b). On August 30, Crown sent a standard cancellation notice to both Chateau Madrid and Casualty Indemnity Exchange and their managing general agents, Program Underwriters. (Petitioner's Exhibit 4, sub D). As a result of the standard cancellation notice, the policy was reduced to a short-term policy which was effective July 15 and expired September 13, 1983. On March 13, 1984, Program Underwriters notified Crown that they had not received a premium payment concerning this particular policy and that neither Respondent nor White Insurance was an authorized agent for Casualty Indemnity Exchange. (Petitioner's Exhibit 4, sub e). Respondent never returned the premium monies he received to Crown. Respondent owes Crown for the premium monies he received from Crown. COUNT III On September 16, a representative of Tennis Trainer, Inc. requested that Respondent secure a multi-peril insurance policy for Tennis Trainer. Respondent secured a binder for Tennis Trainer indicating the insurance would be issued through Service Insurance Company. On September 16, Respondent signed the binder as an authorized representative. (Petitioner's Exhibit 13, sub b). On September 16, Respondent was not authorized to represent Service Insurance Company. (Petitioner's Exhibits 12 and 13, sub a and b). On September 15, Jeffrey Rider, Vice President of Tennis Trainer issued a check in the amount of three hundred five dollars ($305.00) to White Insurance representing the downpayment necessary to secure the agreed business insurance coverage. Thereafter, Respondent, took no measures to secure insurance for Tennis Trainer other than issuing the binder. Respondent has failed to submit the premium to secure the agreed upon insurance coverage on behalf of Tennis Trainer. Additionally, Respondent refused to return the premium payments to Tennis Trainer despite its demand (from Respondent) to do so. Tennis Trainer has directly forwarded the remainder of the premium to Service Insurance to secure the multi-peril coverage. Service Insurance Company is owed a balance due of approximately $305.00 from Respondent. COUNT VI On May 5, Donald Powers entered into a premium finance agreement with Crown, through White Insurance. Pursuant to the agreement, the insurance coverage would be provided through Progressive American Insurance (Progressive). On May 9, Crown issued a check made payable to White Insurance in the amount of two hundred ninety-nine dollars ($299.00) which was subsequently deposited into Respondent's bank account. On October 1, the consumer, Donald Powers, requested that the policy be cancelled. On October 25, Crown sent a standard cancellation notice to both the consumer and Progressive. On October 19, Progressive notified both Crown and White Insurance that the gross unearned premium of two hundred twenty-six dollars ($226.00) was applied to the Agent's (White Insurance) monthly statement and Crown must therefore collect this amount from the Agent. Progressive American never received any premium payments from Respondent concerning the subject policy. On November 25, 1986, Progressive notified Petitioner that the policy was originally accepted on May 7, 1983 at an annual premium of four hundred sixty dollars ($460.00) and was cancelled on October 1, 1983, with Two Hundred twenty-six Dollars ($226.00) credited to Respondent's statement. Progressive never received any premium payment for this policy. Respondent has failed to return to Crown the returned premium credit received on behalf of the Donald Powers' policy. COUNT VII On November 28, Russell Lung entered into a premium finance agreement with Crown through White Insurance. The insurance coverage for Lung was to be provided and issued through Interstate Underwriters. On November 29, pursuant to the premium finance agreement with Russell Lung, Crown issued a check made payable to White Insurance in the amount of one hundred sixty-seven dollars (167.00) which was subsequently deposited into a bank account controlled by Respondent. On February 14, 1984, Crown sent a standard cancellation notice to both the consumer and Interstate Underwriters. The policy for Russell Lung was cancelled before its normal expiration date and the unearned premium was credited to Respondent's account. Respondent has not returned to Crown the unearned premium credit received for Lung's policy. COUNT VIII On December 6, representatives of Thomson's Lawn Care (Thomson) entered a premium finance agreement with Crown, through White Insurance, which indicated the insurance coverage would be provided through Northeast Insurance and Southern Underwriters as managing general agents. On December 8, pursuant to the premium finance agreement, Crown issued a check made payable to White Insurance in the amount of one hundred fifty-one dollars ($151.00) which was subsequently deposited into a bank account controlled by Respondent. On January 25, 1984, Crown sent a standard cancellation notice to both the consumer and Northeast Insurance Company/Southern Underwriters. On February 8, 1984, Southern Underwriters notified Crown that they were never paid by White Insurance for Thomson's insurance. On October 16, 1984, Crown was notified by representatives of Thomson's that immediately after making the down payment to White Insurance, Thomson notified White Insurance that the policy should be cancelled immediately since Thomson never operated as a business. (Petitioner's Exhibit 7, sub e). Crown received the returned premium payment from Southern Underwriters even though the original payment to White Insurance by Crown was never forwarded to Southern Underwriters. Respondent refuses to return the unearned premium payment to Crown. COUNT IX On October 15, representatives of Comfort Inn entered a premium finance agreement with Crown, through White Insurance, which indicated the insurance coverage would be provided through Protective National Insurance Company and Interstate Fire and Casualty Company. On November 4, pursuant to the premium finance agreement, Crown issued a check made payable to White Insurance in the amount of one thousand six hundred sixty dollars ($1,660.00) which was subsequently deposited into a bank account controlled by Respondent. On March 1, 1984, Crown sent a standard cancellation notice to both Comfort Inn and the Insurance Companies involved. On February 6, 1984, Comfort Inn's counsel, James W. Martin, forwarded a letter to the insurance companies involved and simultaneously notified Crown that White failed to remit funds to the insurance companies involved and as a result, the policy was cancelled and subsequently reinstated only after his client, Comfort Inn paid the premium directly to the respective insurers. (Petitioner's Exhibit 8, sub e). On February 23, 1984, Irwin Lonschien of Crown responded to attorney Martin's letter and advised that the one thousand six hundred sixty dollars premium payment was forwarded to White Insurance pursuant to the premium finance agreement on November 4, 1983. On July 23, 1984, William Edwards, a representative of Comfort Inn, wrote a letter to Dan Martinez of Eagle Underwriters advising that Comfort Inn had paid a premium to White Insurance and Comfort Inn no longer desired White Insurance to represent them in insurance matters. Respondent, has not returned premiums received from Crown and is therefore indebted to Crown in the amount of one thousand six hundred sixty dollars. COUNT X On April 14, representatives of Royal Palm Motel entered into a premium finance agreement with Crown, through White Insurance which indicated insurance coverage would be provided through Casualty Indemnity- Exchange. On April 18, pursuant to the premium finance agreement, Crown issued a check made payable to White Insurance in the amount of nine hundred seventy- seven dollars ($977.00) which was subsequently deposited into a bank account controlled by Respondent. COUNT XI On March 16, 1982, representatives of Flip's of West Broward entered a premium finance agreement with Crown, through White Insurance which indicated the insurance coverage would be provided through Service Insurance Company. On March 19, 1982, pursuant to the premium finance agreement, Crown issued a check made payable to White in the amount of six hundred forty-eight dollars ($648.00) which was subsequently deposited in a bank account controlled by Respondent. Sometime between March 1982 and June 20, 1982, White Insurance forwarded a premium payment for this coverage to Service Insurance Company. On June 20, 1982, Crown sent a standard cancellation to the consumer and Service Insurance indicating the policy was to be cancelled. By letter dated January 7, Service Insurance notified White Insurance that the policy had been cancelled and the returned premium for the policy was credited to the account of White Insurance. Respondent, as agent/director of White Insurance has failed and refused to return to Crown the returned premiums received for Flip's of West Broward. COUNT XII On November 7, Paula Wilcoxon entered a premium finance agreement with Crown, through White Insurance, indicating the insurance coverage would be issued through Universal Casualty. On November 8, pursuant to the premium finance agreement, Crown issued a check made payable to White Insurance in the amount of two hundred ninety-five dollars ($295.00) which was subsequently deposited into a bank account controlled by Respondent. On December 15, Crown notified the consumer and Universal Casualty, by standard cancellation notice, that the policy was being cancelled. Respondent has refused and continues to refuse to return the unearned premium to Crown.
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 revoking all licenses and qualifications for licensure of Respondent, Kenneth Everett White, as an insurance agent in the State of Florida. RECOMMENDED this 20th day of March, 1987, in Tallahassee, Florida. JAMES E. BRADWELL 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 20th day of March, 1987.
The Issue Whether, upon proof of eligibility, pursuant to Sections 624.401 and 624.404, Florida Statutes, Petitioner may be granted a Certificate of Authority to transact business as a property and casualty insurer in the State of Florida.
Findings Of Fact Petitioner Dallas National Insurance Company (Dallas National) is a Stock Insurance Company, domiciled in Texas, with headquarters in Dallas, Texas. It writes predominantly small business liability insurance and workers’ compensation insurance, both of which fall in the property and casualty classification of insurance, generally. Respondent Office of Insurance Regulation (OIR) is the State Agency responsible for licensing and regulating insurance in Florida. Absent a Florida license, Petitioner Dallas National cannot legally write or sell insurance in this state. Dallas National is a successor in interest to Dallas Fire Insurance Company (Dallas Fire) and California Indemnity Insurance Company (California Indemnity). California Indemnity was previously licensed to do business in Florida. Its license to do business in Florida was revoked by OIR in 2006, while Dallas Fire and California Indemnity were transitioning into Dallas National, as more fully described infra. In 2006, Petitioner Dallas National filed an application for a certificate of authority as a foreign property and casualty insurer to write lines of workers' compensation and employer’s liability insurance in Florida. That application was denied on December 1, 2006. Petitioner reapplied for a Florida license in 2008, and was denied by a letter from Respondent, dated September 17, 2008. It is this letter and present application and denial that are at issue herein. The September 17, 2008, denial letter incorporated parts of the earlier December 1, 2006, denial letter. (See Preliminary Statement). Dallas Fire was a property and casualty insurer authorized to do business in Texas and Oklahoma, which was acquired by Charles David Wood in July 2002. In December 2003, Dallas Fire, by consent of Mr. Wood and its Board of Directors, was placed under administrative supervision by the Texas Office of Insurance Regulation. By mutual agreement, the Texas regulatory agency’s oversight was not made public, and Mr. Wood continued to manage the company through his own staff, while taking instruction and advice from the Texas regulator. Texas lifted its oversight after approximately 19 months. During this period of time, and for years before and after, Betty Patterson was a Texas Deputy Commissioner of Insurance. At about the same time in 2002, that Mr. Wood accepted Texas’ regulatory oversight, a search was conducted and Chris Nehls was ultimately selected as a replacement corporate president for the company that ultimately became Dallas National. Mr. Nehls continues as president of Dallas National and has final responsibility for all operations, underwritings, claims handling, profits and losses, accounting and finance, and any of the operation and technical functions within the company. He had oversight of Dallas National’s successive license applications to OIR in 2006 and 2008. In 2005-2006, Mr. Wood, with approval by the Texas and California insurance regulatory agencies, acquired California Indemnity, a property and casualty insurer licensed in the State of California and 30 other states. When purchased, California Indemnity had a number of old regulatory actions pending against it by California’s Department of Insurance. California’s insurance regulator’s agreement/acquiescense in Mr. Wood’s purchase of California Indemnity was conditioned on (1) Mr. Wood’s transferring California Indemnity to Texas, where it would be merged with Dallas Fire to become Dallas National; (2) Dallas National’s removing the word “California” from its corporate name by December 31, 2005; and (3) the re-domesticated company’s not writing any insurance in California until California’s insurance regulatory agency approved. This agreement has kept Dallas National under California regulatory scrutiny since that time. Dallas National continues to invite California to inspect its offices, its books, and its business activities, but Dallas National has yet to formally petition for a license in California.1/ On January 2, 2006, effective December 31, 2005, the merger of Dallas Fire and California Indemnity into Dallas National Insurance Company was approved by the Texas Department of Insurance. This effected the name change in a timely manner under Dallas National’s agreement with California. However, Dallas National did not fulfill the letter of its agreement with the California regulator, because the paperwork for finally divesting itself of the word “California” was not completed and filed with California until September 12, 2007. California has neither prosecuted nor fined Dallas National for this delay, and despite a 2003, California violation by Dallas Fire, continues to be willing to work with Dallas National towards California licensure. (Cf. Findings of Fact 66-70). At the present time, Dallas National is licensed as a property and casualty insurer in 39 states and the District of Columbia. Respondent correctly points out that because Dallas National acquired approximately 30 states’ licenses at the same time it re-domesticated California Indemnity and renamed Dallas Fire, Dallas National and Mr. Wood have not proven themselves in the same way as if Dallas National had acquired 30 new licenses on its own. Even so, it appears that, since 2003, at least six states have found Dallas National, and derivatively Mr. Wood, to be honest, competent, and trustworthy enough for licensing purposes. In direct contrast, OIR has pronounced Mr. Wood and Dallas National not sufficiently honest, competent, and trustworthy to be licensed to write insurance in Florida. (See Preliminary Statement). After forming Dallas National in 2002-2003, its principals concentrated on a business model wherein Dallas National would provide workers’ compensation insurance coverage for the “employee staff leasing companies” a/k/a “professional employer organizations” (PEOs) owned by Mr. Wood. Petitioner’s business theory is that Dallas National benefits from more timely and effective underwriting and claims processing because of its access to a PEO’s payroll and computer systems and otherwise benefits from close communication with staff leasing personnel. Mr. Wood owns PEOs operating in many of the states in which Dallas National does business. He opened his first PEO in 1991, and his first PEO in Florida in 1998. AMS Staff Leasing, Inc., AMS Staff Leasing II, Inc., and Equity Group Leasing I, Inc., are PEOs catering to different types of small businesses and authorized and licensed to do business in Florida. They are all owned 100 per cent by Mr. Wood. AMS Staff Leasing, Inc., does most of the staff leasing business in Florida. (Hereafter, AMS Staff Leasing Inc., and AMS Staff Leasing II, Inc., will be referred to as “AMS” and Equity Group Leasing I, Inc., will be referred to as “Equity.”) Companion Property and Casualty Insurance Company (Companion) is domiciled in South Carolina and is an OIR- authorized property and casualty insurer in Florida. Companion currently provides workers’ compensation coverage to Mr. Wood’s Florida PEOs, AMS and Equity. At the present time, DNIC Insurance Holdings, Inc., a holding company owned 100 per cent by Mr. Wood, owns Jefferson Life Insurance Company and, through another entity, owns Petitioner herein, Dallas National Insurance Company. At the present time, Aspen Administrators, Inc. (Aspen), is a Florida-licensed “third party administrator.” Aspen is owned 100 per cent by Mr. Wood. Aspen now processes workers’ compensation claims for Companion in Florida. Previously, it processed claims for Providence Property and Casualty Insurance Company (Providence) in Florida. Aspen also handles workers’ compensation claims on behalf of Dallas National in a number of other jurisdictions. Dallas National or Companion can cease to do business with Aspen and hire another third party administrator at any time. However, due to Mr. Wood’s and Dallas National’s preferred business model, that is an unlikely prospect for Dallas National. Florida PEOs provide a valuable service for small business owners. A PEO can obtain affordable workers’ compensation coverage for a large group of employees and lease those employees to several small businesses which otherwise could not operate. PEOs, like other employers, frequently contract for provided bundled services by third party administrators who perform all the claims handling, payroll tax, human resources services, and other personnel services for the PEO-employer. In Florida, as in most states, a PEO or staff leasing company must obtain workers’ compensation coverage through a master policy covering all employees the PEO employs and then leases to small businesses. California has no PEO/staff leasing law, and individual workers’ compensation policies must be purchased by the PEO to cover each entity to whom the PEO leases employees. This difference has caused both California and Dallas Fire/Dallas National some problems in the past. (See Finding of Fact 67). Although common ownership of an insurer and affiliated PEOs is not prohibited by Florida statute or rule, and although Lion Insurance Company, Southern Eagle Insurance Company, and Frank Crum Insurance Company are all licensed in Florida as property and casualty insurers providing workers’ compensation coverage to employers located in Florida, and although each of these companies, like Petitioner Dallas National, is owned by a single person or entity and is affiliated with a PEO which the 100 per cent individually-owned insurer insures in the State of Florida, OIR is concerned about the inter-relationships of the various entities in this case and with the fact that, as 100 per cent shareholder of all of those entities, Mr. Wood is the “controlling shareholder.” OIR witnesses testified that the Agency views it as critical that a PEO and its insurer be separated so that claims are handled and reported properly. OIR also asserted that all three of the other similarly structured companies and affiliates differ from Dallas National because they use unaffiliated third party administrators, but that was demonstrated only as to one such insurer, a start-up company with no compliance history. PEOs obtain their own Florida licenses, subject to regulatory oversight. (See §§ 468.524—468.535, Fla. Stat.). Third party administrators obtain their own Florida licenses, subject to regulatory oversight. (See §§ 626.8805 and 626.891, Fla. Stat.). Insurance companies obtain their own Florida licenses, subject to regulatory oversight. (See Conclusions of Law). No Florida statute or rule prohibits 100 percent ownership of the stock of an insurance company by a single individual. In short, there is no Florida statute or rule that prohibits Petitioner’s business model, but it is clear from the testimony, and the candor and demeanor of OIR’s witnesses while testifying, that although the Legislature has authorized PEOs/staff leasing companies, OIR’s in-house witnesses see them as opportunities for abuse, and they simply do not like the concept of PEOs, which have been a legitimate business model in Florida since the 1990’s. Having eliminated those statements attributed to Agency employees in the course of litigation settlement negotiations and relying only upon their testimony at the instant hearing and statements made during the course of the two licensing processes related to this particular Petitioner, which statements reasonably constitute either Agency admissions against interest or the Agency’s rationale in the licensing process, it is clear that Respondent’s reviewers are holding any entity associated with Mr. Wood or with PEOs to a higher, or at least different, standard than other applicants for a Florida workers’ compensation insurance carrier’s license.2/ OIR’s Property and Casualty Financial Oversight Division’s review of the current Dallas National application raised concerns about Dallas National’s relationship with its affiliated PEOs. OIR wants assurance that there are sufficient checks and balances between the affiliated entities. “An adequate firewall,” was the term repeatedly used. What the desired “firewall” is supposed to accomplish was explained only to the extent that the Agency wanted to be certain that injured workers’ compensation claimants (employed by AMS) would be timely and correctly paid their workers’ compensation (indemnity), that their medical bills (medical) would be timely and correctly paid to their medical practitioners, and that Dallas National’s underwriting practices must provide sufficient reserves to cover the “long tail” of workers’ compensation injuries.3/ However, there is no OIR or Division of Workers’ Compensation rule defining an adequate “firewall.” The Agency just believes it is safer, or at least easier, to deny an out-of-state application than it is to monitor a questionable non-domiciliary carrier after licensing, even though Florida can, and does, audit out-of- state insurers. In 2006, Florida cancelled California Indemnity’s license to do business in Florida and required that Dallas National re-apply in its own name, which Dallas National promptly did. On December 1, 2006, Respondent OIR denied Petitioner Dallas National’s first application for Florida licensure. A formal proceeding under Section 120.57(1), Florida Statutes, ensued, and Petitioner Dallas National ultimately dismissed that proceeding and withdrew its 2006 application on the belief that if Dallas National reconstituted its Board of Directors with persons who were not already employees of Dallas National, OIR would grant its next application for a certificate of authority.4/ In 2007, Dallas National reconstituted its Board of Directors. All current members are highly qualified in the field of insurance. None have any adverse criminal or regulatory history. Five-ninths of the Board (a majority) are not Dallas National employees and not previously associated with any Wood enterprise. These new members are Laura Wehrle, Mike Pickens, Mick Thompson, Marta Prado Butterworth, and Betty Patterson. Ms. Wehrle was a senior vice-president of Liberty Mutual Insurance Company, which at the time of her service there had the largest book of workers’ compensation business in Florida. Ms. Wehrle’s area of expertise within Liberty Mutual was PEOs. Mike Pickens is the former Arkansas Commissioner of Insurance, who described Petitioner’s prior problems in that state as extremely minor. (In 2002, while Mr. Pickens was Arkansas Insurance Commissioner, Arkansas disciplined AMS for operating without a license for eight months). Mick Thompson is the current Oklahoma Commissioner of Banking. Marta Prado Butterworth is a successful, self-made business-woman in the health care industry. Betty Patterson was the Texas Deputy Commissioner of Insurance who oversaw Dallas National and who graduated Dallas National from that agency’s oversight. Ms. Patterson and Mr. Pickens have been accredited, active members of the National Association of Insurance Commissioners (NAIC) for many years. Ms. Patterson is a consistent award-winner in that society of state regulators. Both Patterson and Pickens joined Dallas National’s Board quite some time after the end of their terms of office in their respective states (after retirement for Ms. Patterson) and well after Dallas National had been returned to “business as usual” by their respective regulatory agencies. Charles David Wood is Chairman of the Board of Dallas National, but he is currently semi-retired and has been semi- retired from all of his businesses since early 2006. Neither he, the new five Board members, nor Mr. Nehls, who also currently sits on the Board, has ever declared bankruptcy or been arrested, indicted, or convicted of any crime. There also is no evidence that either of the other two members of the Board, who have personal and business relationships with Mr. Wood, has any adverse bankruptcy, criminal, or regulatory history. The Board members who testified herein vigorously defended their own integrity and that of Mr. Wood. All described Mr. Wood as the equivalent of a member emeritus or a supportive, but non-initiating, member of the Board who attends meetings on an irregular basis. All agreed that, with the exception of Mr. Wood, Dallas National now has a dynamic Board that has considerable regular “hands on” expertise and involvement in making Dallas National a better insurer, which is compliant with all regulatory agencies in each of the 39 different regulatory environments where Dallas National operates. None has found that any information has been withheld from the Board by any of Mr. Wood's enterprises. None has found it difficult to get any information sought from Dallas National employees. Except for Mr. Wood’s presence on the Board, the credentials and integrity of the new Board members are apparently not an issue for OIR, but OIR’s regulators are concerned because Dallas National’s by-laws permit removal of any director by a majority vote of the shareholders (that is, unilaterally by Mr. Wood) at any special meeting of the Board called for that purpose. There is no reason to suppose this is a situation unique to Dallas National. (See Finding of Fact 25). OIR also considers it “problematic” that several of Mr. Wood’s companies are housed on several floors of the same building at the same corporate address in Dallas Texas. Of particular concern were the first-hand observations of Susan Bernard, Bureau Chief of the San Francisco and Sacramento Offices of the Field Examination Division of the California Department of Insurance. She observed that administrators for Aspen were located in an open area of the same floor (or perhaps two floors below) Dallas National’s offices; that AMS employees were on the same floor as Dallas National; and that all shared the same computer systems. Added to other factors, Ms. Bernard and OIR interpret the foregoing as amounting to “comingling" and interactions not at “arm’s-length.” The portion of Aspen or AMS located in the same Dallas office building with Dallas National probably is more than just AMS’s and Aspen’s Texas operations, (see infra) but clearly, AMS and Aspen have offices in Florida and in other states in which they do business. Both Ms. Bernard and Stephen Yon, Senior Management Analyst II with the Florida Division of Workers’ Compensation, now part of OIR, testified that it was hard to distinguish where Aspen or AMS left off and Dallas National began in the various computer functions in the Dallas offices, but obviously, both regulators were eventually able to make distinctions, because each prepared reports based on doing so, and Mr. Yon was able to assess Florida fines accordingly. (See Findings of Fact 53-56). That said, computers undoubtedly link Dallas National with all its affiliates in every state, and there is no reason to suppose that computers do not link other insurance companies, to some degree at least, with the employers they insure, with their insured PEOs (such as AMS) if they have them, and possibly with the third party administrators (such as Aspen) for those PEOs. Aspen’s past reporting problems are a big part of OIR’s denial letter for Dallas National’s current application, as are violations of the Florida Workers’ Compensation Statute by both AMS and Aspen (see Findings of Fact 52-56), but no significant comparison was made at hearing between Aspen’s historical past errors and omissions and the historical accuracy of any other third party administrators. Also, no significant comparison was shown with regard to AMS’ past errors and omissions and those of any other PEOs. Another of OIR’s reasons for denying Dallas National’s current application was the alleged incompetency, untrustworthiness and/or “bad faith” performance of Mr. Wood in relation to a 16 days' gap of workers’ compensation coverage of AMS in Florida which occurred in 2002. Over the years, AMS has sequentially obtained workers’ compensation coverage in Florida from several insurance companies, among them Reliance National Insurance Company, CNA Insurance Company (CNA), Insurance Companies of America (ICA), Providence, and Companion. Relevant to OIR’s mistrust of Mr. Wood and its concerns with the 2002 gap of AMS coverage, were a one-million dollar deductible workers’ compensation policy for AMS issued by CNA prior to Mr. Wood's acquisition of Dallas Fire in July 2002. In the last quarter of 2001, CNA had advised AMS that CNA was preparing to stop insuring PEOs but that AMS’ CNA policy would be renewed for the period of September 1, 2001, through September 1, 2002, without cancellation during that period, but without renewal at its end. Nonetheless, in late February, or in March 2002, CNA issued a 30-day cancellation notice to AMS. AMS sued CNA, and the suit was settled with an agreement for CNA to continue workers’ compensation coverage in Florida for AMS through the end of June 2002. To eliminate any potential for a gap in coverage, AMS attempted to arrange for a replacement policy to be issued by Bankers Insurance Company (Bankers), based in St. Petersburg, Florida. At all times material, Bankers was a Florida insurer licensed by OIR. As part of this 2002 transaction, Bankers essentially mortgaged or pledged a stock it owned to Mr. Wood as security or collateral for a five-million dollar loan from him, and in turn, Bankers was to provide workers’ compensation coverage to AMS as of June 20, 2002, so that AMS would have no gap in coverage when CNA pulled out. However, Bankers never issued a workers’ compensation policy to AMS, and OIR submits that a “handshake deal” with Bankers demonstrated Mr. Wood's bad business judgment.5/ AMS next attempted to obtain its workers’ compensation coverage from Guerling Insurance Company. Guerling required a five-million dollar down payment of premium to issue a certificate of insurance to AMS for a policy to take effect at midnight on June 20, 2002. The down payment was made, but after relying for two weeks on the certificate of coverage obtained, AMS (in the persons of Mr. Wood and his personal attorney Mr. Reid) discovered that the certificate, purportedly from Guerling, was a fake.6/ As a result of the fake certificate of insurance, AMS had operated in Florida during a 16-day gap in its workers’ compensation coverage, so even though Mr. Wood personally paid all workers’ compensation claims which arose during the gap, AMS, as the employer of those workers’ compensation claimants, was required to cease business in Florida under a Division of Workers’ Compensation “stop work order” until AMS had obtained new Florida workers’ compensation coverage from yet another source and also had to pay a mandatory $189,000, fine to the Division of Workers’ Compensation, based on one-and-a-half times the premium AMS would have had to pay if it had been covered. Dallas National was not a party to any of the “gap” events. Settlements were reached with CNA and a lawsuit recovered Mr. Wood’s money from Bankers. Dallas National was not a party to any of the lawsuits. All of the foregoing events involving CNA, Bankers, Guerling Insurance, and Mr. Wood (with the exception of the ultimate recovery of Mr. Wood’s money) occurred in June-July 2002. The Texas regulatory agency did not approve Mr. Wood’s acquisition of Dallas Fire until later. See supra. Given the timing of events and the extraordinary efforts of AMS and Mr. Wood to ensure uninterrupted workers’ compensation coverage for AMS, plus Mr. Wood's covering AMS’ losses to workers’ compensation claimants out of his own pocket, the undersigned is not persuaded that AMS, Dallas National, Mr. Wood, or Mr. Reid evidenced any untrustworthiness, bad faith, or incompetence as alleged by OIR in relationship to these 2002, events. In 2005, while Providence was AMS’ workers’ compensation carrier, the third party administrator, Aspen, which was not then incorporated and licensed to adjust claims in Florida, illegally adjusted claims for Providence. Stephen Yon, Senior Management Analyst II, is aware that Aspen is now a Florida-licensed third party administrator servicing several workers’ compensation insurance carriers doing business in Florida. However, Mr. Yon’s 2005 audit of Aspen’s processing of claims for Providence showed a “no license” period and also showed late filings of various workers’ compensation forms with the Division and late payments to claimants. A mandatory fine was imposed. The same situation with late form filings and late payments was found by Mr. Yon’s audits of Aspen, working for Providence and then Companion in 2007, and fines were again paid. Although efforts have been made in 2007-2008, by Dallas National, through Board member Ms. Wehrle, to create a diary system that would reduce these timeliness errors, there has been little improvement to date. Apparently, there were 10 filings that were only one day late out of 68 filed, but other reportage and/or payments were more delayed and the Agency views all these activities as “hazardous practices.” Florida law requires that the employer (PEO) be active and participating in some of the reportage, and the essence of a third party administrator system is that the errors and omissions of the third party administrator relate back to the insurance carrier. In all of the foregoing incidents, AMS was the employer and Aspen was handling claims for either Providence or Companion, not Dallas National. Insurance carriers’ failures to file forms timely or to pay benefits timely as previously related are common in the processing of Florida workers’ compensation insurance claims. Workers’ compensation claimants are supposed to receive their first indemnity checks within 14 days, and some reports must be filed within seven days, and others within 21 days, of the injury, not just within a period following a formal claim (see Section 440.185, Florida Statutes) and the Division requires 95 percent accuracy. (See § 440.20 (8)(b), Fla. Stat.). Fines on these bases are mostly mandatory, but the Division of Workers’ Compensation may distinguish between willful and non-willful violations. (See § 440.525, Fla. Stat.). It is unclear which type of fine(s) were imposed on Aspen, and thus the respective insurance companies, for the foregoing failures. That said, it appears that, contrary to Mr. Yon’s testimony that the only way to discipline an insurer, PEO, or third party administrator is with a fine, other disciplinary action might be available against Aspen (see §§ 626.8805 and 626.891, Fla. Stat.), but Florida did not take any other disciplinary action, even though AMS/Aspen has never met the statutory goal of 95 per cent timely payments and has vacillated between 70 and 80 per cent for three years. The failure to pursue any regulatory remedy against AMS and/or Aspen, such as revoking their licenses, suggests that these errors are not truly significant to the Agency. Companion is PEO/Employer AMS’ current workers’ compensation carrier. AMS, while insured by Companion, paid some first day medical claims, because Texas allows an employer to pay on-site first aid claims, and the company’s operatives assumed that such payments were also permitted in Florida. They were wrong. Florida actually requires that all workers’ compensation claims be paid by the insurance carrier from the first day. AMS stopped its illegal procedure when informed of the violation by the Florida Division of Workers’ Compensation. Companion was assessed a fine of only $2500, based on the claims adjusted by AMS. Mr. Yon agreed it was acceptable to the Agency to move licensed AMS adjusters to Aspen, so as to resolve the illegal adjusting problem. There have been no violations of this sort for two years. Companion now pays all medical bills. OIR asserts that Messrs. Wood and Nehls, personally, and Dallas National as a corporate applicant, have lied to OIR in each of the two successive application processes. With regard to the 2006 application, OIR conducted an evidentiary hearing. The transcript thereof is in evidence and although there is a question-and-answer format in which Mr. Wood, Mr. Nehls, and others answered questions, most of the “hearing” is more in the nature of a formalized marathon conversation, which moves from topic to topic with several people chiming in to clarify what OIR’s hearing officer was seeking by a question or to answer the question, or with the hearing officer trying to clarify what Dallas National’s witnesses meant by their answers. Under these circumstances, someone not involved in a company’s day-to-day operation might reasonably fail to answer some questions correctly or fail to correct or elaborate on his answers as the proceeding moved on. Nonetheless, clearly, Mr. Wood incorrectly answered some questions put to him at that hearing by Florida regulators. He testified that with regard to any and all S&P companies with which he was affiliated (1) they had not failed to hold an annual shareholders’ meeting; (2) had not charged unapproved rates; (3) had not operated in any state without a license; (4) had not continued in business after losing workers’ compensation coverage; (5) had not paid claims from collateral funds; and (6) had not become a party to any service agreement including re-insurance, which was not reported to the state of domicile on the appropriate state licensure. At the instant hearing herein, it was shown that at some point before, or while, Dallas National was under Texas oversight in 2002-2003, Mr. Wood, indeed, did not, as required by law, meet with himself for regular shareholders’ meetings, so his answer to question (1) should have been “yes.” It was shown that with regard to the situation with CNA, Bankers, and Guerling, in 2002 (see Findings of Fact 45-51) his answers to questions (3), (4) and (5) should have been “yes.” (See also Findings of Fact 34, 52, and 67, as to reasons that question (3) should have been answered “yes.”) However, the instant hearing did not demonstrate that his answers to questions (2) and (6) were clearly wrong. OIR attributed all six negative answers to lack of trustworthiness. Although Mr. Wood unilaterally and voluntarily submitted an affidavit attempting to correct some of his hearing testimony a couple of weeks after the evidentiary hearing, his affidavit does not really clarify or alter his wrong answers to these questions, and it was a serious omission for Mr. Wood to have not acknowledged the problems that Dallas Fire, AMS, and Aspen have had, if he was aware of them, even though they were remote in time. OIR also construes the business plan submitted with Dallas National’s 2006 application to be suspect. The application required that Mr. Wood list all the companies he owns, but he failed to list Aspen, third party administrator for AMS and Equity, on a chart and may have failed to list either Aspen or Equity, one of his Florida PEOs, in the space provided on another page. Mr. Wood testified herein that the omission was an oversight. Mr. Nehls, Petitioner’s president, who prepared both applications, testified that the oversight was probably his, and the evidence as a whole supports a finding that Mr. Wood had no current “hands on” administration of either Aspen or Equity in relation to the time of either of Dallas National’s applications to OIR and did not prepare either voluminous application, both of which went back and forth with supplements to OIR for a period of time till each was pronounced “complete.” Because he signed both applications, OIR views the omission(s) of the companies as a material misrepresentation, reflective of Mr. Wood’s lack of trustworthiness, but given the fact that all the companies were listed somewhere in the application papers; the parties’ past history, which meant that OIR knew of these companies’ probable affiliation with Dallas National and indeed asked questions about them; the due diligence known to be Florida regulators’ hallmark; and the testimony of OIR’s witnesses that failure to list a company is not an absolute bar to licensing, it is unreasonable to suppose that any plot existed within Dallas National, with Mr. Woods, or with Mr. Nehls to hide these companies or Mr. Wood’s affiliations therewith from Florida regulators. OIR also faults Mr. Wood personally for a portion of the current 2008 application, which discusses Dallas National’s plans to expand into the California insurance market, claiming that this was also a material misrepresentation since California has not yet approved Dallas National to write insurance in that state. Recognizing that Dallas National remains licensed in California, but is not yet authorized to write insurance there, a situation impossible under Florida’s law, and that Mr. Nehls placed discussion of what Dallas National planned to do in California under a heading of the 2008 application which equates with “future business plans,” this information was not a material misrepresentation. OIR has doubts about Dallas National’s underwriting parameters. For this aspect of the case, OIR relied heavily on the testimony of Susan Bernard. Ms. Bernard was accepted as an expert in California financial and regulatory examinations. Unlike Florida, California does not license PEOs, but like Florida’s OIR, California’s regulatory agency mistrusts insurers affiliated with PEOs, even though Ms. Bernard was not able to represent that such an affiliation offended California’s insurance code. California requires that a PEO obtain a separate workers’ compensation policy for each employer to whom it leases employees. (See Finding of Fact 24). In July 2003, Dallas National was not permitted to sell insurance in California, but Mr. Wood’s company, AMS, secured, through another entity, what a California corporation that leased employees from AMS was led to believe was a valid Dallas Fire workers’ compensation policy. The policy was disavowed by Dallas Fire, and therefore, the small employer who leased employees from California AMS suffered a gap in coverage in violation of California’s Labor Code and its leased employees also were without workers’ compensation coverage for that same period. Someone at AMS or at Dallas Fire apparently described the invalid policy or binder as a “test certificate,” and California’s Insurance Department issued a scathing letter of admonishment to Dallas Fire with the promise of a cease and desist order if Dallas Fire ever again issued such a disingenuous document or wrote insurance in California without Agency approval to do so. Based on the timing of the transitioning of Dallas Fire into Dallas National, it is hard to be sure what really happened in this situation, but so far as this record is concerned, neither Dallas Fire nor Dallas National has done anything similar since. Ms. Bernard, a Certified Financial Examiner, has performed three onsite visits to Dallas National’s Texas headquarters to consider recommending licensure of Dallas National by California. These visits were in August 2006, August 2007, and December 2007. She testified that, based on a reasonable sample in August 2006, Dallas National’s compliance with its own underwriting guidelines was non-existent. Her sampling in August 2007, produced only minimally better adherence to Dallas National’s own guidelines, and on that occasion, Dallas National’s own accountants, Ernst & Young, also found significant underwriting flaws, while the Texas Department of Insurance approved the underwriting at that time. Her sampling in December 2007, using Dallas National’s new underwriting guidelines, again was only slightly better than the last time, but Ms. Bernard conceded that at the same time she audited Dallas National on that occasion, the Texas Department of Insurance was also present and again found Dallas National’s underwriting compliance in December 2007, to be acceptable. Ms. Bernard’s report at the close of her examination in December 2007, was partially affected by her concern over the proximity of AMS and Dallas National’s offices being in a single building and using the same computers (see Findings of Fact 39- 41), and her speculation that a 2007 sports event disaster involving a different Wood company could deplete the reserves of Dallas National and all Wood corporations. However, on the basis of Dallas National’s failure, at that time, to consistently apply its own underwriting guidelines, Ms. Bernard recommended that California not license Dallas National until Dallas National met all its own underwriting guidelines. Due to California’s time and budget constraints, Ms. Bernard has not returned to audit Dallas National since December 2007, despite urgings by Dallas National’s Board to do so. In 2008, a Board-authorized underwriting committee spear-headed by Ms. Patterson and Ms. Wehrle completely overhauled Dallas National’s underwriting guidelines. Ms. Bernard has not reviewed Dallas National’s new underwriting guidelines, and Ms. Wehrle did not elaborate on them in detail. However, there is no current information that these guidelines are not adequate nor that they are not being followed. Since effective underwriting plays into the overall financial picture of an insurance company, the current reports of actuaries and accountants for Dallas National (see infra) would seem to suggest that Dallas National’s underwriting is currently adequate. Since Petitioner Dallas National was created out of the merger of California Indemnity and Dallas Fire, Dallas National has employed Milliman, Inc., a prominent, independent actuarial firm with 60 years of experience and a credible reputation. Milliman, Inc., has advised Dallas Fire from the time Mr. Wood purchased Dallas Fire in 2002, and has given Dallas National a “responsible” rating (essentially a “clear” financial rating) each year since 2003. Dallas National uses A-rated reinsurance partners and independent accountants and auditors. One of its independent accountants is Ernst & Young. Dallas National uses independent investment advisors to maintain a conservative and profitable investment portfolio. Dallas National relies heavily on opinions of all these advisers with regard to loss reserves and collateral. OIR faults Dallas National in two technical compliance categories. First, OIR claims that Companion is “fronting” for Dallas National in violation of Subsections 624.404(4)(a) and (b), Florida Statutes. Second, by citing what OIR asserts is an illegal re-insurance agreement with Companion, OIR charges that Dallas National has set up insufficient loss reserves. Section 624.404, Florida Statutes, provides, in pertinent part, as follows: 624.404 General eligibility of insurers for certificate of authority.--To qualify for and hold authority to transact insurance in this state, an insurer must be otherwise in compliance with this code and with its charter powers and must be an incorporated stock insurer, an incorporated mutual insurer, or a reciprocal insurer, of the same general type as may be formed as a domestic insurer under this code; except that: (4)(a) No authorized insurer shall act as a fronting company for any unauthorized insurer which is not an approved reinsurer. (b) A "fronting company" is an authorized insurer which by reinsurance or otherwise generally transfers more than 50 percent to one unauthorized insurer which does not meet the requirements of s. 624.610(3)(a), (b), or (c), or more than 75 percent to two or more unauthorized insurers which do not meet the requirements of s. 624.610(3)(a), (b), or (c), of the entire risk of loss on all of the insurance written by it in this state, or on one or more lines of insurance, on all of the business produced through one or more agents or agencies, or on all of the business from a designated geographical territory, without obtaining the prior approval of the office.(Emphasis supplied) No case law has developed around Florida’s “fronting” statute. When OIR advised Dallas National’s new Board of Directors that the Agency viewed Dallas National’s relationship with Companion as a “fronting” situation, the Board, including the former state regulators, closely reviewed the statute. The Board members collectively could not discern how Florida’s “fronting” statute could be applied to Dallas National’s situation with Companion, and sought advice from Companion, Ernst & Young, and Milliman, Inc. Relying on consistent advice from all these entities that Florida’s “fronting” statute did not apply, Dallas National’s Board proceeded to administrative hearing. Mr. Wood's PEOs have been issued high deductible workers’ compensation policies by Companion. Companion and Dallas National have a re-insurance agreement which starts with a million-dollar deductible, whereby Companion agrees to pay the first million dollars per claim by each employee of the PEO. Thereafter, Companion must seek reimbursement from the policyholder, the PEO. Dallas National re-insures claims between one and five million dollars. Other reinsurance coverage for Companion is provided by other companies for claims between five and 30 million dollars, and Companion is the direct writer above 30 million dollars. OIR witnesses who had never reviewed the actual reinsurance agreement in this case were not helpful by their opinions that a “fronting” situation exists, and those opinions are discounted. Steve Szypula currently is the Chief Analyst in OIR’s Property and Casualty Oversight Unit. He was accepted as an expert in financial regulation, accounting, and regulation examination, and testified that the providing of reinsurance coverage by Dallas National to Companion for workers’ compensation coverage written by Companion for AMS constituted an unlawful “fronting” arrangement in violation of Subsections 624.404(4)(a) and (b). However, Mr. Szypula’s area of practice is not specifically workers’ compensation, and he has no background in reinsurance, specifically. Mr. Szypula found no fault with the Milliman Inc. December 31, 2008, report, including reserves or its calculations and agreed that, with or without a high deductible, Companion is always required to pay workers’ compensation claims from the first dollar. However, his “fronting” theory requires that the statutory phrase, “entire risk of loss” be read as the single word, “premium,” and that the million-dollar deductible in the subject insurance policy be equated with a “credit risk." By his interpretation, Mr. Szypula opined that more than 50 percent of Companion’s risk was being ceded to Dallas National because the premium was a simple “pass through.” Ray Neff is a Member of the American Academy of Actuaries; the former Director of the Florida Division of Workers’ Compensation, when the Division was housed in the Department of Labor; and a former Bureau Chief of the Florida Department of Insurance Bureau of Rates. Mr. Neff is an actuary and certified Reinsurance Arbitrator, and was accepted as an expert with special knowledge regarding re-insurance arrangements and interpretation of re-insurance agreements and insurance in general. Mr. Neff agreed with Mr. Szypula that, under the re- insurance agreement between Dallas National and Companion, Companion takes the risk of loss on the entire claim and is liable from the first dollar, due to the nature of workers’ compensation insurance, as compared with other types of insurance/re-insurance. He further testified that the insurer must pay the deductible first and may only seek reimbursement from its re-insurers later. Therefore, Companion is liable for, and must first pay, all claims, regardless of whether there is, or is not, eventual reimbursement by re-insurers. Concentrating on the phrase “entire risk of loss” as used in Section 624.404(4)(b), Florida Statutes, Mr. Neff opined that an unlawful “fronting” arrangement did not exist between Companion and Dallas National by the terms of their re-insurance agreement in this case. By that agreement, Dallas National agrees to insure between one million and five million dollars in liability. The one million dollar deductible policy issued to AMS by Companion does not mean that Companion does not assume the risk of the first million dollar loss, because via Florida Administrative Code Rule 69O-189.006,7/ the insurer is always responsible for first paying the injured claimant directly, regardless of any deductible, and only thereafter may seek reimbursement. Mr. Neff maintains that, unlike those other types of casualty insurance which are Mr. Szypula’s forte, reinsurance of workers’ compensation policies is only a reimbursement mechanism and not a true deductible. Because of his education, training, and experience, his clarity of explanation, and particularly his use of the actual language of the “fronting” statute analyzed, Mr. Neff is the more credible witness over Mr. Szypula. OIR presented the testimony of Joseph Boor, who reviews general lines, commercial, intangible and surety rate filings for OIR. Mr. Boor has special experience in hurricane losses. He is an esteemed actuary, a member of the Casualty Actuarial Society, and the first person in the United States to have achieved the “Senior Professional of Insurance Regulation” designation by NAIC. However, Mr. Boor does not review workers’ compensation rate filings. He was accepted as an expert in actuarial science, loss reserving, and large deductible business practices. Even though he did not point to any errors in Milliman Inc.’s December 31, 2008, annual actuarial report, Mr. Boor used that report to conclude that Dallas National is deficient in loss reserves by plus or minus 42 million dollars. Mr. Boor was brought on relatively late in Respondent’s preparation of the case and purely for purposes of litigation testimony. Accordingly, he had to revise his figures several times. To his credit, in the highest standards of his profession, Mr. Boor pro-actively disclosed his mathematical errors to all concerned. Milliman, Inc., conducted an independent loss reserve analysis of Dallas National as of December 31, 2008,8/ on both a gross and net basis with respect to reinsurance and rendered its year-end statement of actuarial opinion on the held reserves of Dallas National. Two fully credentialed actuaries (both Fellows of the Casualty Actuarial Society) performed the work, including a review of the company’s entire claim liability, which went through two peer reviews, one of which was “firm-wide,” before Milliman, Inc., issued its final opinion. Robert Meyer, a principal and consulting actuary of that firm, is a Fellow of the Casualty Actuarial Society and a Member of the American Academy of Actuaries. He was accepted as an expert actuary in the field of property and casualty insurance. He explained Dallas National’s loss reserving process and critiqued Mr. Boor’s methodology and conclusions, to the effect that Mr. Boor used reserves in place of collateral so as to overstate collateral; had suggested reserves be posted before a loss occurred; and made unreasonable assessments on claims now and in the future. Vastly simplified, Mr. Meyer’s defense of Milliman Inc.’s report, approving Dallas National’s loss reserves as reasonable, is more credible than Mr. Boor’s opinion for the foregoing reasons, and most particularly because Mr. Boor skewed loss development factors on the basis of his choice of an industry database, and his adjustment thereof, which overestimated the claim liability of Dallas National and Companion.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Office of Insurance Regulation enter a Final Order issuing the license for which Petitioner Dallas National Insurance Company has applied. DONE AND ENTERED this 3rd day of February, 2010, in Tallahassee, Leon County, Florida. S ELLA JANE P. DAVIS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 3rd day of February, 2010.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: At all times relevant to this proceeding, Respondent, Barrett Chambers Miller, was licensed as an agent with Independent Life and Accident Insurance Company in the State of Florida. On March 11, 1981, Respondent signed a Combination Agent's Contract Form 1-7759 with the Independent Life and Accident Insurance Company. Part I, Article 2, of the contract requires the agent to "pay over all monies collected to the manager of the district" or to his representative and forbids the agent to retain any monies collected for any purpose. Part I, Article 1, of the contract requires the agent to "keep true records of the business on the books [and] to forward to the company on company forms a true account each week of his business. Among the "company forms" routinely used by agents in the conduct of their business are: (1) the Premium Receipt Book, (2) the Collection Book, (3) the Ordinary Remittance Report, (4) the Field Accounting Route List, and (5) the Balance Due Account Deficiency Sheet. The Premium Receipt Book is used to record the premium paid by the policyholder; is annotated whenever a premium is paid; and bears the premium paid, the date paid, and the signature or initials of the agent receiving the payment. The Collection Book page bears the name and address of the premium payer, the policy number(s), the type of plan, some statistics as to the insured, the death benefit, and the date on which the premium is paid each month. The Ordinary Remittance Report carries, as to each policy on the agent's debit (list of policyholders to be serviced), an account of the periodic premium collections recorded during the week covered by the report. The Field Accounting Route List is used by the agent to indicate weekly collections on weekly premium payments, and the Balance Due Account Deficiency Sheet is used to charge back deficiencies to the agent's account that are found in his collections turned in weekly. Count I: On May 26, 1981, Annie McKibben, owner of Policies A 39189 on the life of Carol L. Cox, A 39190 on the life of Ronny Cox, Jr., and A 39191 on the life of Stacey Cox, paid to the Respondent by check payable to Independent Life the amount of $13.96, total premium for the three policies listed. The premium card for that policy reflects an altered payment of $13.98 with the signature "B. C. Miller" for the May 1981 payment on the 26th of that month. The Collection Book page reflects collection on May 26, 1981. The Ordinary Remittance Report for the week of May 25, 1981, shows collection of $13.96. There is no Field Accounting Route List in evidence for this account, but the Balance Due Account Deficiency Sheet for the week of August 17, 1981, reflects deficiencies for money not turned in for all three policies for the collections made thereon on May 26, 1981. The check with which Mrs. McKibben paid the premiums in question was subsequently deposited to the account of Independent Life at the Florida First National Bank of Jacksonville. Respondent denies any wrongful withholding on this account. Count II: On some date in June, 1981, Wilma L. Robinson, owner of Policies B 03628 and A 67660, both in her name, wrote Check No. 348 on the Flagship Bank of Jacksonville in the amount of $48.68, payable to Independent Life Insurance and reflecting the notation "Ins. June." Someone, she is not sure who, gave that check to a representative of the company. Her payment book reflects a payment of $23.03 received by B. C. Miller on June 16, 1981. The Collection Book reflects collection on June 16, 1981. The Remittance Report reflects collection on June 16, 1981. The Deficiency Account Sheet, however, reflects a deficiency for money not turned in in the total amount of $23.03. Mrs. Robinson is not sure to whom her check was given. She was sick during that period, and it may be that her husband actually delivered the check; and in early 1981, she began mailing her payment checks in. However, to the best of her knowledge, she had never seen Respondent until he came to her home on January 4, 1983. Count III: In June, 1981, Mrs. Evelyn Reynolds had four policies with Independent Life: 017872 on Debbie Spivey, A0037496 on Angela Reynolds, A0010351 on Sherry D. Reynolds, and A14776 on Robert Reynolds. Though she cannot identify to whom she made her payment that month, her routine practice was to make the payment monthly, sometimes by check and sometimes by cash. On some occasions, Respondent and a Mr. McGroarty from the company both came to get her payment. On some occasions, she left the payment with her mother and does not know to whom it was made. Mrs. Reynolds' payment book shows a payment of $24.02 made on June 9, 1981, with the initials "BCM" reflected in the block for the signature of the agent. The Collection Book page shows collection on June 9, 1981; and the Remittance Report does as well, but the Deficiency Sheet shows a deficiency of $24.02 for monies not turned in but collected that date. Mr. Miller unequivocally denies the initials in the payment book were put there by him, nor was any entry on the Collection Book page relating to this account put there by him. Count IV: Mrs. Evie Bennett does not recognize the Respondent. She has only seen him once before in her life, on New Year's Day, 1983, when he came to her house. She did not meet with him on August 4, 1981, and did not make any payments to him. Her payment book for Policy No. B0000499 in her name reflects a premium payment in the amount of $9.51 made on August 4, 1981; and the entry in the block for the signature of the agent reads "Receipt Miller." The Collection Book page for this account reflects a collection on August 4, 1981, of $9.51. Other pertinent documents reflect a deficiency by reason of monies not turned in of $9.51 for this collection. Mr. Miller denies the entries in both the Payment Receipt Book and the Field Report were made by him. Mr. Edward Cooper owned Policies 05 18285A on Edward Thomas; and 0536115A and 0536115B, both on Mary Cooper. He normally paid his premiums by check once a month to whatever agent came to collect. He does not know to whom he made the payment on July 7, 1981, nor does he know whether he paid on that day by check or cash, notwithstanding his written statement on November 24, 1981, witnessed by Mr. Pat McGroarty, indicates he paid the payments on his Premium Receipt Book to the Respondent. The payment card for these policies reflects that on July 7, 1981, an individual who used the signature "B. C. Miller" received payment of $20.80, representing premiums of $4.16 for each of five weeks including June 29, 1981; July 6, 1981; July 13, 1981; July 20, 1981; and July 27, 1981. The Field Accounting Route List for this Respondent in the period in question reflects a remittance of $16.64 with a shortage of $4.61, which shortage is also reflected on the deficiency page. Mr. Miller admits the signature on the payment card is his, but contends the card was altered. Mr. Kerry Fossett is a field auditor for Independent Life Insurance Company and in November, 1981, was requested to conduct an audit of Respondent's agency. As a part of the audit, he checked policyholders' receipt books and compared them to the agent's account. His audit showed discrepancies on 19 premium receipt cards for a total shortage of $141.75, of which amount the sum of $100.98 occurred when Respondent had the agency. The remainder of the shortage occurred either before or after Mr. Miller was in the job. During the course of the audit, Mr. Fossett found at least one instance where Mr. McGroarty made a collection on Mr. Miller's account and failed to turn it in. In the opinion of the auditor, the shortages in the account of $30 before Mr. Miller took over, when it was handled by Mr. McGroarty, were theft. Mr. McGroarty was discharged from employment with Independent Life and Accident Insurance Company approximately one week after the audit was completed. Mr. Baucom, assistant vice president of the company and custodian of the personnel records, indicated the audit done on Respondent's records revealed a shortage of $361.50. This was subsequently adjusted to $126.18 as a result of the company withholding commissions due Respondent. On February 4, 1983, Mr. Baucom wrote to the Department of Insurance, State of Florida, requesting to withdraw a charge of deficiency against Respondent previously submitted on December 7, 1981, on the basis that the company was not satisfied with the documentation of the alleged deficiency. Thereafter, on April 5, 1982, he again wrote the Department of Insurance reinstating the charge based upon subsequent receipt of "satisfactory documentation" and Mr. Miller's "attitude." Gracie Williams, a policyholder with Independent Life, experienced somewhat of a problem with the company when she and her husband tore down a house on which they had been paying premiums. When the house was removed, they mentioned the fact to Mr. McGroarty, but he did nothing about it. As a result, they paid several months' premiums on property that did not exist. In fact, when Respondent complained about this to Mr. McGroarty, he was told to collect the money or McGroarty would take it from another policy. Jennie L. Wilder also had difficulties on her policy with Independent Life's agent named "Alligood" (sic). She had paid her premiums for six months in advance, but because the agent delayed remitting the premium, she got credit for only three months. On the other hand, Catherine C. DiPerna and her husband have been insured with Independent Life for quite a while. Part of that time, the Respondent was her agent/collector. On June 16, 1981, just about the time of the other alleged shortages in Respondent's remittances, she paid her premium payment to Mr. Miller by check. The check was cashed, she did not receive a notice of lapsed policy, nor did she have any problem with her policy, even though on the Ordinary Remittance Report for the same period used by the Petitioner in the allegations relating to Mrs. Robinson shows no money received from the DiPernas. On March 11, 1981, upon the recommendation of Mr. R. Brenner, an investigator with the Department of Insurance, Respondent went to work for Independent Life as a debit agent in Jacksonville, Florida, under the supervision of Mr. Pat McGroarty, who, also, had had the debit (account) before. After the basic company indoctrination course, Respondent underwent on-the-job training under McGroarty. He never, during the entire time he worked for the company, accepted total responsibility for the account because, in his opinion, there were large discrepancies between the premium receipt cards and the company records when he was assigned the account. Respondent discussed these difficulties with McGroarty and other officials of the company, such as Mr. Ivanoski, Mr. Tharpe, and Mr. Baucom. In April, 1981, Miller saw that his signature as agent was forged on a policy owned by the Petitioner's witness Cooper on the life of Cooper's nephew, Edward Thomas, who, at all times pertinent, was an inmate in the state penitentiary. When Respondent mentioned this to McGroarty, McGroarty told him that Cooper had forged the names and Respondent was with McGroarty when he delivered the policy to Cooper. This is one of the policies which form the allegation in Count V of the Complaint and about which there is an obvious alteration on the Premium Receipt Book showing an increase in the weekly premium of one cent because of a change from a health policy to a life policy. Other difficulties with this particular account were brought by Miller to the attention of the district manager who forced McGroarty to make up the shortage from his own pocket. During a part of the time Respondent worked with the company, he also handled fire policies on a temporary license. He found so many irregularities and such out-and-out corruption, he states, that he intentionally failed the state examination for an industrial fire license. Even after instructions came from the home office terminating Respondent's work in fire insurance, the district manager instructed him to continue to collect fire premiums and turn them over to McGroarty. As a result of all of this, deficiencies show up on his fire accounts for periods after the time he ceased fire business. In fact, documents show collections by Miller on his accounts, even after he left the employ of the company. Respondent unequivocally denies any wrongdoing with regard to his accounts.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law stated above, it is RECOMMENDED: That the Administrative Complaint against the Respondent dated August 27, 1982, and amended on September 24 and December 28, 1982, be DISMISSED. RECOMMENDED this 28th day of February, 1983, in Tallahassee, Florida. ARNOLD H. POLLOCK Hearing Officer Division of Administrative Hearings Department of Administration 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of February, 1983. COPIES FURNISHED: Rhoda Smith Kibler, Esquire David Yon, Esquire Department of Insurance 413-B Larson Building Tallahassee, Florida 32301 S. Perry Penland, Esquire Penland, McCranie & Shad, P.A. Suite 1103, Blackstone Building Jacksonville, Florida 32202 The Honorable Bill Gunter State Treasurer and Insurance Commissioner The Capitol Tallahassee, Florida 32301
