The Issue The issue is whether Respondent committed the offenses alleged in the Amended Administrative Complaint and, if so, what disciplinary action should be imposed on his licenses and appointments as a life, life and health, and health agent.
Findings Of Fact At all times material to this action, Respondent, Louis Francis Robert, Jr. (Respondent), was a licensed insurance agent and under the jurisdiction of Petitioner, the Department of Insurance (Department). Respondent has been licensed in the State of Florida for fifteen years. Grace Newson is an elderly widow, presently age eighty- one (81) who lives alone and who lived alone at all times material to the occurrences in this matter. Mrs. Newson first met Respondent on September 10, 1998, when he made an unannounced visit to her home in Plant City, Florida. During this initial visit, Respondent told Mrs. Newson that he was in the area and the purpose of his visit was to see if she wanted to change her annuity policy. Respondent's initial visit with Mrs. Newson was about two months after Mrs. Newson's husband died. Mrs. Newson had never met or spoken with Respondent prior to his September 10, 1998, visit to her home. However, it was apparent to Mrs. Newson that based on Respondent's comments to her during the visit that he knew her husband had recently died. Moreover, it was also apparent to Mrs. Newson that at the time of Respondent's initial visit, he was aware that she owned an annuity policy. The annuity policy owned by Mrs. Newson prior to and at the time she met Respondent had been issued by Fidelity and Guaranty Life Insurance Company (Fidelity and Guaranty). The policy number was 1-00127454. After his initial visit to Mrs. Newson's house, Respondent continued to visit Mrs. Newson whenever he was in the Plant City area and/or to call her. Each time Respondent contacted Mrs. Newson, he attempted to sell her another annuity policy. In response, Mrs. Newson repeatedly told Respondent that she did not need another policy. Nonetheless, Mrs. Newson's credible testimony was that Respondent was "insistent in trying to put [Mrs. Newson] in a new product." At one point, Mrs. Newson told Respondent that she wanted her deceased husband's name removed from her annuity policy that had been issued by Fidelity and Guaranty. Mrs. Newson told Respondent that the annuity was for her handicapped nephew and that the reason she wanted her husband's name removed from the annuity was so that her nephew would not have difficulty receiving the benefits after her death. Respondent agreed to have Mrs. Newson's deceased husband's name removed from the annuity and requested that she give him the annuity documents in her possession. Mrs. Newson complied with this request. After Mrs. Newson told Respondent to have her deceased husband's name removed from the annuity, he went to her house and delivered two documents for her to sign. Mrs. Newson assumed that the two printed documents were necessary only for the purpose of removing her deceased husband's name from the existing annuity. At no time did Respondent advise Mrs. Newson that the documents he was requesting her to sign were for a new annuity policy and for a death claim benefit. Mrs. Newson signed the documents on the designated signature lines and next to the hand-written "X" on each of those lines, as instructed by Respondent. At the time Mrs. Newson signed the documents, she believed that the documents were for the purpose of removing her deceased husband's name from her annuity issued by Fidelity and Guaranty. Accordingly, she did not thoroughly review or read the documents. One of the documents that Respondent gave to Mrs. Newson to sign was an application form which requested information regarding the "premium amount paid with the application." In the space provided for the response to that inquiry, there is a hand-written "0" with a diagonal line drawn through it that had been scratched out. Immediately below the scratched out "0" was written $32,282.04 and the word, "TRANSFER." Next to the space on the application form that requested "the premium amount paid with the application" was another space that requested "additional information." In that space, the following was written: "Funds coming from death claim on policy #1127454." This was the number of Mrs. Newson's annuity policy that she owned prior to and at the time she met Respondent. The documents were completed by Respondent and signed by Mrs. Newson. However, it is unknown whether all the hand- written information on the documents was on the forms when they were delivered to Mrs. Newson for her signature. In or around October 1998, Respondent processed the forms signed by Mrs. Newson to cause a death claim on the existing annuity previously issued by Fidelity and Guaranty, and to use the proceeds therefrom for the purchase and issuance of a new annuity by that company. Respondent's actions were taken without Mrs. Newson's knowledge or consent. After the forms were processed, Respondent delivered to Mrs. Newson a newly numbered policy issued by Fidelity and Guaranty. Mrs. Newson assumed that the policy simply eliminated her deceased husband's name from the annuity that she owned when she first met Respondent. Based on that assumption, Mrs. Newson merely filed that policy and did not know or understand that it was a new annuity policy which Respondent had caused to be issued without her knowledge. Subsequently, Mrs. Newson received a Form 1099 from the Internal Revenue Service, calling to her attention that her initial annuity had been caused to be surrendered and the proceeds therefrom had been used for the purchase of a new annuity. This was her first knowledge of this occurrence. Immediately, Mrs. Newson immediately contacted Fidelity and Guaranty to inform the company that she did not authorize the purchase of a new annuity policy. She further advised the company that she desired to be immediately returned to ownership of her previously existing policy. During Mrs. Newson's discussions with staff of Fidelity and Guaranty, it was confirmed that Respondent had filed a death claim against her Fidelity and Guaranty annuity, surrendered her initial annuity, and issued a new policy in Mrs. Newson's name. After Mrs. Newson confirmed Respondent's actions, she demanded that Fidelity and Guaranty straighten out the matter. In response, Fidelity and Guaranty canceled the new policy that Respondent had issued to Mrs. Newson and reinstated her original annuity policy. Respondent collected a commission in the amount of $3,758.43 for issuing the new policy to Mrs. Newson. However, Respondent had to reimburse the company for the commission he received as a result of his issuing a new policy to Mrs. Newson, which she had not authorized or requested. Had Mrs. Newson not discovered what had occurred relative to her initial annuity and had the new annuity policy rescinded, Respondent would have received a substantial commission from the transaction. Mrs. Newson never authorized or directed Respondent to file a death claim against her annuity. According to Mrs. Newson, she had no reason to do so because her husband's funeral had been pre-paid and he had a government policy. Furthermore, Mrs. Newson never agreed to purchase a new annuity from Respondent and had repeatedly declined his offers to sell her a new annuity. Erma Clark is an elderly woman, presently aged eighty- eight (88), who lives alone and lived alone at all times material herein. Prior to meeting Respondent, Mrs. Clark was the owner of two (2) annuity policies issued by IDS Life Insurance Company. The policy numbers were 9300-425987 and 9300-04085461. In or around early 2001, Respondent came to the home Mrs. Erma Clark unannounced and without a prior appointment, and asked to see her existing annuities. Respondent then proceeded to attempt to persuade Mrs. Clark to surrender her existing policies and purchase a new annuity that would earn more interest. Mrs. Clark refused to surrender her existing policies and to purchase a new annuity from Respondent. After his initial visit to Mrs. Clark's home in early 2001, Respondent returned to Mrs. Clark's home several times and continued to attempt to convince her to surrender her existing policies and purchase a new annuity policy. Mrs. Clark repeatedly informed Respondent that she did not wish to nor would she do so. On one of Respondent's subsequent visits to Mrs. Clark's home, she told Respondent that she wanted to change the beneficiaries presently reflected on her existing annuities. Respondent agreed to accomplish this task for her. Thereafter, in or around May 2001, Respondent again visited the home of Mrs. Clark and presented her with forms that she assumed were necessary only for the purpose of changing beneficiaries on her existing annuities. She did not carefully review these papers and executed them as instructed by Respondent. In fact, the forms presented by Respondent to Mrs. Clark were those necessary to cause the surrender of her existing annuities and for the purchase of a new annuity to be issued by American Investors Life Insurance Company. In or around May 2001, after Mrs. Clark executed the papers that were presented to her by Respondent, he processed the forms to cause surrender of her existing annuities and the purchase and the issuance of a new annuity from the proceeds thereof. This action by Respondent was without Mrs. Clark's knowledge and consent. In or around June 2001, Mrs. Clark was contacted by IDS Insurance Company, insurer of her previously existing annuities, inquiring as to why she was surrendering the annuities. This was her first knowledge of such occurrence. Upon becoming aware of Respondent's actions, Mrs. Clark immediately informed IDS that at no time did she have knowledge of Respondent's actions nor did she authorize or desire to surrender her existing annuities to purchase any new annuity. She informed IDS that she desired to retain ownership of her two existing annuities. Mrs. Clark then discovered that Respondent had caused National States Insurance Company to issue a new annuity policy to her, policy number HC1-1-0946693. She immediately informed the company that she wanted that policy canceled. On or about June 6, 2001, National States Insurance Company acknowledged cancellation of the new annuity policy that had been effected by the actions of Respondent.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is recommended that the Department of Insurance enter a final order finding that Louis Francis Robert, Jr. committed the offenses alleged in the Amended Administrative Complaint and suspending his insurance license for eighteen months. DONE AND ENTERED this 25th day of July, 2002, in Tallahassee, Leon County, Florida. CAROLYN S. HOLIFIELD 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 25th day of July, 2002. COPIES FURNISHED: Dean Andrews, Esquire Department of Insurance Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399-0333 James V. Caltagirone, Esquire 111 South Moody Avenue Tampa, Florida 33609 Honorable Tom Gallagher State Treasurer/Insurance Commissioner Department of Insurance The Capitol, Plaza Level 02 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Insurance The Capitol, Lower Level 26 Tallahassee, Florida 32399-0307
Findings Of Fact Petitioner is the administrative agency charged with responsibility for administering and enforcing the provisions of Chapter 626, Florida Statutes. At all times material to this proceeding, Respondent has been licensed and eligible for appointment in Florida as a life and variable annuities agent, a life, health, and variable annuities agent, and a general lines agent. The City of Port St. Lucie (the "City") has had a City-funded pension plan in effect for its employees since October 1, 1977 (the "plan"). The City funds the plan with a contribution of 10.5 percent of the gross income of each employee who is enrolled in the plan (the "participant"). The monthly contributions by the City are sent directly to The Prudential Insurance Company ("Prudential"). The plan is participant directed. It allows each participant to direct the investment of his or her share of the City's contribution into either an investment account or a split investment account. If a participant elects an investment account, all of the City's contributions for that participant are used to purchase an annuity contract. If a participant elects the split investment account, a portion of the City's contribution for that participant is invested in an annuity contract and a portion is invested in whole life insurance issued by Prudential. Each whole life policy builds a cash value and provides benefits not available in the annuity contract, including disability benefits. Each participant is completely vested in the plan after he or she has been enrolled in the plan for five years. Prudential issues annuity contracts and insurance policies on participants and provides plan services to the administrator and trustees of the plan. 1/ The City is the owner of both the annuity contracts and the insurance policies. Both the annuity contracts and insurance policies are maintained in the City offices of the plan administrator. Participants do not receive copies of either annuity or insurance contracts and do not receive certificates of insurance. Beginning in 1984, each participant has received monthly Confirmation Statements in their paycheck envelopes. The Confirmation Statements are prepared by Prudential and disclose the net investment activity for the annuity contract. From the inception of the plan, each participant has received an annual Employee Benefit Statement which is prepared by Prudential and discloses the amount of the employer contributions that were allocated to the annuity contract and the amount that was allocated to insurance. Participants are eligible to enroll in the pension plan after six months of service. Biannual enrollment dates are scheduled in April and October each year. Prior to each biannual enrollment date, the City conducts an orientation meeting to explain the pension plan to prospective participants. The City sends a notice to each eligible employee in his or her payroll envelope. The notice informs the employee of his eligibility and the date and time of the orientation meeting. At the City-run orientation meeting, eligible employees are told that the pension plan is a participant directed plan in which each of them must elect either a straight annuity investment or a split investment involving an annuity and life insurance. Thirty to forty percent of the prospective participants do not attend the City-run orientation meeting. Subsequent to the orientation meeting, Respondent meets individually with each eligible employee in a room located on the premises of the City. The enrollment sessions are scheduled by the City so that Respondent has approximately 30 minutes to meet individually with each prospective participant. During that 30 minutes, Respondent provides each eligible employee who enrolled in 1987 and thereafter with a copy of the Summary Plan Description. 2/ Respondent explains the investment options, answers questions, asks the participants for the information contained in the applications and has the participants sign the appropriate applications. 3/ Each participant elects his or her investment option during the 30 minute enrollment session with Respondent. 4/ There is no separate written form evidencing the participant's election. The only written evidence of the election made by the participant is the application for annuity contract and, if the participant elects the split investment option, the application for insurance. If a participant elects the straight annuity investment option, Respondent completes and has the participant sign only one application. That application is for an annuity contract. If the split investment option is elected, Respondent completes and has the participant sign a second application. The second application is for life insurance. An application for an annuity contract is completed by Respondent and signed by the participant regardless of the investment option elected by the individual participant. 5/ An application for an annuity contract is clearly and unambiguously labeled as such. The top center of the application contains the following caption in bold print: Application For An Annuity Contract [] Prudential's Variable Investment Plan Series or [] Prudential's Fixed Interest Plan Series The participant must determine as a threshold matter whether he or she wishes to apply for a variable investment or fixedinterest annuity contract. Respondent then checks the appropriate box. The front page of the application for annuity contract contains an unnumbered box on the face of the application that requires a participant who applies for a variable investment annuity contract to select among seven investment alternatives. The unnumbered box is labeled in bold, capital letters "Investment Selection." The instructions to the box provide: Complete only if you are applying for a variable annuity contract of Prudential's Variable Investment Plan Series Select one or more: (All % allocations must be expressed in whole numbers) [] Bond [] Money Market [] Common Stock [] Aggressively Managed Flexible [] Conservatively Managed Flexible [] Fixed Account [] Other TOTAL INVESTED 100 % The application for annuity contract is two pages long. Question 1a is entitled "Proposed Annuitant's name (Please Print)." Question 4 is entitled "Proposed Annuitant's home address." Question 10, in bold, capital letters, is entitled "Annuity Commencement Date," and then states "Annuity Contract to begin on the first day of." There is an unnumbered box on the application relating to tax deferred annuities. Question 12 asks, "Will the annuity applied for replace or change any existing annuity or life insurance?" (emphasis added) The caption above the signature line for the participant is entitled "Signature of Proposed Annuitant." An application for insurance is also completed by Respondent and signed by the participant if the split investment option is elected. The application for insurance is clearly and unambiguously labeled as such. The upper right corner of the application for insurance contains the following caption in bold print: Part 1 Application for Life Insurance Pension Series to [] The Prudential Insurance Company of America [] Pruco Life Insurance Company A Subsidiary of The Prudential Insurance Company of America The term "proposed insured" also appears in bold print in the instructions at the top of the application for insurance. The application for insurance is approximately five pages long. 6/ It contains questions concerning the participant's treating physician, medical condition, driving record, and hazardous sports and job activities. 7/ Question 1a is entitled "Proposed Insured's name - first, initial, last (Print)." Question 7 asks for the kind of policy for which the participant is applying. Question 9 asks if the waiver of premium benefit is desired. Question 12 asks, "Will this insurance replace or change any existing insurance or annuity in any company?" (emphasis added) Question 21 asks, "Has the proposed insured smoked cigarettes within the past twelve months?" The caption under the signature line for the participant is entitled "Signature of Proposed Insured," as is the signature line for the Authorization For The Release of Information attached to the application for insurance. Respondent met with each of the participants in this proceeding during the time allowed by the City for the enrollment sessions. Mr. Robert Riccio, Respondent's sales manager, was present at approximately 70 percent of those enrollment sessions. Respondent provided each participant who enrolled in 1987 and thereafter with a copy of the Summary Plan Description. Respondent explained the investment options, and answered any questions the participants had. The name, occupation, and date of the enrollment session of the participants involved in this proceeding are: (a) Edmund Kelleher Police Officer 3-16-88 (b) Raymond Steele Police Officer 9-29-88 (c) Mark Hoffman Police Officer 10-29-86 (d) Joseph D'Agostino Police Officer 3-12-88 (e) Charles Johnson Police Officer 9-24-84 (f) Donna Rhoden Admin. Sec. 3-26-87 (g) John Gojkovich Police Officer 10-2-84 (h) John Skinner Police Officer 9-14-84 (i) John Sickler Planner 3-14-90 (j) James Lydon Bldg. Inspect. 9-13-89 (k) Robert McGhee Police Officer 9-18-84 (l) Richard Wilson Police Officer 3-21-89 (m) Lorraine Prussing Admin. Sec. 9-6-84 (n) Helen Ridsdale Anml. Cntrl. Off. 9-14-84 (o) Sandra Steele Admin. Sec. 4-3-85 (p) Linda Kimsey Computer Op. 3-18-89 (q) Jane Kenney Planner 3-13-85 (r) Alane Johnston Buyer 3-18-89 (s) Paula Laughlin Plans Exam. 3-18-89 Helen Ridsdale Anml. Cntrl. Super. 9-14-84 Jerry Adams Engineer 3-16-88 Cheryl John Records Super. for the Police Dept. 9-14-84 Each participant in this proceeding elected the split investment option during his or her enrollment session with Respondent and signed applications for both an annuity contract and an insurance policy. Each participant signed the application for insurance in his or her capacity as the proposed insured. The City paid 10.5 percent of each participant's salary to Prudential on a monthly basis. The payments were sent to Prudential with a form showing the amount to be invested in annuities and the amount to be used to purchase insurance. Each participant who enrolled in 1987 and thereafter received with his or her paycheck a monthly Confirmation Statement and all participants received an annual Employee Benefit Statement disclosing the value of the investment in annuities and the value of the investment in life insurance. The participants in this proceeding, like all participants, did not receive copies of annuity contracts and insurance policies and did not receive certificates of insurance. The annuity and insurance contracts were delivered to the City, as the owner, and maintained in the offices of the City's finance department. The participants in this proceeding had no actual knowledge that they had applied for insurance during the enrollment session with Respondent. Most of the participants had other insurance and did not need more insurance. Each participant left the enrollment session with Respondent with the impression that they had enrolled in the pension plan and had not applied for insurance. The lack of knowledge or misapprehension suffered by the participants in this proceeding was not caused by any act or omission committed by Respondent. Respondent did not, either personally or through the dissemination of information or advertising: wilfully misrepresent the application for insurance; wilfully deceive the participants with respect to the application for insurance; demonstrate a lack of fitness or trustworthiness; commit fraud or dishonest practices; wilfully fail to comply with any statute, rule, or order; engage in any unfair method of competition or unfair deceptive acts or practices; knowingly make false or fraudulent statements or representations relative to the application for insurance; or misrepresent the terms of the application for insurance. No clear and convincing evidence was presented that Respondent committed any act or omission during the enrollment sessions which caused the participants to believe that they were not applying for insurance. 8/ None of the participants testified that Respondent prevented them or induced them not to read the applications they signed. 9/ All of the participants affirmed their signatures on the application for insurance, but most of the participants did not recognize the application for insurance signed by them. Some participants could not recall having signed the application. The participants could not recall being hurried or harassed by Respondent and could not recall if Respondent refused to answer any of their questions. 10/ None of the participants provided a clear and convincing explanation of how Respondent caused them to sign an application for insurance without their knowledge or described in a clear and convincing fashion the method by which Respondent prevented them or induced them not to read or understand the contents of the documents they were signing. 11/ Eleven of the 22 participants cancelled their insurance policies after "learning" that they had insurance policies. Eight participants cancelled their policies on August 23, 1990. Two cancelled their policies on February 5, 1991, and one cancelled her policy on April 18, 1991. Financial adjustments required by the cancellations have been made and any remaining contributions have been invested in annuity contracts. Since 1983, Respondent has assisted Prudential and the City in the administration of the pension plan, including the enrollment of all participants. Prior to 1990, there was only one incident in which a participant complained of having been issued an insurance policy without knowing that she had applied for an insurance policy. The policy was cancelled and the appropriate refund made. Respondent has a long and successful relationship with the City and has no prior disciplinary history with Petitioner. Respondent is the agent for Prudential. The pension plan was intended by Prudential and the City to provide eligible employees with investment opportunities for annuities and life insurance. Respondent generally makes higher commissions from the sale of insurance than he does from the sale of annuities. 12/ Mr. Riccio receives 14 percent of the commissions earned by Respondent. Respondent encourages all participants to elect the split investment option by purchasing both annuities and insurance. If a participant states that he or she does not want life insurance, Respondent asks them for their reasons and explains the advantages of life insurance. If the participant then rejects life insurance, Respondent enrolls the participant in a straight annuity investment. Such practices do not constitute fraud, deceit, duress, unfair competition, misrepresentations, false statements, or any other act or omission alleged in the one count Administrative Complaint.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner should enter a Final Order finding Respondent not guilty of the allegations in the Administrative Complaint and imposing no fines or penalties. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 14th day of January 1992. DANIEL MANRY 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 14th day of January 1992.
The Issue The issue in this case is whether Respondents have violated provisions of Section 627.837, Florida Statutes, through payment of alleged monetary inducements to insurance agents for the purpose of securing contracts which finance insurance premiums.
Findings Of Fact Petitioner is the Department of Insurance and Treasurer (Department). Respondents are Puritan Budget Plan, Inc., and Gibraltar Budget Plan, Inc., (Respondents). Findings contained in paragraphs 3- 23, were stipulated to by the parties. Stipulated Facts Common shares in Respondents' corporations were sold to insurance agent/shareholders for between $500.00 and $2,500.00 per share, depending on date purchased. Presently, and for the purposes of this litigation, marketing and/or administrative fees paid by Respondents to agent/shareholders range from $1.00 to $13.00 per contract produced, depending on the number of payments made, and the amount of the down payment. Each per contract marketing and/or administrative fee paid by Respondents to agent/shareholders is completely unrelated to the number of contracts produced by that agent/shareholder, and is based upon the characteristics of each contract, pursuant to the terms of the shareholder purchase agreement. Perry & Co., pursuant to a written agreement, manages the day to day activities of Respondents, including solicitation of new shareholder/agents. Alex Campos is currently President of Perry & Co. Perry & Co., Dick Perry or Alex Campos have no equity ownership, either direct or indirect, in Respondents corporations. No shareholder of Perry & Co. is also a shareholder in either Respondent, and no shareholder of the Respondents is a shareholder in Perry & Co. No officer or director of Perry & Co. is an officer or director of either Respondent, and no officer or director of either Respondent is an officer or director of Perry & Co. The individual management agreements between Perry & Co. and Respondents are terminable with proper notice by either party. Respondent Puritan Budget Plan, Inc., was originally licensed by the Department as a premium finance company in 1984, pursuant to the provisions of Chapter 627, Part XV, Florida Statutes. Puritans' principle office is located at 2635 Century Parkway, Suite 1000, Atlanta, Georgia 30345. Respondent Gibraltar Budget Plan, Inc., was originally licensed by the Department as a premium finance company in 1984, pursuant to the provisions of Chapter 627, Part XV, Florida Statutes. Gibraltar's principle office is located at 2635 Century Parkway, Suite 1000, Atlanta, Georgia 30345. Customers of Respondents are typically financing automobile insurance premiums. There is little if any variation among licensed premium finance companies in the State of Florida as to the interest rate charged to customers. In 1988, the Department inquired of Respondents' activities in relation to agent/shareholder compensation arrangements. After several meetings with representatives from Respondents, the Department closed the matter without taking any action. Also in 1988, the Department proposed the adoption of Rule 4-18.009, which in part would have explicitly made payment of processing fees or stock dividends a violation of Section 627.837, Florida Statutes, but later withdrew the proposed rule. Again in 1994, the Department proposed a rule which would have explicitly made payment of processing fees or stock dividends a violation of Section 627.837, Florida Statutes. After a hearing and adverse ruling by the hearing officer, the Department withdrew proposed Rule 4-196.030(8). Financial consideration paid to insurance agents in exchange for the production of premium finance contracts may result in the unnecessary financing of contracts, and the Department believes Section 627.837, Florida Statutes, was intended to make such conduct illegal. Financial consideration paid to insurance agents in exchange for the production of premium finance contracts may result in insurance agents adding or sliding unnecessary products to make the total cost of insurance more expensive and induce the financing of additional contracts, and the Department believes Section 627.837, Florida Statutes, was intended to make such conduct illegal. An "inducement" is presently defined as "an incentive which motivates an insurance purchaser to finance the premium payment or which motivates any person to lead or influence an insured into financing the insurance coverage being purchased; or any compensation or consideration presented to a person based upon specific business performance whether under written agreement or otherwise." Rule 4-196.030(4), Florida Administrative Code (July 27, 1995). This rule is currently effective but presently on appeal. There is no evidence that Respondents unnecessarily financed any premium finance contracts or engaged in any "sliding" of unnecessary products to induce the unnecessary financing of contracts. Section 627.837, Florida Statutes, does not prohibit the payment of corporate dividends based on stock ownership to shareholders who are also insurance agents. According to the Final Bill Analysis for H.B. 2471, in 1995 the Legislature amended Section 627.837, Florida Statutes, relating to rebates and inducements. This section was amended to clarify that this statute does not prohibit an insurance agent or agents from owning a premium finance company. The statute, as amended, is silent on the issue of how owner-agents may be compensated. Other Facts Approximately 80 percent of Respondents' insureds will turn to the shareholder/agent to handle premium mailing and collection. When a shareholder/agent provides these valuable services and labor to Respondents through the servicing of the premium finance contract with an insured, payment for those services and/or recoupment of the expenses involved with their provision is made, at least in part, in the form of the marketing and administrative fees paid by Respondents to the shareholder/agent. The marketing and administrative fee payment by Respondents to shareholder/agents is made from the net profit of the corporation and represents payment of ownership interest (dividends) to shareholder/agents in addition to payment for shareholder/agent services or expenses. Respondents generally finance "non-standard" private passenger automobile insurance. Such insurance generally covers younger drivers and drivers with infraction points against their license. The average non-standard premium is $500 per year. Thirty percent of non-standard insureds will cancel their insurance prior to the renewal date. Cancellation of policies and financing arrangements by non-standard insurers require the agent to return unearned commissions, about $30 generally. In contrast, payment of an insurance premium in cash guarantees an agent his/her entire commission, an average of $90 per non-standard policy. Consequently, the financial interest of most agents is best served by cash sale of auto insurance as opposed to financing the insurance. The average amount generated by 95 percent of all premium finance contracts executed in Florida would yield an agent/shareholder approximately six dollars per contract.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that a Final Order be entered dismissing the Administrative Complaints. DONE and ENTERED in Tallahassee, Florida, this 28th day of November, 1995. DON W. DAVIS, 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 28th day of November, 1995. APPENDIX In accordance with provisions of Section 120.59, Florida Statutes, the following rulings are made on the proposed findings of fact submitted on behalf of the parties. Petitioner's Proposed Findings 1.-11. Accepted to extent included within stipulated facts, otherwise rejected for lack of citation to the record. 12. First sentence is rejected as not substantially dispositive of the issues presented. Remainder rejected for lack of record citation if not included within stipulated facts. 13.-15. Rejected to extent not included within stipulation, no citation to record. Incorporated by reference. Rejected, no record citation, legal conclusion. 18.-19. Rejected, not materially dispositive. 20. Rejected, no record citation. 21.-23. Rejected, not materially dispositive. Rejected, record citation and relevancy. Rejected, weight of the evidence. Incorporated by reference. Respondent's Proposed Findings 1. Rejected, unnecessary to result. 2.-3. Accepted, not verbatim. 4. Rejected, unnecessary. 5.-7. Accepted, not verbatim. 8.-9. Rejected, unnecessary. 10. Accepted per stipulation. 11.-12. Rejected, unnecessary. 13. Accepted per stipulation. 14.-16. Accepted, not verbatim. Rejected, hearsay. Rejected, relevance. Rejected, unnecessary. 20.-22. Accepted per stipulation. 23. Rejected, unnecessary. 24.-57. Incorporated by reference. 58.-60. Rejected, unnecessary. 61.-62. Rejected, subordinate and not materially dispositive. 63.-67. Rejected as unnecessary to extent not included in stipulated facts. Accepted per stipulation. Rejected, unnecessary. Accepted per stipulation. 72.-76. Rejected, unnecessary. 77. Accepted per stipulation. 78.-79. Incorporated by reference. 80.-87. Accepted per stipulation. 88. Incorporated by reference. 89.-90. Accepted per stipulation. 91.-95. Rejected, subordinate. 96. Accepted. 97.-101. Rejected, unnecessary. 102. Incorporated by reference. COPIES FURNISHED: Alan Liefer, Esquire Division of Legal Services 612 Larson Building Tallahassee, FL 32399-0333 Steven M. Malono, Esquire Cobb, Cole & Bell 131 N. Gadsden St. Tallahassee, FL 32301 Bill Nelson State Treasurer and Insurance Commissioner Department of Insurance The Capitol, Plaza Level Tallahassee, FL 32399-0300 Dan Sumner Acting General Counsel Department of Insurance The Capitol, PL-11 Tallahassee, FL 32399-0300
The Issue The issue is whether disciplinary action should be taken against Respondents’ licenses based on the allegations set forth in Petitioner’s Administrative Complaint.
Findings Of Fact Background on Annuities In general, annuities are contracts in which the purchaser, usually an individual, makes one or more premium payments to the seller, usually an insurance company, in return for a series of payments that continue for a fixed period of time or for the life of the purchaser or a designated beneficiary. In re May, 478 B.R. 431, 433 (Bankr. D. Colo. 2012); Lander v. Hartford Life & Annuity Ins. Co., 251 F.3d 101, 104 (2d Cir. 2001). “For traditional or ‘fixed annuities,’ the stream of payments begins immediately or soon after the contract is purchased. The contract will specify the amount of interest that will be credited to the [buyer]’s account as well as the amount of payments to be received under the contract.” Lander, 251 F.3d at 104. Fixed annuities are similar to certificates of deposit in that the seller of a fixed annuity guarantees that the purchaser will earn a minimum rate of interest over time. Am. Equity Inv. Life Ins. Co. v. SEC, 613 F.3d 166, 168 (D.C. Cir. 2009). In other words, fixed annuities do not lose money. Fixed annuities are typically thought of as insurance products because the purchaser receives a guaranteed stream of income for life, and the seller assumes “mortality risk.” The seller’s risk arises from the possibility that the purchaser will live longer than expected, thereby receiving benefits that exceed the amount paid to the seller. Id. In re May, 478 B.R. at 434 (noting that “a person typically purchases an annuity to avoid the risk associated with living an unexpectedly long life and running short of financial resources.”). A fixed annuity is appropriate for someone who desires a guaranteed interest rate without incurring the risk associated with the stock market. Because there is little to no risk, the returns on fixed annuities tend to be lower than the types of annuities discussed below. In contrast to a fixed annuity, the stream of payments associated with a variable annuity does not start upon purchase of the contract. Instead, the purchaser makes a single payment or a series of payments that are invested in securities of the purchaser’s choosing. Those securities are typically mutual funds or other types of investments that reflect the purchaser’s investment objectives. Lander, 251 F.3d at 104-05. From the time that a variable annuity is purchased to the time it begins to pay out, the annuity’s value will fluctuate depending on the performance of the underlying securities in which the purchaser’s principal is invested. Id. at 105. After a defined number of years, the variable annuity will mature and begin paying benefits to the purchaser. The purchaser is not guaranteed a particular payout. Instead, the payout will vary depending on the value of the portfolio at the annuity’s maturity and the purchaser’s life expectancy. Id. A variable annuity has characteristics that make it like an insurance product. By providing periodic payments that continue for the purchaser’s life, a variable annuity provides a hedge against the possibility that the purchaser will outlive his or her assets after retirement. Id. However, a variable annuity is also like a stock mutual fund in that the amount of benefits paid to the purchaser depends on the performance of the investment portfolio. As a result, many purchasers use variable annuities to accumulate greater retirement funds through market speculation. See In re May, 478 B.R. at 434 (explaining that “[m]any annuities are now ‘variable’ rather than fixed, and contemplate that the premiums collected will be invested in stocks or other equities, and that benefit payments to the annuitant will vary with the success of the annuity’s investment policy. In other words, the annuitant is not guaranteed a fixed level of benefits, rather the payment amount will vary depending upon the value of the stock portfolio upon maturity. Such variable annuities are considered akin to an investment contract, because they place all the investment risk on the [purchaser] and guarantee nothing to the annuitant except an interest in a portfolio of common stocks or other equities . . . .”)(internal citations omitted). A fixed index annuity is a hybrid financial product that combines some of the benefits of fixed annuities with the earning potential associated with a security. Am. Equity Inv. Life Ins. Co., 613 F.3d at 168. Like fixed annuities, fixed index annuities provide downside protection through a minimum guaranteed rate of return. However, the seller of the annuity “credits the purchaser with a return that is based on the performance of a securities index, such as the Dow Jones Industrial Average, Nasdaq 100 Index, or [the] Standard & Poor’s 500 Index.” Id. Therefore, depending on the index’s performance, the return on a fixed index annuity might be much higher than the guaranteed return. Id. The fixed index annuity may have a participation rate that limits the buyer’s upside. For example, if a particular fixed index annuity has an 80 percent participation rate and is tied to the Standard and Poor’s 500, then that annuity would return 8 percent if the Standard and Poor’s 500 rose 10 percent that year. In short, a fixed index annuity provides principal protection in a down stock market. While the potential return is less than what one would expect from a variable annuity, it is greater than what one would expect from a certificate of deposit or a fixed annuity. Therefore, a fixed index annuity appeals to someone who desires an opportunity to experience gains in a good market while also receiving protection from market downturns. For an additional fee, a purchaser can customize an annuity through the addition of “riders.” For example, an annuity with a guaranteed income rider provides a guaranteed amount of income for the annuity owner’s life. That income stream continues even if declines in the stock market cause the principal to dissipate. That guaranteed income stream does not start until it is activated by the annuity owner. Until activation, the money associated with the rider grows at a guaranteed rate of return, known as the “roll-up rate,” so long as the annuity owner does not activate the income stream. That guaranteed income stream can be destroyed if the annuity owner takes a withdrawal from the annuity’s principal. Surrender charges are another annuity feature and provide that the buyer will be penalized if he or she withdraws money from the annuity. Surrender charges usually apply during the first five to ten years after the annuity’s purchase and gradually decline over time. For example, an annuity could have a 10 percent surrender charge if the owner withdraws money during the first three years after purchase. During the next three-year period, that surrender charge may decrease to 7 percent. By the tenth year after purchase, the surrender charge could have decreased to 3 percent. Before a sale is completed, Florida law requires that insurance agents ensure that an annuity is “suitable” for the client. For example, section 627.4554(4)(a), Florida Statutes (2012), imposed the following duty on insurers and insurance agents: In recommending to a senior consumer the purchase of an annuity or the exchange of an annuity that results in another insurance transaction or series of insurance transactions, an insurance agent, or an insurer if no insurance agent is involved, shall have reasonable grounds for believing that the recommendation is suitable for the senior consumer on the basis of the facts disclosed by the senior consumer as to his or her investments and other insurance products and as to his or her financial situation and needs. The current version of section 627.4554 does not limit the suitability analysis to senior consumers and sets forth additional detail about the content of a suitability analysis: When recommending the purchase or exchange of an annuity to a consumer which results in an insurance transaction or series of insurance transactions, the agent, or the insurer where no agent is involved, must have reasonable grounds for believing that the recommendation is suitable for the consumer, based on the consumer’s suitability information, and that there is a reasonable basis to believe all of the following: The consumer has been reasonably informed of various features of the annuity, such as the potential surrender period and surrender charge; potential tax penalty if the consumer sells, exchanges, surrenders, or annuitizes the annuity; mortality and expense fees; investment advisory fees; potential charges for and features of riders; limitations on interest returns; insurance and investment components; and market risk. The consumer would benefit from certain features of the annuity, such as tax-deferred growth, annuitization, or the death or living benefit. The particular annuity as a whole, the underlying subaccounts to which funds are allocated at the time of purchase or exchange of the annuity, and riders and similar product enhancements, if any, are suitable; and, in the case of an exchange or replacement, the transaction as a whole is suitable for the particular consumer based on his or her suitability information. In the case of an exchange or replacement of an annuity, the exchange or replacement is suitable after considering whether the consumer: Will incur a surrender charge; be subject to the commencement of a new surrender period; lose existing benefits, such as death, living, or other contractual benefits; or be subject to increased fees, investment advisory fees, or charges for riders and similar product enhancements; Would benefit from product enhancements and improvements; and Has had another annuity exchange or replacement, including an exchange or replacement within the preceding 36 months. § 627.4554(5)(a), Fla. Stat. (2018). Despite section 627.4554, the suitability analysis tends to be subjective in nature. Extreme circumstances notwithstanding, it is fair to say that reasonable people could reach different conclusions about what annuity would be best for a certain person. The Parties The Department is the state agency responsible for regulating and licensing insurance agents and agencies. That responsibility includes disciplining licensed agents and agencies for violations of the statutes and rules governing their profession. At all times relevant to the instant case, Ms. Dorrell was a Florida-licensed insurance agent selling fixed annuities and fixed index annuities. She owns SFS, a licensed insurance agency located in The Villages, Florida. Ms. Dorrell is not licensed to conduct securities business. Count I – Frederic Gilpin Frederic Gilpin was born in 1940 and worked in the automobile industry, primarily as a service manager in dealerships, for 44 years before retiring in 2006. Mr. Gilpin purchased a Prudential variable annuity in 2006 through Bryan Harris, an investment advisor in Maryland, for $260,851.14. By September 30, 2007, the value of Mr. Gilpin’s Prudential variable annuity had increased to $326,557.31. On December 31, 2007, its value had fallen to $319,877.84. On December 31, 2008, Mr. Gilpin’s Prudential variable annuity was worth only $200,989.32. By March 31, 2009, its value had fallen to $183,217.37. The decrease in the annuity’s underlying value coincided with the precipitous declines experienced by the stock market in 2008 and 2009. On May 1, 2009, Mr. Gilpin exercised a rider in the Prudential annuity contract that guaranteed a yearly income of $15,625. That annual income would continue for the rest of his life regardless of the stock market’s performance. The guaranteed income stream would only be destroyed if Mr. Gilpin withdrew from the annuity’s principal. Mr. Gilpin and his wife met with Ms. Dorrell in 2012 to discuss their financial situation. Mr. Gilpin reported that he was very concerned with income, preservation of assets, and maximizing growth. According to Ms. Dorrell, Mr. Gilpin “did express to me that he was concerned about a downturn [in the stock market] because he had already gone through one in [2007 and 2008] and lost quite a bit of money in the annuity.” Mr. Gilpin also told her that he and his wife had committed “financial suicide” because “he had taken excess withdrawals from his variable annuity when they went to buy [their home in Florida] and that they were constantly invading their investments to help their children and they needed to stop that.” As recommended by Ms. Dorrell, Mr. Gilpin surrendered the Prudential annuity and used the proceeds to purchase a fixed index Security Benefit annuity. The purchase price of approximately $205,000 for the Security Benefit annuity was allocated between two accounts whose performance was tied to the Standard and Poor’s 500. Mr. Gilpin filled out a Department form titled “Annuity Suitability Questionnaire” on September 26, 2012, and reported that he was purchasing the Security Benefit annuity for “safety of principal + guarantee.” He also reported that he planned to keep the Security Benefit annuity for 10 years. At the time of this transaction, the Prudential annuity had four more years of surrender charges, and Mr. Gilpin started a new 10-year period of surrender charges associated with the Security Benefit annuity.4/ Mr. Gilpin incurred a surrender charge of $13,077.56 for surrendering the Prudential annuity. The surrender charge was more than offset by the 8 percent bonus (i.e., $16,000) he earned by purchasing the Security Benefit annuity. However, the 8 percent bonus was subject to recapture for the first six years. With the Security Benefit annuity, Mr. Gilpin could withdraw 10 percent of the money without penalty after the first year. If Mr. Gilpin waited until 2016 to take income from the Security Benefit annuity, then he would be getting over $17,000 a year in guaranteed income for his lifetime. If he died, then the guaranteed income stream would continue for his wife’s lifetime. Mr. Gilpin had no pressing need for income in 2012 because he had used the sale from his home in Maryland to acquire a home in Florida, and he had $50,000 left over. The Prudential annuity did not have a home healthcare doubler, and the Security Benefit annuity did. That feature increases the annuity purchaser’s income stream if he or she becomes disabled. The Security Benefit annuity had a 100-percent participation rate, and a 7-percent roll up rate. In contrast the Prudential annuity only offered a 5-percent roll up rate. In retrospect, Mr. Gilpin considers the move from the Prudential annuity to the Security Benefit annuity to be unwise. In recent years, Mr. Gilpin and his wife have experienced significant health issues. By purchasing the Security Benefit annuity and extending the amount of time that their funds were committed to relatively illiquid annuities, the Gilpins would likely have incurred substantial penalties if they had needed to use those funds to finance their medical treatment. Fortunately, the Gilpins are well-insured and were not compelled to take such drastic measures. Mr. Gilpin is also critical of Ms. Dorrell for recommending that he move his money from a variable annuity to a fixed index annuity. As a result, his holdings did not appreciate as much when the stock market rebounded from the lows of the most recent recession. Given that the Prudential annuity guaranteed him annual income of $15,625 regardless of valuations in the stock market, Mr. Gilpin stated “[t]here’s no way in the world [the Security Benefit annuity] could have been better for me, especially since the stock market has gone up.” This criticism is unfounded. It is exceedingly difficult to predict whether the stock market will go up or down, and Mr. Gilpen’s testimony enjoys the benefit of “20/20 hindsight.” A strongly contested point between the Department and Ms. Dorrell concerns whether Mr. Gilpin destroyed his guaranteed income stream by taking an excess withdrawal from the Prudential annuity. If he had, then it would be more difficult for the Department to argue that the Security Benefit annuity was not a suitable replacement for the Prudential annuity. In that regard, there is evidence suggesting that Mr. Gilpin took an excess withdrawal in 2010 and/or 2011. For example, Mr. Gilpin appeared to acknowledge during his testimony that he had taken an excess withdrawal from the Prudential policy in order to assist his daughter with purchasing a condominium.5/ Mr. and Mrs. Gilpin’s income tax return for 2010 indicates that they received $44,423.00 from “pensions and annuities.” That amount is listed separately from $15,626 attributed to “IRA distributions.” The Gilpin’s 2011 income tax return indicates they received $32,005.00 from “IRA distributions” and $43,778.00 from “pensions and annuities.” The evidence indicating that Mr. Gilpin may have taken an excess withdrawal corresponds with when the Gilpins moved to Florida and bought a house in 2011. According to Ms. Dorrell, Mr. Gilpin stated during a meeting with her on September 21, 2012, that “he had made an excess withdrawal to buy the house in Florida, because when they were down here, they found something and they didn’t want to lose out, so they took extra money out.” Also, Ms. Dorrell testified that she called Prudential and confirmed that he took an excess withdrawal in 2011. However, even if Mr. Gilpin had not destroyed the guaranteed income from the Prudential annuity, the evidence does not clearly and convincingly establish that the Security Benefit annuity was not a suitable replacement for the Prudential annuity. In sum, the Department failed to prove by clear and convincing evidence that Ms. Dorrell or SFS violated any statutes or rules in conducting business with Mr. Gilpin. Count IV – Deborah Gartner’s Annuities Deborah Gartner is a 71-year old widow who met Ms. Dorrell at an SFS seminar in 2007. Ms. Gartner filled out an SFS form indicating that her net worth was between $500,000 and $1 million. In January of 2008, Ms. Gartner met with Ms. Dorrell in order to seek financial advice. Ms. Gartner had $201,344.14 in a Guardian Trust account and $195,182.44 in a Guardian Trust IRA. In addition, Ms. Gartner owned an $80,000 certificate of deposit. On a monthly basis, Ms. Gartner was receiving $1,381 from social security, $786.15 from a pension, and $4,500 from investment withdrawals. The latter came from depleting principal rather than interest. Ms. Gartner also earned income from teaching one to three Zumba classes a week. One hundred people would attend those classes and pay $10 a person. At the time of the January 2008 meeting, the stock market was declining, and Ms. Gartner was adamant about getting out of equities. Ms. Dorrell told Ms. Gartner that annuities would be appropriate if she was interested in principal protection and guaranteed income. Because she lacked a securities license, Ms. Dorrell could not legally recommend or instruct Ms. Gartner to liquidate her equity investments, and Ms. Dorrell credibly denies doing so. Ms. Gartner was able to liquidate her Guardian Trust accounts without incurring any fees. The funds from the Guardian Trust accounts were used to purchase two Allianz and two American Equity annuities on February 1, 2008. The Department criticizes Ms. Dorrell for directing Ms. Gartner’s funds into four annuities rather than just two. Ms. Dorrell explained that this was intended to increase Ms. Gartner’s income: Q: Now, Mr. Davis this morning was explaining the reason for having multiple annuities. And if I understood him, it was that if you have multiple annuities and you want to either take a withdrawal or whatever other thing, you have to do it at a specific amount based upon the amount of the annuity; is that correct? A: Yes, that’s correct. It’s - - - Q: Well, for example, if you’re going to take a 10 percent penalty-free withdrawal, if you have a $75,000 annuity, you take $7,500. A: Right. Q: If you had a $150,000 annuity, you’re stuck at 15,000. A. Right. Q: But if you’ve got two $75,000 annuities, you could take it from one and leave the other one without being reduced? A: Yeah, some of the companies – some of the companies only allow a penalty-free withdrawal after the first year, but then once somebody makes a penalty-free withdrawal, some of the companies make them wait around another 12 months before they could make another one. So if she only needed $7,500 and she had 15,000 available, but then she needed the rest of it before the 12 months went by, she might have a problem. So that’s the reason I staggered the accounts for her and for many clients that are taking income. Q: In your opinion, was this suitable for Ms. Gartner at that time? A: Yes, it was. Q: Did you believe it was in her best interest? A: Yes. In March of 2008, Ms. Gartner used the $80,000 from her certificate of deposit to purchase a Reliance Standard fixed index annuity. At that time, the certificate of deposit was coming due and had been paying 3.9 percent. The Reliance Standard annuity offered 4.5 percent along with an additional 1 percent for the first year. The minimum guaranteed rate was 3 percent. As for why she recommended that Ms. Gartner purchase the Reliance Standard annuity, Ms. Dorrell testified as follows: Deborah was very sensitive to creditor protection. Due to what her husband had done for a living, he often told her about making sure your assets are creditor-protected. She had a son that had a problem with being – having assets seized. I believe it was in a divorce or some sort of lawsuit. And so one of her things that she liked about the annuities is that they gave her creditor protection. So she still had the CD at the bank that was at risk if for some reason something happened and she needed her assets protected. It wasn’t paying as much. She wanted to get more income, and she wanted principal protection and safety. By January of 2011, Ms. Gartner wanted more income, and Ms. Dorrell recommended that the Reliance Standard annuity be split into two annuities. Surrendering the Reliance Standard annuity caused Ms. Gartner to incur a $5,132.56 surrender charge and left her with $72,496.03 from the initial $80,000 purchase. She used $43,815 of the $72,496.03 to purchase an American Equity annuity that offered a guaranteed minimum interest rate of 3 percent. However, the American Equity annuity also had 16 years of surrender charges, and the surrender charge for the first year was 20 percent. Ms. Gartner used $26,185 of the $72,496.03 to purchase a North American annuity. As for the reasoning behind recommending the surrender of the Reliance Standard annuity, Ms. Dorrell testified as follows: A: I recommended, because she wanted more income, and my concern was she was getting to the point where she might be having to live on her IRA monies, which would be a taxable event. So I made a recommendation that we do a split annuity with the money that was in the Reliance to give her more income and less taxes. Q: Can you explain how that’s done? A: Yes. So, a split annuity is like a bucket concept. In her case we use two buckets. One was going to be the immediate annuitization in the North American that would then give her $150 more a month in income with much less taxation. Only a small portion of that payment would be taxable. And then on the other side was the American Equity which was purchased for accumulation over that same 5-year time frame that the North American would be paid out, so when the North American balance went to zero, she’d have the same amount of money in her American Equity policy as she started with when she bought both of them. Q: So how long a period of time would this provide the same income for her? * * * A: For the rest of her life. That was the reason for buying the American Equity, because it would remain – when we used the rider on that side, it would give her guaranteed income for as long as she lived and she was concerned about that because her parents were both in their nineties. Q: In your opinion, were these purchases suitable for her? A: Yes, they were. Q: And the surrender of the Reliance Standard, was that suitable? A: Yes. Q: Because that was a source of the funds to obtain the other two annuities; is that right? A: Yes. Ms. Dorrell also addressed the Department’s allegation that it was ill-advised to incur a $5,132.56 charge for surrendering the Reliance Standard annuity: Q: It’s been alleged that the liquidation of the Reliance Standard annuity cost Ms. Gartner $5,132.56 and, apparently, that it shouldn’t have cost her or that it was a bad idea to surrender the policy. Does that take into account what’s known as the market value adjustment? A: No. So many just straight fixed annuities and some fixed index annuities, in particular we’re speaking of the Reliance Standard fixed annuity, they come with what’s called a market value adjustment. It’s really something that an insurance company determines if they’re going to give them a positive market value adjustment or a negative value adjustment. So a negative market value adjustment could make a higher surrender charge and a positive market value adjustment could make a lower surrender charge, and they’re sort of driven by interest rates. So at that time, if you remember, you know, 2011 interest rates were, you know, still very low. But it was a good time, if you had an annuity with a market value adjustment, it was a good time to consider changing it because they would still have positive market value adjustments, which by the next year, the next six months later, exactly what I knew would happen is all those market value adjustments went negative. So not only would it have cost her the percentage rate on the surrender penalty to get out, she would have paid an additional negative market value adjustment. And this way it was timed to better her annuity anyway and she ended up in the positive. Q: Was there a positive market value adjustment? A: Yes. Q: $1,700? A: Correct. Q: And was there also a bonus on the American Equity? A: Yes. Q: And do you know what the bonus was? A: 10 percent. Q: And what was that, about $3,000? A: I think she put 43,000 in there, so it was about $4,300. Q: So after the surrender, taking into account the market value adjustment, taking into account the bonus on the American Equity, in fact, wasn’t she $1,000 ahead? A: Yes. The Department argues that Ms. Dorrell gave investing advice to Ms. Gartner and that Ms. Dorrell’s actions led to a depletion of Ms. Gartner’s assets. Ms. Dorrell addressed those allegations as follows: Q: It’s alleged in the administrative complaint that Ms. Gartner’s assets were depleted by the exchange of policies and also that you gave securities advice. First of all, were her assets in any way depleted? A: No. Q: She takes at the beginning $300,000 cash. She buys $300,000 worth of annuities. And the annuity companies add 10 percent, so initially she takes $300,000, truly liquid asset[s], but earning very little, and now she’s got $330,000 in the annuities; is that right? A: Yes. Q: Is there any depletion of her assets there? A: No. Q: Two months later, March of 2008, she takes an $80,000 CD and buys an $80,000 Reliance Standard annuity. Is there any depletion of assets there? A: No. Q: Later on she takes the $80,000 Reliance Standard annuity and converts it to a total of almost $80,000 in American Equity and National American? A: North American, yes. Q: North American? Is there any depletion of assets there? A: No. Q: Do all of these annuities actually earn income? A: Yes. Q: Did the principal balance of any of these assets decline? A: No. Q: In comparison to the stock market where there’s volatility up and down and your account may vary, did Ms. Gartner’s accounts ever vary or get lower? A: No. Q: Do you know the difference between giving advice on insurance and on securities? A: Yes. Q: Now, honestly, I’m not quite sure what is advice on securities, but I assume it is sell this one and buy another one? A: Right. Q: Did you make any recommendation that she sell a particular security? A: No, I did not. Q: Did you make a recommendation that she buy a particular stock? A: No, I did not. Q: Other than advising her that she needs to get the source of some funds to buy the annuities, and they would have to come from her accounts, is that the only advice you gave her? A: Yes. In sum, the Department failed to prove by clear and convincing evidence that Ms. Dorrell or SFS violated any statutes or rules in conducting business with Ms. Gartner. Count V – Gartner’s Real Estate Ms. Gartner and Ms. Dorrell became friends, and Ms. Gartner sought Ms. Dorrell’s advice in 2012 about selling her home in Summerfield, Florida. At that time, Ms. Gartner wanted to acquire a smaller home in The Villages, Florida. However, Ms. Gartner was having difficulty selling the Summerfield home. Along with referring Ms. Gartner to a real estate agent, Ms. Dorrell allegedly advised her to stop paying the mortgage on her Summerfield home and to do a short sale.6/ Ms. Dorrell denies making either recommendation. Ms. Dorrell spent $3,100 on “staging” the Summerfield home in order to make it appear more attractive to potential buyers. Ms. Gartner and Ms. Dorrell informally agreed that Ms. Gartner would select a house in The Villages, Ms. Dorrell would purchase it, and Ms. Gartner would then buy the house from her. Ms. Dorrell made the initial purchase because Ms. Gartner lacked funds and/or a good credit rating following the short sale. Ms. Gartner and Ms. Dorrell discussed Ms. Gartner purchasing the villa from Ms. Dorrell, but they never reached a formal agreement on terms. Because a short sale would have a negative impact on her credit rating, Ms. Dorrell allegedly advised Ms. Gartner to buy a new car prior to executing the short sale. Ms. Gartner sold her 2003 Mazda Tribute to Ms. Dorrell for $10,000, and Ms. Gartner purchased a new car. Ms. Dorrell then gave the Mazda Tribute to Diana Johnson, an SFS employee. Ms. Dorrell deemed the car to be income, and Ms. Johnson declared it on her tax return. Ms. Gartner selected a villa in The Villages, and Ms. Dorrell purchased it for $229.310.78 on November 1, 2012. Of the aforementioned amount, Ms. Gartner paid $10,000, and Ms. Dorrell paid the remaining $219,310.78. At this point in time, Ms. Dorrell was the legal owner of the villa. Ms. Gartner could not move into the villa immediately after the sale because it was being rented, and the tenants’ lease extended through April of 2013. Ms. Dorrell received the rental payments of $1,800 per month and paid the expenses associated with the villa between November of 2012 and April of 2013. Those expenses included items such as home insurance, cable television, lawn maintenance, and utilities. By May of 2013, Ms. Gartner had completed a short sale of her Summerfield home. She received a short sale benefit of $36,775.00 and a seller assistance payment of $3,000.00. Ms. Gartner moved into the villa in May of 2013. At that point in time, there was no formal agreement between Ms. Gartner and Ms. Dorrell about when Ms. Dorrell would sell the villa to Ms. Gartner or how Ms. Gartner would pay Dorrell for it. Ms. Gartner paid no rent to Ms. Dorrell from May of 2013 through April of 2014. In November of 2014, Ms. Dorrell sold the villa to Ms. Gartner for approximately $219,000, the same price that Ms. Dorrell paid for it. In order to finance the sale, Ms. Gartner executed a promissory note that would pay Ms. Dorrell $100,000 with 4-percent interest. Ms. Dorrell did not record that promissory note.7/ In order to finance the remainder of the purchase price, Ms. Gartner obtained a reverse mortgage. Ms. Dorrell allegedly pressured Ms. Garter to obtain the reverse mortgage, but Ms. Dorrell denied having any discussions with Ms. Gartner about a reverse mortgage. There is a substantial amount of disagreement between Ms. Gartner and Ms. Dorrell as to who was entitled to receive the rental payments. They also disagree about the expenses associated with maintaining the villa prior to Ms. Gartner moving in. This is not surprising given the lack of a written agreement between them. The Department’s Exhibit 185J purports to be an accounting of the rental income and expenses associated with the villa prior to Ms. Gartner moving in, and it suggests that Ms. Gartner should have received or been credited for an additional $17,950.51. Ms. Dorrell had Diana Johnson prepare Exhibit 185J, but there is substantial reason to question Ms. Johnson’s credibility about the interpretation of Exhibit 185J.8/ Ms. Gartner ultimately sold the villa for $285,000. Ms. Dorrell filed a mortgage foreclosure action against Ms. Gartner in order to recover the balance of the money Ms. Gartner owed her. Part of that litigation involved a reconciliation of expenses associated with the villa prior to Ms. Gartner moving in. Following a mediation conference on June 6, 2017, Ms. Gartner agreed to pay $97,500 to Ms. Dorrell in settlement of the foreclosure action. In the Administrative Complaint, the Department alleges that Ms. Dorrell acted “wrongfully” through the following actions: (a) advising Ms. Gartner to stop making mortgage payments on the Summerfield home; (b) advising Ms. Gartner to buy a new car and purchasing Ms. Gartner’s used car; (c) arranging for the purchase of the villa and accepting a $10,000 deposit from Ms. Gartner without giving her credit for it; (d) not crediting Ms. Gartner for paying expenses associated with taking possession of the villa; (e) directing Ms. Gartner to sign a $100,000 promissory note; (f) making Ms. Gartner responsible for all of the property taxes owed for the villa in 2014; pressuring Ms. Gartner to procure a reverse mortgage; and arranging for Ms. Gartner to use funds from an IRA account to pay off the promissory note. Ms. Dorrell’s failure to have a written agreement governing her acquisition and subsequent sale of the villa to Ms. Gartner was foolhardy. Without such an agreement, conflicts regarding the villa were inevitable. However, the evidence does not clearly and convincingly establish that Ms. Dorrell violated any statutes or rules in her dealings with Ms. Gartner. Count VI – Earl Doughman Earl Doughman was born on December 6, 1934. After completing a two-year stint of military service in 1958, Mr. Doughman spent the next 40 years managing a company’s inventory. At some point after his retirement, Mr. Doughman and his wife moved from Cincinnati, Ohio to The Villages. On August 4, 2008, Mr. Doughman purchased a Midland National Deferred Annuity (“the Midland annuity”) from Ms. Dorrell. That annuity provided a 5.25-percent guaranteed interest rate for five years. The annuity did not have an income rider or a home healthcare doubler. In 2013, Mr. Doughman visited SFS to inquire about purchasing another annuity. According to Mr. Doughman, he dealt exclusively with Diana Johnson and never met with Ms. Dorrell about his finances.9/ Ms. Johnson allegedly advised Mr. Doughman to utilize 10-percent penalty free withdrawals from the Midland annuity and a Fidelity and Guaranty annuity to fund the acquisition of a Security Benefit annuity for $29,492. The Department asserts that the Security Benefit annuity was not a suitable replacement for the Midland annuity. The Midland annuity was a fixed annuity and the Security Benefit was a fixed index annuity. The Midland annuity had five more years of surrender charges, and the surrender charge for each year was 10 percent. The purchase of the Security Benefit annuity resulted in Mr. Doughman beginning a new 10-year term of surrender charges. Those surrender charges were 10 percent for the first five years, but gradually declined to 0 percent by year 10. As noted above, Mr. Doughman could withdraw 10 percent a year from the Midland annuity without incurring a penalty. With the Security Benefit annuity, he would incur a 10 percent surrender charge after the first year. The Midland annuity provided a minimum guaranteed interest rate of 1 percent, and the Security Benefit Annuity had no minimum guarantee. However, the Security Benefit annuity came with a 9-percent bonus based on the premium amount. As a result, Mr. Doughman received approximately $2,654.28 upon purchasing the Security Benefit annuity. The Midland annuity had a 5.25-percent interest rate cap for the first year. By 2013, the Midland annuity was paying 3 percent. The participation rate in both annuities was 100 percent. The Security Benefit annuity had a home healthcare doubler, and the Midland annuity did not.10/ However, the Midland annuity had a death benefit and a terminal illness rider that would result in the waiver of surrender penalties if they were activated. Ms. Dorrell testified as follows as to why the Security Benefit annuity was more suitable for Mr. Doughman than the Midland annuity: Q: Why is the Security Benefit [annuity] a better product for Doughman? A: Because it has the home healthcare doubler that he desperately needed. It has the income rider. It has the upside potential in the stock market with not any downside potential whatsoever. It has a fixed account inside of it that would have paid close to the same amount that the Midland had renewed out at 3 percent. So why wouldn’t he buy something that he can get a bonus on, not lose anything from the Midland, and have the ability to make more money than what he was going to make if he stayed at Midland? It makes perfect sense to move that. Mr. Doughman was concerned about whether he was actually earning 4 percent on the annuity contract amount as had allegedly been represented to him. Therefore, Mr. Doughman asked Don Geist, an insurance agent with Financial Solutions Group of Florida, to review the terms of this Security Benefit annuity. Mr. Geist is a competitor of Ms. Dorrell’s and determined that the 4-percent interest rate applied only to the annuity’s income rider.11/ With Mr. Geist’s assistance, Mr. Doughman wrote a letter to Security Benefit on April 14, 2014, seeking the termination of the Security Benefit annuity and a refund of the $29,492.30 he paid to acquire that annuity.12/ Security Benefit refunded the money that Mr. Doughman had paid to acquire the Security Benefit annuity. Ms. Dorrell learned of Mr. Doughman’s complaint in April of 2014. In response, she had Ms. Johnson use SFS’s records to prepare a chronology and description of Mr. Doughman’s meetings with SFS. Ms. Johnson then transmitted the following e-mail to Ms. Dorrell’s attorney on April 29, 2014, indicating that Ms. Johnson did not sell an annuity to Mr. Doughman: Hi Jed, Here is a timeline of when the Doughmans came to our office and who they met with: July 17, 2012 attended Seminar, which Jean was the speaker. July 31, 2012, met with Goldie, who was a licensed agent and discussed annuities. August 28, 2013, met with Jean for a review and purchased annuity. August 29, 2013, brought in beneficiary information and gave to Diana. October 3, 2013, met with Jean for policy delivery. February 21, 2014, met with Diana and the Doughmans expressed concern re: a salesman that came to their door inquiring about their finances and dropped off card from Don & Tim Geist from Financial Solutions. The Department alleges that Ms. Dorrell committed wrongdoing by having unlicensed agency personnel (i.e., Diana Johnson): (a) perform prohibited sales activities with respect to Mr. Doughman’s transactions of insurance; (b) unreasonably recommend the partial surrender of senior consumer Doughman’s existing annuities to fund the purchase of the Security Benefit annuity; (c) misrepresent the percentage return on the Security Benefit policy by including a costly rider to the policy; and (d) advising Mr. Doughman that the cap on the indexed Security Benefit policy was two points lower than the cap on his indexed Midland annuity. The evidence does not clearly and convincingly establish that Ms. Dorrell or SFS violated any statutes or rules in dealing with Mr. Doughman. Count VII – Margaret Dial Margaret Dial was born in 1950 and earned a high school diploma. She was married for 42 years. During her marriage, she worked as a bookkeeper until she took an early retirement to care for her mother. Ms. Dial receives income from a pension and social security. Ms. Dial met Ms. Dorrell in July of 2007 and purchased multiple annuities from her. One of those annuities was an Old Mutual annuity that she purchased on November 11, 2007. In 2013, Ms. Dorrell advised Ms. Dial to surrender the Old Mutual annuity and use the proceeds to purchase a Security Benefit annuity. After incurring $16,560.39 in surrender charges, Ms. Dial received $129,901.21 in the form of a check mailed to her home. Ms. Dial then wrote a check for $130,000 to purchase a Security Benefit annuity. The difference between the purchase price of the Security Benefit annuity and the proceeds from the surrender of the Old Mutual annuity was $98.79. On March 12, 2013, Ms. Dial signed an application to purchase the Security Benefit annuity recommended by Ms. Dorrell for $130,000. The application associated with the Security Benefit annuity was incorrect because it did not show that it was a replacement for the Old Mutual annuity. The Department asserts in its proposed recommended order that: [t]he manner in which [the Old Mutual annuity] was replaced shows that it was a smokescreen to avoid Old Mutual conservation efforts and to make the new purchase look like it was accomplished by fresh money. By replacing her own business, Dorrell sold the same money twice, making commissions each time, while Ms. Dial incurred a $16,000 surrender penalty. Instead of encouraging the sale, Dorrell should have conserved the Old Mutual business. “Conservation” is the term used to describe an insurance company’s effort to retain existing business. As for why it was problematic that the Security Benefit annuity was not identified as a replacement, Mr. Spinelli testified as follows: A: Because this case – the first contract, [Old Mutual], was written by Dorrell, and she’s replacing her own business to move it to – having the check sent to the client’s house to avoid a conservation effort because it’s saying that she’s surrendering the policy for cash. A proper replacement, if it was a legitimate replacement, would have been a 1035 exchange from one company to another, therefore, avoiding any taxable events. If it was gains in this policy, which there might have been, by surrendering it, it could have created a tax event. And it also avoided the conservation effort that [Old Mutual] was trying to perform. And then adding $99 created a different amount that was surrendered. So that’s a big smokescreen to the company that it was a different amount than was surrendered. Q: So it looks like fresh money, so to speak? A: Correct. And there was [a] $16,604 surrender charge when that transaction was done. The – that’s the case of that money being sold twice. Dorrell sold that money twice there. She sold it with [Old Mutual} and then she turned around and sold it again with Security Benefit. She made commission twice on that. Q: If that were – if, in fact, that had been indicated as a replacement, how do companies look upon – do they look upon these kinds of replacements with a jaundiced eye, so to speak? I’m talking about where the real facts are set forth. A: The company I work for, they do. They take conservation very seriously, especially in a situation like this where the money’s being sent to somebody’s home. Q: And so isn’t the reason for the comparison sheet between the two annuities, to try to point out to the underwriting people that, if the facts are true, then they may or may not allow for issuance of the annuity, the replacement annuity; correct? A: Well, they have to eventually comply with the client’s wishes. If the client insists on surrendering that and making a terrible mistake and paying $16,000 surrender charges, there’s nothing the company can do to stop it. But they can have the agent try to conserve the business. Q: And that’s what the agent should be doing? A: Correct. ALJ: I’ve heard the term conserve. I have a pretty good idea – think I know what it means, but no one’s actually defined it for me. Could you formally define what conserve is? A: Yeah. Conserve, conservation, you’re conserving the business on the books for that company for your clients. You should be conserving the business for your clients. Why are they leaving? You know, quality companies have a high retention rate in their business. It’s because of conservation efforts. ALJ: Okay. Thank you. A: If you have more business leaving the company, your ratings are going to go down. It’s going to be detrimental to the company. Not just the company, but to the clients they serve. Ms. Dorrell acknowledged during her direct testimony that she failed to make the proper notation on the application form. However, she disputed Mr. Spinelli’s assertion that her failure prevented Old Mutual from initiating conservation efforts: Q: Now, on that third page with respect to the question, “Does this proposed contract replace or change any existing annuity or life insurance policy,” the answer is no. Is that incorrect? A: It’s incorrect, yes. Q: Did you notice that when the application was completed and was shown to Margaret Dial? A: I did not. Q: Were you with Margaret Dial when the application was shown to her? A: Yes. * * * Q: At some point did you discover that there was an error on the application before the administrative complaint was filed? A: No. Q: Okay. Now, what impact would that incorrect answer have in regard to the transaction? * * * A: Well, it’s a replacement. I should have checked yes. I mean, that was an error on my part. Q: Did you do that intentionally? A: No. Q: Okay. So, again, did this have an impact on Margaret Dial, financial impact? A: No. Simply because we had discussed that she would pay a surrender charge, and she knew that she was paying it, and she knew what the bonus was as presented in my illustration to her on the Security Benefit annuity. It showed her the bonus. It showed her how her money grew at 7 percent each year, what the value would be, so she knew it took about a year to get back to where she was, and she was willing to pay that surrender penalty because of all the other benefits she was getting. Q: I understand. Mr. Spinelli testified though that if an application is not marked that it is a replacement, that there might not be the conservation letter sent to the policy holder. A: No, there’s a conservation letter sent regardless of that. No insurance company wants to lose business so they – as far as I know, all the companies I work with, they send conservation letters out to the client because they don’t want to lose the business, so they want to make sure that they’re informing the client what they may be giving up. Q: So in other words, the Old Mutual that was being surrendered, whether it was being replaced or just being surrendered and Ms. Dial was taking the money, Old Mutual would still send her a conservation letter. A: Yes. Q: Because she was cancelling the policy. A: Yes, and they didn’t want to lose the business. Q: And it’s irrelevant, really, whether it’s being replaced or whether it’s just being cashed out. A: Right. They send it regardless. * * * Q: And this conservation letter that went to Ms. Dial advises her of the surrender charge, doesn’t it? A: Yes. Q: $16,560.39? A: Yes. The evidence does not clearly and convincingly demonstrate that Ms. Dorrell or SFS violated any statutes or rules in the dealings with Ms. Dial. Count VIII - Unlicensed Activities The Department alleges under Count VIII of the Administrative Complaint that Ms. Dorrell and/or SFS employees performed work without having the proper licensure. Specifically, the Department alleges that SFS employees wrote Lady Bird deeds and wills without being licensed attorneys. A Lady Bird deed enables a person to designate a child or some other beneficiary as the person who will take possession of the designator’s property after death. The Department also alleges that Ms. Dorrell and/or SFS employees encouraged clients to liquidate security holdings without being licensed investment professionals. The Department’s case largely depends on two former SFS employees with questionable credibility. Laura Wipperman began working for SFS in July of 2010, providing support to Ms. Dorrell as an administrative assistant. Ms. Wipperman did not have an insurance license. Ms. Wipperman left SFS in March of 2013, supposedly because of Ms. Dorrell’s harsh treatment of her employees. Nevertheless, Ms. Wipperman later returned to SFS as a receptionist. Ms. Wipperman separated from SFS a second time in June of 2014. Ms. Dorrell was upset that Ms. Wipperman failed to timely prepare a file. After Ms. Dorrell had a tense confrontation with Ms. Wipperman, she told Diana Johnson to fire her. Because Ms. Wipperman and Ms. Johnson were friends, Ms. Dorrell’s direction probably led to tension between Ms. Dorrell and Ms. Johnson. In approximately June of 2014, Ms. Dorrell fired Ms. Johnson for stealing money from SFS’s petty cash fund. Ms. Wipperman and Ms. Johnson filed a complaint a few weeks later with the Department alleging that Ms. Dorrell had engaged in improper conduct. Ms. Johnson also joined Ms. Gartner in reporting improper conduct by Ms. Dorrell to an organization called Seniors Versus Crime. Ms. Johnson unsuccessfully pursued a claim alleging that Ms. Dorrell did not pay her what she was owed after the firing. Ms. Johnson acquired an insurance license and began working for an SFS competitor in December of 2014. Ms. Johnson and Ms. Wipperman had obvious reasons to hold a grudge against Ms. Dorrell, and that cast a great deal of doubt on the credibility of their testimony. In addition, the undersigned found their testimony to be unpersuasive and unsupportive of the allegations made in Count VIII. Ms. Dorrell credibly testified that SFS refers clients needing wills and/or deeds to attorneys. Also, there was no sufficiently credible testimony to clearly and convincingly demonstrate that Ms. Dorrell instructed clients to liquidate their securities holdings. In sum, the Department failed to prove its allegations under Count VIII by clear and convincing evidence. Count IX - SFS Employees Performing Unlicensed Insurance Activites The Department’s allegations under Count IX also substantially rely on the testimony of Ms. Wipperman and Ms. Johnson. They testified that they performed activities that should have been handled by someone with an insurance license. Those alleged activities included tasks such as selling insurance, reviewing products with clients, and encouraging clients to use penalty-free withdrawal money to acquire new annuities. As found above, the undersigned does not find the testimony provided by Ms. Wipperman or Ms. Johnson to be credible or persuasive. In sum, the Department failed to prove any of its allegations under Count IX by clear and convincing evidence.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services enter a final order dismissing the Administrative Complaint. DONE AND ENTERED this 5th day of November, 2018, in Tallahassee, Leon County, Florida. S G. W. CHISENHALL 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 5th day of November, 2018.
The Issue Whether Respondent, Rosette Francesca Berban (Respondent), committed the violations alleged in the Administrative Complaint issued against her and, if so, what penalty should be imposed.
Findings Of Fact Petitioner is the state agency charged with the responsibility and authority to regulate insurance and insurance-related activities within the State of Florida. The licenses held by Respondent are included within the Petitioner’s authority. At all times material to the issues of this case, Respondent has been licensed as a life, health and variable annuity insurance agent, and as a life and health insurance agent (licensee). At all times material to the issues of this case, all of Respondent's acts or omission were in the course of her conducting insurance business as a licensee and agent for Penn Life-Senior Solutions, Lincoln Financial Group, or Aviva. Ezelle Smith is a female retiree, who resides in Sanford, Florida. At all times material to this case, Ms. Smith was a "senior consumer," as that term is used in the statutes. Ms. Smith was born in 1922 and makes her permanent residence in Florida. In November 2003, at age 80, Ms. Smith acquired a deferred annuity from Pennsylvania Life Insurance Company by paying a $50,000.00 premium. This annuity guaranteed Ms. Smith a certain monthly income for a certain period of time. Prior to January 25, 2008, Ms. Smith contacted Penn Life-Senior Solutions for the purpose of changing her beneficiary under the previously described annuity. On or about January 25, 2008, Respondent went to Ms. Smith's home purportedly to handle the change of beneficiary. At the time of Respondent's visit, Ms. Smith was 85 years of age. In discussions between Respondent and Ms. Smith, the latter opined that she would like more monthly income. Respondent sold Ms. Smith an equity indexed tax deferred annuity from Lincoln Financial Group (new annuity). The premium for the new annuity was funded, in part, by the Pennsylvania Life Insurance annuity. The total required to fund the new annuity was $56,497.97. In addition to the redeemed annuity, Ms. Smith was required to write a check in the amount of $10,000.00, for the difference in cost. Further, when the annuity was cashed in, Ms. Smith paid a surrender penalty of $3,607.43. It is found, Respondent did not fully explain the surrender penalty that would be incurred in the acquisition of the new annuity. Because Respondent did not make full disclosures regarding the new annuity, Ms. Smith did not understand the transaction and did not have a full accounting of the options available to her. Additionally, when Respondent explained the transaction to Respondent's daughters, she omitted pertinent information regarding the surrender penalty. Although the daughters knew their mother was seeking an increased monthly income, Respondent did not accurately explain the entire transaction. Ms. Smith's right to cancel the new annuity provided a 20-day window after the receipt of the policy within which it was possible to cancel the transaction. Respondent knew or should have known within the cancellation period that Ms. Smith was not agreeable to the transaction. Under the original annuity, Ms. Smith received a monthly income in the amount of $123.00. Under the new annuity, the monthly income was increased to $222.00. Mathematically, an 85-year-old woman would have to wait over three years to recover the amount surrendered when the original policy was cashed in. Although Respondent claimed the new annuity was superior to the original one, Ms. Smith lost the surrender amount, and $10,000.00 was then tied up in the new annuity. An annuity is not "more liquid" than cash. In summary, the new annuity did not afford sufficient benefits to overcome the loss of the surrender penalty and the loss of liquidity of the cash for the consumer. Respondent encouraged Ms. Smith to acquire an inappropriate investment, and thereby failed to protect the consumer's best financial interests. Mary Ann DeVita is a ?senior consumer,? who resides in DeBary, Florida, and is a citizen of the State of Florida. Ms. Devita was born in 1935. Prior to April of 2009, Ms. DeVita acquired two deferred variable annuities from John Hancock Life Insurance Company. The total invested in the annuities was well over $550,000.00. Ms. DeVita was unhappy with the performance of her investments and responded to an advertisement placed by Respondent's company. Ms. DeVita sought information as to how her retirement funds might be better invested to preserve the principle. Respondent visited Ms. DeVita in her home and explained options available regarding a new investment. Respondent proposed that Ms. DeVita invest in two equity indexed deferred annuities with Aviva that would be funded by the John Hancock annuities and Ms. DeVita's stock market account valued in the amount of $475,000.00. In furtherance of her proposal to Ms. DeVita, Respondent visited the home on several occasions. Each visit Respondent pitched the proposal. Respondent filled out the application for the proposed transaction and eventually Ms. DeVita signed the form. Ms. DeVita did not want the transaction to be completed until her children could review the paperwork and sign off on the deal. Respondent claimed she would consult with Ms. DeVita's family and that an additional signature would be needed to complete the transaction. In fact, no additional signatures were needed. Shortly after learning about the proposed transaction, Ms. DeVita's son was contacted by Bill Harrison (Ms. DeVita’s insurance agent). Mr. Harrison was concerned that by surrendering the John Hancock annuities, Ms. DeVita could potentially lose the death benefits that were valued at approximately $286,000.00. As a result of Mr. Harrison's intercession into the matter, Respondent was not able to complete her proposed transaction.
Recommendation It is recommended that the Department of Financial Services enter a final order finding Respondent guilty of the violations alleged in Counts I and II of the Administrative Complaint as set forth above, suspending her license for a period of 180 days, and imposing an administrative fine in the amount of $2,500.00. DONE AND ENTERED this 1st day of June, 2011, in Tallahassee, Leon County, Florida. S J. D. PARRISH 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 1st day of June, 2011. COPIES FURNISHED: Regina M. Keenan, Esquire Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399-0390 Walter A. Ketcham, Jr., Esquire Grower, Ketcham, Rutherford, Bronson, Eide & Telan, P.A. Post Office Box 538065 Orlando, Florida 32853-8065 Julie Jones, CP, FRP, Agency Clerk Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399-0390
The Issue The issue to be determined is whether Petitioner (“Senior Financial Security”)1/ is entitled to an award of attorney’s fees and costs pursuant to section 57.111, Florida Statutes (2019).2/ Senior Financial Security is entitled to such an award if: (a) the Department of Financial Services’(“the Department”) actions were not substantially justified; or (b) no special circumstances exist that would make an award of fees and costs unjust.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing, matters subject to official recognition, the Recommended Order and the Final Order from the underlying proceeding, and the entire record in the instant case, the following Findings of Fact are made: The Parties The Department is the state agency responsible for regulating and licensing insurance agents and agencies. That responsibility includes disciplining licensed agents and agencies for violations of the statutes and rules governing their industry. At all times relevant to the instant case, Jean-Ann Dorrell was a Florida-licensed insurance agent selling fixed annuities and fixed index annuities. She owns Senior Financial Security, a licensed insurance agency located in The Villages, Florida. Ms. Dorrell is not licensed to conduct securities business. The Initiation of the Department’s Investigation At all times relevant to the instant case, Susan Alexander was the regional administrator for the Department’s Jacksonville field office. Prior to becoming a Department employee in 1998, Ms. Alexander had been an insurance agent and financial advisor who held insurance licenses pertaining to life, health, variable annuities, and property and casualty. She also held a Series 6 investment license. At the time of the final hearing in the instant case, she still possessed the aforementioned licenses, but they were “on hold.” On July 1, 2014, Ms. Alexander received a complaint forwarded to her from the Department’s Division of Insurance Fraud. The complaint was from Laura Wipperman who had recently worked for Ms. Dorrell at Senior Financial Security. Ms. Wipperman’s complaint alleged that Ms. Dorrell regularly engaged in the following practices: (a) participating in the sale or delivery of annuities only for new clients, clients with money to move, or existing clients who insisted on meeting with her; (b) giving investment advice without having the necessary licensure; (c) instructing clients to procure reverse mortgages and use the resulting funds to purchase annuities; (d) instructing clients to surrender annuities and replace them with ones that are less suitable for them; and (e) encouraging clients to engage in financially disadvantageous transactions so that Ms. Dorrell would receive commissions. Ms. Wipperman executed an affidavit on July 29, 2014, alleging that Ms. Dorrell had her acting as an agent for Senior Financial Security clients between July of 2010 and March of 2013 despite the fact that she lacked the required licensure. Diana Johnson, another former employee of Senior Financial Security, also provided the Department with an affidavit on July 29, 2014, stating that: I began working for Jean-Ann Dorrell at Senior Financial Security about June of 2010, and I was the receptionist at that time. In the first part of 2013, I was promoted to [] office manager. I do not have and have not been licensed to sell insurance in Florida. . . . When I was promoted to the position of [] office manager, agent Dorrell expanded my duties to include, meeting with clients to review the client’s insurance coverage Agent Dorrell had a motto, “Don’t leave any money on the table.” If a client had an annuity that had a penalty free withdrawal available, I was instructed to contact the client to have them come in for a review. I would then solicit the sale of either another annuity or a life insurance policy and tell the client that funds are available and they will not incur a penalty to withdraw the funds from their policy. If the client made the decision to purchase a policy that I recommended, I would complete the application and have the client sign the paperwork along with the forms to have the funds withdrawn from the existing policy. Agent Dorrell instructed me to explain policies and the benefits. When a policy was issued, I would have the client come to the office and I would deliver the contract to them. . . . I would also answer any questions the client may have [had] about the insurance policy. Many times an appointment was made for agent Dorrell to meet with the client and when the client arrived at the scheduled time, agent Dorrell would make an excuse that she was not able to meet with the client and I was instructed to handle the sale of the policy and then complete the application. I am aware of certain situations where a client passed away and agent Dorrell would have me contact the relatives or beneficiaries to complete the paperwork to receive the death benefits. Agent Dorrell told [me] to sell some type of an insurance policy to the beneficiary using the proceeds from the death benefits. Janet Barbuto was a client who passed away that I remember. I sold an annuity policy to each of her two daughters, Elizabeth Barbuto and Maria Erb, using the proceeds from Janet’s policy. . . . Agent Dorrell would also have me review any client’s brokerage account they may have. Agent Dorrell would have me convince the client to either liquidate their account to cash or transfer the funds to her brokerage house account Agent Dorrell’s ultimate goal is to use funds from the client’s brokerage account to sell the client an annuity or life insurance policy. . . . I have prepared several Lady Bird deeds at the instruction of agent Dorrell. . . . I have taken several insurance company product training classes online for agent Dorrell. Agent Dorrell would send an email to me instructing me to take a particular product training course online. I would log onto the company’s website as agent Dorrell and complete the training course. Agent Dorrell would consistently berate me for not selling life insurance policies because the client would not want to purchase one after I had asked the client if they would be interested in a policy. Agent Dorrell told me that the client does not know what they want and that I needed to learn how to sell policies. Agent Dorrell would say that if I did not learn how to sell, our door would not be open if all the clients said no to my recommendations. Matthew Plunkitt, another former employee of Ms. Dorrell, executed the following affidavit on December 11, 2014: During the time that I worked in agent Dorrell’s office there were a number of issues and regular business practices which made me decide to find a new job. . . . I sat in on several appointments at agent Dorrell’s direction where she would tell the consumer that they should be concerned about the stock market, that a stock market correction was coming, that they were going to lose a lot of money, and that they needed to get out of the market right away. Agent Dorrell was absolutely talking about investments which I knew that she was not licensed to talk to the consumer about. Agent Dorrell would then suggest that if the consumer would transfer their account to Van Guard Capital, the funds could then be turned into cash to purchase annuities, which would make the money safe and the consumer would not lose anything when the market made the correction which was coming. . . . When new clients would come into the office, agent Dorrell would sit with them for usually the first two appointments. Afterwards clients would then meet with usually Diana Johnson, the office manager and sometimes myself. Agent Dorrell was not in the office often, so Diana Johnson, as the office manager was required to handle everything in agent Dorrell’s absence. . . . I remember that on the appointments that I sat in on, everyone was sold an income rider on their annuity whether it was necessary or not. I do not know what the reasoning was behind the rider. . . . Being employed in agent Dorrell’s office was extremely stressful and she was frequently verbally abusive to her staff, threatening to fire them for not following her exact instructions. When objections would be raised about her instructions or office procedure, they would be told that we need to listen to her and not the clients or the insurance companies or the rules. I can’t remember the name of the client, but I remember that at one point she instructed me to pretend to be someone’s grandson to get the information she needed on a stock account. Her attitude made it impossible to discuss many of the issues in the office with her. Ms. Alexander supervised Ruth Williams, the Department’s lead investigator for this matter. Prior to her employment with the Department, Ms. Williams spent 10 years in the insurance industry and had acquired life insurance, health insurance, and variable annuity licenses. She also dealt with indexed annuities. The investigation of Ms. Dorrell was assigned to Ms. Williams, and Ms. Alexander received regular updates on the status of Ms. Williams’s investigation. At the close of a typical investigation, Ms. Alexander would review the evidence and the investigator’s recommendation. She could then decide that a case should be closed without any disciplinary action or that the case should be forwarded to the Legal Processing Unit in Tallahassee for an assessment of the allegations and evidence. If the Legal Processing Unit did not close the case, then the case would be forwarded to the Department’s General Counsel’s Office. Count I – Frederic Gilpin Frederic Gilpin was born in 1940 and worked in the automobile industry, primarily as a service manager in dealerships, for 44 years before retiring in 2006. Mr. Gilpin purchased a Prudential variable annuity in 2006 through Bryan Harris, an investment advisor in Maryland, for $260,851.14. On December 31, 2008, Mr. Gilpin’s Prudential variable annuity was worth only $200,989.32. By March 31, 2009, its value had fallen to $183,217.37. The decrease in the annuity’s underlying value coincided with the precipitous declines experienced by the stock market in 2008 and 2009. On May 1, 2009, Mr. Gilpin exercised a rider in the Prudential annuity contract that guaranteed a yearly income of $15,625.00. That annual income would continue for the rest of his life regardless of the stock market’s performance. The guaranteed income stream would only be destroyed if Mr. Gilpin withdrew from the annuity’s principal. Mr. Gilpin and his wife met with Ms. Dorrell in 2012 to discuss their financial situation. As recommended by Ms. Dorrell, Mr. Gilpin surrendered the Prudential annuity and used the proceeds to purchase a fixed index Security Benefit annuity. The purchase price of approximately $205,000.00 for the Security Benefit annuity was allocated between two accounts whose performance was tied to the Standard and Poor’s 500. Ms. Alexander obtained a letter that Mr. Gilpin wrote to Security Benefit on April 22, 2013, asking that the aforementioned purchase be rescinded: Please accept this letter as indication that I would like my annuity that was rolled over from Prudential and into Security Benefit on January 4th, 2013 rescinded and put back into the contract that we rolled it over from. . . . My agent, Jean Dorrell misrepresented the facts and did not disclose to me the guarantee that I would be giving up when I moved the money over. . . . I put my trust in Ms. Dorrell, and I believe that she did not do what was in my best interest and was simply looking to get paid by moving my annuity contract over. She listed in a letter to me that I was paying $15,000 per year in fees, as a big reason why I should move the money. I have since discovered that was a gross overstatement of the fees that I was paying in my Prudential contract. Upon closer examination, it looks more like my fees were closer to $7,000 per year, not $15,000 and my Management and Expense fee was set to drop from 1.65% to 0.65% when I hit my 10 year marker in 2016 (also not disclosed by Jean). I also paid a $13,077 surrender charge when I moved the contract. Jean told me not to worry about it because with the 8% bonus it would offset the fee that I was paying to move the money. While it appears that this is true, she didn’t take into consideration that I now am in a new contract with a new 10 year surrender charge both on my contract and the bonus I received with not as much liquidity on my money after the move. Probably the most egregious representation is that she stated to me that the old Prudential contract had no guarantees, and I have since come to understand that I had a very valuable lifetime income guarantee that gave me protected income for life based on a protected income base of $312,513.80, which guaranteed lifetime income of $15,625.69. . . . Now that I have moved the funds over, I have forfeited that guarantee. . . . The Department’s April 25, 2017, Administrative Complaint alleged that Ms. Dorrell violated multiple provisions of the Florida Insurance Code and the Florida Administrative Code by using misleading and/or false assertions to induce Mr. Gilpin to purchase an unsuitable annuity. The Findings of Fact from the Recommended Order demonstrate that the Department had valid reasons to question the suitability of the Security Benefit annuity. At the time of the exchange, the Prudential annuity only had four more years of surrender charges, and Mr. Gilpin started a new 10-year period of surrender charges with the Security Benefit annuity. Mr. Gilpin incurred a surrender charge of $13,077.56 for surrendering the Prudential annuity. While that surrender charge was more than offset by an eight percent bonus (i.e., $16,000.00) he earned by purchasing the Security Benefit annuity, that eight percent bonus was subject to recapture for the first six years. The Security Benefit annuity had a 100- percent participation rate, and a seven percent roll-up rate. In contrast, the Prudential annuity only offered a five percent roll-up rate. Also, Mr. Gilpin and his wife experienced significant health issues during the relevant time period and were fortunate to be well-insured. However, they would have likely incurred substantial penalties if they had been forced to use funds from the relatively illiquid Security Benefit annuity to finance their treatment. In addition, moving Mr. Gilpin’s funds from a variable Prudential annuity to the fixed index Security Benefit annuity cost Mr. Gilpin when the stock market rebounded from the lows of the most recent recession. Finally, a significant factor in assessing the suitability of the two annuities was whether Mr. Gilpin destroyed his guaranteed lifetime income stream of $15,625.69 by taking an excess withdrawal from the Prudential annuity. If he had not, then it becomes much easier to argue that the Security Benefit annuity was not a suitable replacement for the Prudential annuity. At the time it issued the Administrative Complaint, the Department possessed statements from Prudential indicating that Mr. Gilpin’s guaranteed income stream was intact as late as September 30, 2012. However, Mr. Gilpin’s hearing testimony, his 2010 and 2011 income tax returns, and Ms. Dorrell’s testimony called that into question. While the totality of the evidence presented at the final hearing did not clearly and convincingly demonstrate that Ms. Dorrell committed the violations alleged in Count I, Mr. Gilpin’s letter to Prudential, the Prudential statements, and a comparison of the Prudential and Security Benefit annuities provided the Department with a reasonable basis for pursuing Count I. This analysis is further discussed in paragraphs 81 through 84 in the Conclusions of Law. Counts II and III – Elizabeth Barbuto and Maria Erb Elizabeth Barbuto executed the following affidavit on November 10, 2014: My mom, Janet Barbuto passed away on April 16, 2014. My aunt, Marlene Brisco and my mom were both clients of agent Jean Ann Dorrell and Senior Financial Security. After the funeral, my aunt, Marlene Brisco, set up an appointment for my sister Maria Erb and me to meet with agent Dorrell to review my mom’s investments with agent Dorrell. When we got to the appointment, Diana Johnson and Matthew Plunkitt were waiting to meet with us. Agent Dorrell came in for a few moments and then left to meet with other clients. When I went into this appointment, I did not realize that I would be making any major decisions that day. I thought that I was going over my mom’s things, and that I would have time to make any major decisions afterwards. In the meeting, I was sitting next to Matthew and my sister Maria was sitting next to Diana. Diana did the majority of the talking. If there was something that I didn’t understand or needed to read Matthew would help me out, but he did not really explain anything about what we were seeing or signing. I remember filling out a form which appeared to be a new client form, asking about my risk tolerance and things. I thought that I would be signing some paperwork to have Mom’s policies placed into my name. Instead I now know that the paperwork, which Diana already had prepared, was paperwork to have new annuity contract[s] issued in my name, not transferring the contracts mom had [set] up into my name. The only thing I remember is that I was told that I would need to keep one for 10 years. I believe that one of the policies was placed with Athene and one was placed with Equitrust. I received a huge packet from Athene, but by the time that I opened it, it was too late to free look the policy. Since that time, I have paid more attention and have spoken to a family friend and financial advisor, David Hodge, who explained to me that I could have made different choices with my inheritance. In looking back on that day, I was still grieving the loss of my mother and cannot believe that paperwork was already prepared to move my financial future without anyone ever having talked with me beforehand to see what I was thinking about doing. At the Department’s request, EquiTrust and Athene offered refunds to Ms. Barbuto. Ms. Erb executed an affidavit on October 30, 2014, that mirrored her sister’s: My mom, Janet Barbuto, passed away in Florida in April, 2014. She was a client of agent Jean Ann Dorrell’s. While I was in Florida a few days after my mom’s passing, my sister Elizabeth Barbuto and I went to agent Dorrell’s office to discuss my mom’s estate. We had a meeting with two people, Diana and Matthew. I do not know either of their last names. Diana did most of the talking. Matthew did not say much. She explained to us that Mom had several Roth and IRA accounts. At sometime during that meeting agent Dorrell came into the office, talked for a few minutes, offered her sympathy, and then left. Agent Dorrell did not discuss any of the policies or accounts with us. Shortly after that one meeting, I returned to Oregon and haven’t been back to Florida to see agent Dorrell since. I think at that first meeting, I may have signed some papers, but I was still in shock, so I am not sure what I signed. At that point, the office of agent Dorrell emailed me some documents to be signed. I know that Mom’s two IRA’s needed to have mandatory withdrawals taken from them, before we could proceed with anything else. Most of Mom’s annuities were with American Equity and I remember at some point either Diana or Matthew informed me that American Equity did not do inherited IRA annuities for people who lived outside Florida, so it would be necessary for me to place my inheritance with another company. My sister is a Florida resident so this problem did not pertain to her. I am not sure if my sister is doing business with agent Dorrell’s office or not. I did receive two packages with contracts from agent Dorrell’s office and I signed where I was instructed to sign and returned everything to the office as instructed. The annuity policies which agent Dorrell selected for me were with Athene. After thinking about it, I contacted my financial planner in Pennsylvania, and found out that the paperwork I had signed was for a 10 year annuity, which I did not want to keep. A portion of Diana Johnson’s July 29, 2014, affidavit corroborated the affidavits from Ms. Barbuto and Ms. Erb: I am aware of certain situations where a client passed away and agent Dorrell would have me contact the relatives or beneficiaries to complete the paperwork to receive the death benefits. Agent Dorrell told [me] to sell some type of an insurance policy to the beneficiary using the proceeds from the death benefits. Janet Barbuto was a client who passed away that I remember. I sold an annuity policy to each of her two daughters, Elizabeth Barbuto and Maria Erb, using the proceeds from Janet’s policy. Counts II and III of the Department’s Administrative Complaint alleged that Ms. Dorrell violated the Florida Insurance Code and the Florida Administrative Code by: (a) directing an unlicensed person, Diana Johnson, to sell annuities to Ms. Barbuto and Ms. Erb; (b) failing to perform any insurance agent services for Ms. Barbuto’s transactions; falsely informing Ms. Barbuto that it was necessary to exchange her late mother’s IRA contracts for new financial instruments so that Ms. Dorrell could obtain a commission; and falsely stating to Ms. Erb that her non-Florida residency made it necessary for her mother’s IRA contracts to be liquidated with the resulting funds being used to purchase an annuity from Athene. The Department noted in the pre-hearing stipulation submitted prior to the final hearing in the underlying case that it would be dropping Counts II and III. Nevertheless, the affidavits from Ms. Barbuto, Ms. Erb, and Ms. Johnson provided a reasonable basis to support the Department’s allegation that Ms. Dorrell utilized unlicensed personnel to sell annuities. Ms. Johnson’s affidavit described how she would engage in the unlicensed sale of insurance products, and she specifically named Ms. Barbuto and Ms. Erb as examples of how Ms. Dorrell instructed her to sell products to the beneficiaries of death benefits. As explained in paragraphs 85 and 86, under the Conclusions of Law, the Department’s action against Petitioner as set forth in Counts II and III was, at the time that action was taken, substantially justified. Count IV – Deborah Gartner’s Annuities At the time of the final hearing in the underlying case, Deborah Gartner was a 71-year-old widow who met Ms. Dorrell at a Senior Financial Security seminar in 2007. Ms. Gartner filled out a form indicating that her net worth was between $500,000.00 and $1 million. In January of 2008, Ms. Gartner met with Ms. Dorrell in order to seek financial advice. Ms. Gartner had $201,344.14 in a Guardian Trust account and $195,182.44 in a Guardian Trust IRA. In addition, Ms. Gartner owned an $80,000.00 certificate of deposit. On a monthly basis, Ms. Gartner was receiving $1,381.00 from social security, $786.15 from a pension, and $4,500.00 from investment withdrawals. The latter came from depleting principal rather than interest. At the time of the January 2008 meeting, the stock market was declining, and Ms. Gartner was adamant about getting out of equities. Ms. Dorrell told Ms. Gartner that annuities would be appropriate if she was interested in principal protection and guaranteed income. Because she lacked a securities license, Ms. Dorrell could not legally recommend or instruct Ms. Gartner to liquidate her equity investments. On June 24, 2014, Ms. Gartner requested assistance from “Seniors vs. Crime,” a special project of the Florida Attorney General. Jon Hartman handled her case, and Mr. Hartman had extensive experience in finance. For example, he previously worked as the director of investments for the K-Mart Corporation’s pension savings plan and managed approximately $2 billion in assets. After leaving K-Mart, Mr. Hartman worked as the chief financial officer for a retail telecommunications company. His last position, prior to retiring from full-time employment, involved advising high net worth individuals on their investments. While Mr. Hartman has never sold insurance or held a brokerage license, he is a chartered financial analyst, and he described that credential as “the gold standard for people who wish to manage money on a professional level.” His November 20, 2014, investigative report from “Seniors vs. Crime” states that on December 31, 2007, Ms. Gartner had $394,814 invested in relatively liquid assets such as stock mutual funds, a short term bonds, and one or more money market funds. The report suggests that Ms. Dorrell arranged for the vast majority of the aforementioned money to be transferred into relatively illiquid annuities. The following paragraph from the report questions the wisdom behind transferring Ms. Gartner’s funds to annuities and whether subsequent annuity purchases enriched Ms. Dorrell at the expense of excessively limiting Ms. Gartner’s liquidity: While some investments in annuities may be appropriate, prudent financial management does not recommend that anyone place 90+% of their investable assets in annuities or any other single investment. All investors should maintain a well-diversified portfolio based upon their risk tolerances and liquidity needs. Further, we are troubled by the fact that annuities typically carry high commission rates for agents. Information that we obtained from the insurance company web sites indicates that the commission rates for these types of annuities are 7-9%. . . . Further, we are curious to know the reasoning behind the transfer of the Reliance Standard annuities to different insurance companies [in] 2011. It appears that these transactions were motivated by additional commissions for Ms. Dorrell. It is our understanding that the current surrender charge for the two Allianz MasterDex 10 contracts is 7.50%, decreasing by 1.25% per year. The surrender charge will not drop to zero until February, 2019. For the two American Equity contracts, the current surrender charge is 16% and will not drop to zero until February, 2024. However, withdrawals limited to 10% annually from Allianz and American Equity may be taken without incurring a surrender charge on the anniversary date of the policies. Thus, the annuities severely restrict Ms. Gartner’s liquidity position. One of the conclusions in Mr. Hartman’s report stated that: It is our opinion that Ms. Dorrell “churned” Ms. Gartner’s investment portfolio for her benefit to earn commission income. As evidenced by the Guardian Trust statements as of December 31, 2007, Ms. Gartner had two different accounts totaling $394,814 that were invested approximately two-thirds in different equity mutual funds and the remaining one-third in short bond funds and money market funds. As stated on page 2 of this report, it is our opinion that no reputable financial advisor would place 90% or more of any client’s assets in any single investment vehicle. Ms. Gartner executed an affidavit on October 7, 2014, indicating that she completely relied on Ms. Dorrell to manage her finances after her husband’s death: To the best of my knowledge, everything that my husband had set up was in the stock market. Most of the funds were in IRA’s in his name. Nothing was in my name until he passed away. After Agent Dorrell had my portfolio transferred, everything was placed into Van Guard Capital Account number 5XG- 153754. . . . When I did meet with Agent Dorrell in the beginning when the accounts were fresh, Agent Dorrell would get out her chalkboard and explain and [] I didn’t understand what she was talking about, but it sounded good. So I would do what Agent Dorrell suggested. I trusted her like she was my sister, and so whatever Agent Dorrell suggested, I would go along with. I had no reason to question what was happening with my accounts. I was getting a monthly allowance of $2500.00 and I thought everything was fine. . . . Pretty soon, after I had some questions, and I would make an appointment with Agent Dorrell, and in would walk Goldie and she would take over. This went on for about two years. It was always Goldie. I’m not sure where the money was coming from. I am assuming that the money came from one of my annuities or my other accounts. I trusted Agent Dorrell to take care of everything and Goldie and Diana worked for her. They were getting instructions from Agent Dorrell on my behalf. In Count IV of the Administrative Complaint, the Department alleged that Ms. Dorrell: (a) operated without a brokerage registration and gave investment advice that led to the depletion of Ms. Gartner’s funds via the conversion of liquid brokerage assets into illiquid annuities; (b) recommended the liquidation of an annuity that caused Ms. Gartner to incur a substantial loss due to surrender charges; and (c) falsified information on annuity application forms. Thus, the Department accused Ms. Dorrell of violating the Florida Insurance Code and the Florida Administrative Code by disseminating false information and by demonstrating a lack of trustworthiness and expertise. Ms. Gartner’s assertions about how she relied on Ms. Dorrell to manage her money corroborated the portion of Mr. Plunkitt’s affidavit in which he stated that Ms. Dorrell gave investment advice without having the proper licensure. While the Recommended Order from the underlying proceeding indicates that the allegation that Ms. Dorrell gave investment advice turned on a credibility determination, the affidavits from Ms. Gartner and Mr. Plunkitt provided a reasonable basis for Count IV. Also, the report from “Seniors vs. Crime” presented a solid basis for concluding that Ms. Dorrell had mishandled Ms. Gartner’s funds. The substantial justification for pursuing Count IV is discussed further in paragraphs 87 through 89, under the Conclusions of Law. Count V – Deborah Gartner’s Real Estate Transactions Ms. Gartner and Ms. Dorrell became friends, and Ms. Gartner sought Ms. Dorrell’s advice in 2012 about selling her home in Summerfield, Florida. At that time, Ms. Gartner wanted to acquire a smaller home in The Villages, Florida. However, Ms. Gartner was having difficulty selling the Summerfield home. Along with referring Ms. Gartner to a real estate agent, Ms. Dorrell allegedly advised her to stop paying the mortgage on her Summerfield home and to do a short sale. Ms. Gartner and Ms. Dorrell informally agreed that Ms. Gartner would select a house in The Villages, Ms. Dorrell would purchase it, and Ms. Gartner would then buy the house from her. Ms. Dorrell made the initial purchase because Ms. Gartner lacked funds and/or a good credit rating following the short sale. Ms. Gartner and Ms. Dorrell discussed Ms. Gartner purchasing the villa from Ms. Dorrell, but they never reached a formal agreement on terms. Because a short sale would have a negative impact on her credit rating, Ms. Dorrell allegedly advised Ms. Gartner to buy a new car prior to executing the short sale. Ms. Gartner sold her 2003 Mazda Tribute to Ms. Dorrell for $10,000.00, and Ms. Gartner purchased a new car. Ms. Gartner selected a villa in The Villages, and Ms. Dorrell purchased it for $229,310.78 on November 1, 2012. Of the aforementioned amount, Ms. Gartner paid $10,000.00 and Ms. Dorrell paid the remaining $219,310.78. At this point in time, Ms. Dorrell was the legal owner of the villa. Ms. Gartner could not move into the villa immediately after the sale because it was being rented, and the tenants’ lease extended through April of 2013. Ms. Dorrell received the rental payments of $1,800.00 per month and paid the expenses associated with the villa between November of 2012 and April of 2013. Those expenses included items such as home insurance, cable television, lawn maintenance, and utilities. By May of 2013, Ms. Gartner had completed a short sale of her Summerfield home. She received a short sale benefit of $36,775.00 and a seller assistance payment of $3,000.00. Ms. Gartner moved into the villa in May of 2013. At that point in time, there was no formal agreement between Ms. Gartner and Ms. Dorrell about when Ms. Dorrell would sell the villa to Ms. Gartner or how Ms. Gartner would pay Ms. Dorrell for it. Ms. Gartner paid no rent to Ms. Dorrell from May of 2013 through April of 2014. In November of 2014, Ms. Dorrell sold the villa to Ms. Gartner for approximately $219,000.00, the same price that Ms. Dorrell had paid for it. In order to finance the sale, Ms. Gartner executed a promissory note that would pay Ms. Dorrell $100,000.00 with four percent interest. Ms. Dorrell did not record that promissory note. In order to finance the remainder of the purchase price, Ms. Gartner obtained a reverse mortgage. Ms. Gartner stated in her October 7, 2014, affidavit that “all of a sudden I received paperwork from Agent Dorrell stating that I owed her all kinds of money and if I did not pay up she could take my home.” Mr. Hartman’s report also covered the aforementioned transactions and reached the following conclusions: It is our opinion that Ms. Dorrell gave Ms. Gartner very poor investment advice in that she convinced Ms. Gartner to enter into a short sale without investigating other alternatives. Second, Ms. Dorrell either kept very poor records or deliberately kept Ms. Gartner “in the dark” regarding her financial obligations. Third, Ms. Dorrell did not formulate a reasonable exit strategy for Ms. Gartner to pay off her obligations to Ms. Dorrell. Apparently, her strategy was to force Ms. Gartner into applying for a reverse mortgage, using those proceeds to pay off the promissory note, and then get the rest of her money from Ms. Gartner’s IRA account [when] Ms. Gartner turned 70 and ½. That strategy would have a negative impact on Ms. Gartner’s income tax situation as it would increase her adjusted gross income, making her social security payments 85% taxable. It is our opinion that Ms. Dorrell has willfully and deliberately overstated her claims for monies due from Ms. Gartner. Further, we documented that Ms. Dorrell was not being truthful with us regarding her relationship with Ms. Gartner during our meeting on August 14, 2014. The true amount of the financial obligation that Ms. Gartner has to Ms. Dorrell is unknown. Ms. Gartner had signed a promissory note for $100,000. Beyond that, some amount is due Ms. Dorrell. However, we do not have sufficient information to make an accurate determination of the additional amount due. The Department’s Administrative Complaint alleged that Ms. Dorrell committed several wrongful acts such as: (a) advising Ms. Gartner to stop making mortgage payments on the Summerfield home; (b) arranging for the purchase of the villa and accepting a $10,000.00 deposit from Ms. Gartner without giving her credit for that payment; (c) failing to record the promissory note; and (d) pressuring Ms. Gartner to apply for a reverse mortgage and arranging to obtain the balance from Ms. Gartner’s IRA account in order to pay off the promissory note. According to the Department, the aforementioned allegations amounted to a violation of Florida Administrative Code Rule 69B-215.210 which declares that all life insurance agents must always place the policyholder’s interests first. The Department also concluded that the aforementioned allegations demonstrated a lack of trustworthiness to engage in the business of selling insurance. Ms. Gartner’s affidavit along with the report from “Seniors vs. Crime” provided a reasonable basis for the Department to pursue the allegations under Count V. The substantial justification for pursuing Count V is discussed further in paragraphs 90 and 91 under the Conclusions of Law. Count VI – Earl Doughman Earl Doughman was born in 1934 and was a client of Ms. Dorrell’s. He wrote the following letter to the Security Benefit Life Insurance Company on April 14, 2014: This letter is to file a formal complaint concerning the Total Value Annuity dated 9/30/2013. Jean A. Dorrell is the listed agent on my annuity. After a recent phone call to [acquire] information regarding my annuity, I discovered that I was extremely misled and all the important details of this contract were never disclosed to me. This links to Elder Financial Abuse. Jean A. Dorrell was never present during the presentation and sale of my annuity. Jean A. Dorrell was not present during the delivery of my annuity. Jean A. Dorrell never witnessed any process involved with my annuity. Diane Johnson did everything involved with the sale, presentation and delivery of my annuity. Why is Jean A. Dorrell the listed agent on my contract? Why did Jean A. Dorrell sign as agent on 8/28/2013? I never saw Jean A. Dorrell on 8/28/2013. I thought Diane Johnson was my agent. During the presentation, I asked Diane Johnson, “Why should I move from Midland National? Midland is paying me 3% guaranteed fixed interest.” Diane told me, “You are going from 3% to 4%.” Diane NEVER disclosed to me that this is a Rider with an ANNUAL initial charge of 0.95% and maximum charge of 1.80%. Diane presented the 4% interest as fixed guaranteed. This makes me very upset! The initial current interest rate is 1.5% with the Security Benefit Total Value Annuity. As I mentioned before, my Midland National annuity was earning 3% guaranteed. Also, the cap on my index with Midland was 5.25%. The cap with the Total Value Annuity is only 3.25%. This is not a good replacement from an annuity to annuity. Selling the Total Value Annuity to me was never suitable. This appears to be illegal and is definitely Elder Financial Abuse. It is my hope that this contract be terminated and my initial Purchase Payment of $29,492.30 be paid out immediately, with no penalties, because I was misled into purchasing this contract under false details regarding the Total Value Annuity. Security Benefit responded to Mr. Doughman’s letter on May 13, 2014, by notifying him that it would cancel the contract and refund the purchase price. The Department’s Administrative Complaint alleged that Ms. Dorrell violated numerous provisions governing insurance agents by having an unlicensed employee sell an unsuitable annuity to Mr. Doughman. Mr. Doughman’s letter describing how an unlicensed employee, Diana Johnson, sold him an annuity corroborated the affidavits of former employees of Senior Financial Security as to how Ms. Dorrell facilitated unlicensed activities. The aforementioned documents were a reasonable basis for pursuing Count VI, and the substantial justification for pursuing Count VI is discussed further in paragraph 92 under the Conclusions of Law. Count VII – Margaret Dial Margaret Dial was born in 1950. Ms. Dial met Ms. Dorrell in July of 2007 and purchased multiple annuities from her. One of those annuities was an Old Mutual annuity that she purchased on November 11, 2007. In 2013, Ms. Dorrell advised Ms. Dial to surrender the Old Mutual annuity and use the proceeds to purchase a Security Benefit annuity. After incurring $16,560.39 in surrender charges, Ms. Dial received $129,901.21 in the form of a check mailed to her home. On March 12, 2013, Ms. Dial signed an application to purchase the Security Benefit annuity recommended by Ms. Dorrell for $130,000.00. The application associated with the Security Benefit annuity was incorrect because it did not show that it was a replacement for the Old Mutual annuity. Ms. Dial’s surrender of the Old Mutual annuity and purchase of the Security Benefit annuity was problematic for multiple reasons. For instance, Ms. Dorrell sold the Old Mutual annuity to Ms. Dial and then encouraged her to surrender it and use the proceeds to acquire the Security Benefit annuity. In effect, Ms. Dorrell earned two commissions on the same money. Also, the manner in which the Security Benefit annuity was purchased could have potentially prevented Old Mutual from engaging in conservation efforts. “Conservation” is the term used to describe an insurance company’s effort to retain existing business. Ms. Dial filed a complaint with Security Benefit in April of 2016 stating that “Jean Dorrell had me CLOSE the account to transfer my monies with a great LOSS to Security Benefit.” Security Benefit responded with a June 8, 2016, letter offering to cancel the Security Benefit annuity and return Ms. Dial’s purchase payment. Security Benefit then issued the following letter to Ms. Dorrell on June 20, 2016: Security Benefit Life Insurance Company (“Security Benefit”) recently received and addressed a complaint from Margaret Dial, to whom you presented a Secure Income Annuity for sale in 2013. As part of our investigation, Security Benefit directed that you provide a statement addressing the complaint, which you furnished through your attorney. In the course of investigating Ms. Dial’s complaint, Security Benefit learned that despite the application and Annuity Suitability form for the Contract indicating otherwise, Ms. Dial’s purchase of the Contract had in fact involved the replacement of an existing annuity contract she owned (said contract was issued by Fidelity & Guaranty Life Insurance Company). Your statement indicated that the transaction was not disclosed to Security Benefit as a replacement due to clerical error on the part of your office staff. As you should know, the proper handling of proposed annuity replacements is a continuing focus of insurance regulators, including the Florida Office of Insurance Regulation. As such, the failure to disclose that a replacement will occur is a very serious matter and one that Security Benefit does not take lightly whether due to clerical error or otherwise. By this letter, Security Benefit is notifying you that any further failure to disclose replacement activity will result in the termination of your appointment and the enforcement of any other remedies available to Security Benefit under the terms of your Producer Agreement. (emphasis added) The Department’s Administrative Complaint generally alleged that Ms. Dorrell violated several governing statutes by transmitting false information and displaying a lack of trustworthiness. In addition to the fact that Ms. Dorrell had admitted to Security Benefit that she had failed to disclose the source of the funds that would be used to purchase the annuity, the Department knew that Ms. Wipperman had specifically named Ms. Dial as a client who had been misinformed about the amount of their surrender charges. That information provided a reasonable basis for pursuing Count VII against Ms. Dorrell. The substantial justification for pursuing Count VII is discussed further in paragraphs 93 and 94 under the Conclusions of Law. Count VIII – Unlicensed Activities The Department alleged under Count VIII of the Administrative Complaint that Ms. Dorrell and/or her employees performed work without having the proper licensure. Specifically, the Department alleged that Ms. Dorrell’s employees wrote Lady Bird deeds3/ and wills without being licensed attorneys. The Department also alleged that Ms. Dorrell and/or her employees encouraged clients to liquidate security holdings without being licensed investment professionals. The affidavits from Laura Wipperman, Diana Johnson, and Matthew Plunkitt provided a reasonable basis for the Department to pursue Count VIII. The substantial justification for pursuing Count VIII is discussed further in paragraphs 95 through 100 under the Conclusions of Law. Count IX – Performance of Unlicensed Insurance Activities The Department alleged in Count IX that Ms. Dorrell had Ms. Wipperman and Ms. Johnson perform acts that could only be performed by a licensed insurance agent. Those allegations were reasonably supported by the affidavits of Ms. Wipperman, Ms. Johnson, and Mr. Plunkitt. The substantial justification for pursuing Count IX is discussed further in paragraph 101 under the Conclusions of Law. Count X – Failure to Report Administrative Actions The Department dismissed Count X, but alleged in the Administrative Complaint that Ms. Dorrell violated Florida Law by failing to report to the Department two administrative actions taken against her by the states of Nevada and Wisconsin. This allegation was supported by a March 14, 2008, letter from Ms. Dorrell to Reliance Standard Life Insurance Company. That letter provided a reasonable basis for pursuing Count X, and the substantial justification for pursuing Count X is discussed further in paragraphs 102 and 103 under the Conclusions of Law.
The Issue The issues for determination in this case are whether Respondent violated the law as charged by Petitioner in its Administrative Complaint, and, if so, what discipline is appropriate.
Findings Of Fact Petitioner is the state agency with the statutory authority and duty to license and regulate insurance agents in Florida. Respondent has been licensed as a life including variable annuity and health agent, life insurance agent, and life and health insurance agent. At the time of the events which are the subject of this case, Respondent held the aforementioned licenses and was the president of Seniors Financial International, Inc., an insurance agency located in Vero Beach. Storfer is licensed to sell fixed annuities for most of the insurance companies licensed to transact business in the State of Florida, including Allianz, IMG, Aviva, North American, Old Mutual, and American Equity. Storfer keeps himself abreast of the suitability requirements and features of annuities by regularly attending and participating in the quarterly, if not monthly, training presented by insurance companies. The companies also provide seminars at Storfer's office. He goes to their offices or views webinars that can last two-to-three hours. The companies also offer assistance by providing people in-house to answer questions about their products. Even though Storfer could have the option for each client to submit cases to the companies for the company to help prepare and work to find a suitable product for each customer/individual, there was no testimony he did so with the individuals in this case. He also testified that he understood and was knowledgeable about all the products sold, relating to the three clients, from which the AC stems. Storfer regularly holds luncheon/dinner workshops and seminars at restaurants in and around Vero Beach that focus on financial issues. He invites the attendees by mailing them a flier. Each attendee receives a free meal while listening to Storfer's financial presentation. During the luncheons, Storfer does not offer any investment products for sale. However, attendees are asked to complete a "Senior Financial Survival Workshop Evaluation Form" and are invited to request an in- office appointment if they are interested in discussing specific investment products. The form elicits information including family background, financial history, current expenses, and tax liabilities. The attendees are asked to put "yes" or "no" at the top of the form. If an attendee puts yes, then a follow-up appointment is scheduled in Storfer's office. Storfer's wife picks up the forms and sets the appointment. Storfer's procedures at the appointment typically start by filling out a client profile. He goes through the form with the client and asks the client questions to obtain the details regarding age, contact information, beneficiaries, health, estate, plans for money, rate of return, percentage of life saving willing to lose, risk tolerance, liquidity, income needed form investment accounts, what needs to be fixed, income, assets and liability inventory, life insurance, and long-term care insurance/disability insurance. After completing the profile, Storfer reviews the documents that he has requested the client bring in to the appointment. This includes tax returns, an investment portfolio, and list of how much money they have and where it is, including life insurance or long-term care. There is no fee for the appointment. Typically, after the first meeting, Storfer reviews the documents and the client returns for a second appointment. At the client's next appointment, Storfer has reviewed everything and put together a product that he wants to sell the client. He also provides an illustration of the product demonstrating the product's growth and how it would work. If the client decides to go forward and invest in one of the products Storfer has recommended, Storfer gets an application for the product and his wife fills it out.2 After the application has been completed, Storfer's office procedure is to submit it to the company the same day to await approval. Once the application has been approved, then the policy is funded either by transferring from another type of product (direct transfer rollover) or by a 1035 exchange. The policy can not be issued if not funded. Once the policy is funded and issued, the company mails the policy and the documents for the client to sign to Storfer, as the agent to deliver. Storfer's operating procedure is to call the client to set an appointment for policy delivery. The appointment's purpose is to go over the policy with the client, including the amount of money that went into the policy, where the funds came from and what the policy will do for them, including liquidation and charges. Storfer keeps documents which he refers to as client notes in each client's file. After client meetings, he uses a service to dictate what he wants as a summary of the client meeting. The service types up what he says and emails it back to him. It is printed, reviewed, and scanned into his system. Alberto and Celina Grubicy Celina Grubicy ("C.G."), a native of Argentina, was born on April 6, 1940. She was married at age 19 to Alberto Grubicy ("A.G."), who was also born and raised in Argentina. They moved to the United States in 1965; English is their second language. The Grubicys opened a repair shop in New York in 1964. Then, they went in the construction business in Connecticut for about ten years before retiring to Florida. In both successful businesses, C.G. handled the paper work and kept the books. The Grubicys retired in the early 90's and purchased a condominium in Florida, where they now reside. On February 5, 2007, the Grubicys attended Respondent's luncheon seminar at Carrabbas Italian Grill in Vero Beach. At the seminar, the Grubicys listened to the presentation and completed the seminar evaluation form confirming an estate in excess of one million dollars. At the time, A.G. was 65 years old and C.G. was 66 years old. The Grubicys thought the presentation sounded good, so they made an appointment to see Storfer in his office. Prior to any interaction with Storfer, C.G. was the owner of a Transamerica variable annuity with a contract date of September 23, 2002, an AXA Equitable variable annuity with a contract date of June 17, 2005, and a Hartford variable annuity with a contract date of July 25, 2005. Each of the annuities was doing well and approaching dates when surrender charges would no longer apply. The Grubicys met with Storfer on February 7, 2007. At the meeting, the Grubicys informed Respondent that their investment goals were two-fold. They explained that their primary financial goal was safety. Their plan included selling their residential building complex from which they were currently collecting rental payments for income.3 Their goal in five years was to have an investment that would provide their income after they sold the property.4 The Grubicys wanted an investment to replace the rental money that they would no longer receive after the sale of their building. The Grubicys also stressed to Storfer that the security of the investment was a paramount concern. C.G. wanted out of variable annuities because she was concerned about the stock market risk and did not want annuitization to take place. At their second meeting on February 12, 2007, knowing the Grubicys' goals, Storfer misrepresented the advantages for the product he recommended with a graphic illustration on a blackboard. He showed the MasterDex annuity with Allianz in such a fashion, that, when the market advanced in relation to a base line, the return on the annuity would also advance, up to a three percent cap per month on the gain, but that when the market fell below the base line, there would be a zero percent return, but never a loss of the gain made in the previous months, or a loss of invested capital. Storfer recommended and proceeded to sell the Grubicys the Allianz MasterDex 10 ("MasterDex") policy, being fully aware of the Grubicys' goals. He insisted that was the way for the Grubicys to invest because they would never lose their principal compared to the other annuities that have high risk plus excess fees. Storfer did not provide the Grubicys any other investment option. The annuity was a long-term investment that provided for surrender penalties on a declining scale for fifteen years even though Storfer told the Grubicys that the Allianz annuity would mature in five years from the day it started.5 Storfer assured the Grubicys that they were not going to lose anything by investing in the MasterDex annuity with Allianz. They were not accurately informed of the provisions in the contract by Storfer during the meeting nor did Storfer fully review the relevant terms and conditions, including the length of the policy.6 The Grubicys knew that when they surrendered the three variable annuities there would be surrender charges. However, Storfer told them that the product he was selling them had a 12 percent bonus that would offset the monetary lost from surrender penalties of the transferring funds.7 The Grubicys decided to follow Storfer's recommendation with his assurances that they wouldn't lose money, and they surrendered their three annuities to purchase two MasterDex annuities in excess of about one million dollars. After Storfer completed the numerous forms and documents, the Grubicys authorized the transfers of money to Allianz by way of assignment on or about March 2, 2007, and authorized him to buy the new policies. Storfer allocated 100 percent to the Standard & Poors ("S&P") 500 instead of allocating the total investment among three possible choices in smaller increments. Respondent's 100 percent allocation choice on the Supplemental Application contravenes both of the Grubicys' requests on each of their Liquidation Decision forms, which specifically state "the decision to liquidate . . . based solely on . . . desire to eliminate market risk and fees " The annuity product Storfer sold the Grubicys provided for three different values: annuitization value, cash surrender value, and guaranteed minimum value. The Statement of Understanding provided: * * * Annuitization value The annuitization value equals the premium you pay into the contract, plus a 10% premium bonus and any annual indexed increases (which we call indexed interest) and/or fixed interest earned. This will usually be your contract's highest value. Withdrawals will decrease your contract's annuitization value. Cash surrender value The cash surrender value is equal to 87.5% of premium paid (minus any withdrawals) accumulated at 1.5 percent interest compounded annually. The cash surrender value does not receive premium bonuses or indexed interest. The cash surrender value will never be less than the guaranteed minimum value (which we define below). The cash surrender value will be paid if you choose to receive a) annuity payments over a period of less than 10 years for Annuity Option D and five years for Alternate Annuity option IV, or over a period of less than 10 years for all other annuity options, b) annuity payments before the end of the first year for Alternate Annuity Option IV or before the end of the fifth policy year for all other annuity options, or c) a full surrender at any time. Guaranteed minimum value. The guaranteed minimum value will generally be your lowest contract value. The guaranteed minimum value equals 87 5% of premium submitted, minus any withdrawals. The guaranteed minimum value grows at an annual interest rate that will be no less than 1% and no greater than 3%. (emphasis in original) The Grubicys signed the numerous forms and documents without reading them because they trusted Storfer and he sounded as if he knew what he was talking about. They relied on his advice. Storfer sold the Grubicys a policy completely different from what he had described.8 The monthly cap was opposite of the way Storfer explained it. A description of the "monthly cap" stated: Although there is a monthly cap on positive monthly returns, there is no established limit on negative monthly returns. This means that a large decrease in one month could negate several monthly increases. Actual annual indexed interest may be lower (or zero) if the market index declines from one month anniversary to the next, even if the market index experienced an overall gain for the year. (emphasis in original) The Grubicys later learned that the advice Storfer provided them regarding how the MasterDex annuity worked was erroneous. Respondent provided them misleading representations regarding the sale of the annuity products. On April 5, 2007, C.G. received her annuity contract for a MasterDex annuity for approximately $1,123,000, and she executed a Policy Delivery Receipt, Liquidation Decision Form and a Policy Review and Suitability Form. On April 12, 2007, A.G.'s annuity contract for a MasterDex annuity for approximately $35,000 was delivered and he executed a Policy Delivery Receipt, Liquidation Decision Form and a Policy Review and Suitability Form. The sale of the Allianz annuities generated commissions of approximately $95,000.00 for Storfer or his agency, Senior Financial International, Inc. The Grubicys became concerned about the MasterDex product Storfer sold them while watching television at home one day, and seeing a class action lawsuit advertisement about their purchased product. They called Storfer immediately to discuss Allianz. He set up an appointment with the Grubicys to meet with him about their concerns. When Storfer met with the Grubicys, he assured them that they didn't need to change anything, their product was fine. He also informed them that their product was six percent up and not to worry because if the S&P 500 went down, they didn't have to worry because they had already made six percent. In May 2007, the Grubicys went to Connecticut and attended another investment seminar. Afterwards, they set up a meeting with the financial advisor, Mr. Ray ("Ray"). The Grubicys took their investment paperwork to Ray and he reviewed it. Ray explained how the MasterDex worked and called an Allianz customer service representative while they were in the office to further explain how the product worked. The Grubicys were informed that there was a monthly cap of three percent when it went up but no monthly cap on stock market losses. Such a description of the cap combined with the description in the contract support a finding that the MasterDex annuity did not meet the Grubicys' financial goals and was not a suitable investment for them. In particular, the Grubicys had been clear that they did not want to have any market risk. Subsequently, the Grubicys contacted Storfer again and questioned his declaration regarding the cap on stock market losses. Respondent continued to describe the crediting method incorrectly and told them Ray was just trying to sell them something. He insisted that the S&P 500 is the way he explained it earlier and that Ray's interpretation was wrong. Ray eventually sent the Grubicys an article from the Wall Street Journal, which they testified reemphasized that the investment worked completely different from what Storfer continued to tell them. The Grubicys requested a refund from Allianz. Approximately one year later, Allianz eventually set the contract aside and refunded the investment principal, surrender charges for the three annuities, and some interest. The evidence convinces the undersigned that Storfer knowingly made false representations of material facts regarding the MasterDex annuity and its downside cap. Kikuko West Kikuko West ("K.W."), a native of Japan, was born in 1933. She marrried a U.S. soldier and moved to the United States when she was 18 years old. Together they had four children. She is now married to Robert West ("R.W."). K.W.'s employment history started with her working in a bakery, then as a waitress in a Chinese restaurant, and her ultimately owning and operating a successful flower shop for over 30 years in West Warwick, Rhode Island. She sold it in 2006. K.W. sold her house in Rhode Island and used the money to invest in a Smith-Barney mutual fund and an AXA Equitable Life Insurance Company (AXA) annuity (contract # 304 649 121), which she purchased in June 30, 2004. West purchased a condominium in Florida and has been a permanent resident for the past five years. On January, 15, 2008, Robert and Kikuko West ("Wests") attended Respondent's seminar. They scheduled an appointment for January 23, 2008, but didn't show. They attended a second workshop on or about June 3, 2008, and scheduled a meeting for July 9, 2008, but didn't show. The Wests rescheduled their appointment with Storfer on August 4, 2008, and met with him in his office for the first time. Even though K.W.'s husband attended the meeting, the focus of the meeting was her finances. K.W. explained that their monthly income was $2,900 and their monthly living expenses were $2,100, but a majority of it came from her husband's pension so she was worried about income if he passed. She only received $600 a month in social security and wanted income in the future. She had $100,000 for emergencies in a money market account. K.W. also informed Storfer that when she dies she wants her four daughters and six grandchildren to inherit her money. K.W. wanted to stop receiving various statements from each of her numerous investment accounts and bundle her assets. She told Storfer that she wanted to keep everything that she had and would be happy with a rate of return of four or five percent. She emphasized she had zero risk tolerance. K.W. provided the following information for her asset/liability inventory: an AXA variable annuity(non- qualified) in the amount of about $119,589.58; mutual fund (non- qualified) of $253,289.55; IRA (qualified) $80,039.33; CDs (nonqualified) for $25,000 and $35,000; a Fidelity and SunTrust (nonqualified) totaling $40,000; and a Vanguard equaling $60,000. West explained that she didn't have life insurance but had prepaid funeral. Her husband had three life insurance policies. K.W. had a second meeting with Storfer on August 6, 2008. At that meeting, K.W. provided income tax and other paperwork to detail the stocks that she wanted consolidated into one statement.9 Storfer went over the financial illustrations and company profiles he had compiled as proposed investments. Unbeknowest to the Wests, Storfer's plan for restructuring K.W.'s reinvestments was to transfer funds from her variable annuity (approximately $215,000) to a fixed annuity and transfer assets from K.W.'s existing brokerage accoung (approximately $80,000) to a new brokerage account, which were both with American Equity. During the meeting, Storfer also introduced the Wests to Kevin Kretzmar, a broker for Summit Brokerage Services, by speakerphone.10 The discussion consisted of how the money would be transferred.11 The Wests thought Kretzmar worked for Storfer as his assistant and were unaware that he brokered for a separate company. Storfer brought Kretzmar into the transaction to handle the brokerage account because he was not a broker, but he did not make this plain to the Wests. In the meeting, Strofer emphasized to the Wests that K.W. was paying too much in income tax and her investments should be set up to reduce the income tax. Storfer also informed the Wests that K.W. would get a guaranteed eight percent interest each year and would be able to withdraw 10 percent a year with no penalty,12 which K.W. relied upon in deciding to follow Storfer's recommendation to purchase the American Equity annuity selected by Storfer. Respondent provided two letters to K.W. on Seniors Financial International, Inc., letterhead that stated: Kikuko: This would replace the Mutual Funds $253, 289.00. You will receive a bonus w[h]ich is added the first day of $25,329.00. Your account will start with $278,618.00. With an 8% guaranteed growth for income. With no risk. Mitchell Kikuko This would replace the AXA Variable Annuity $119,589.00. You will receive a bonus w[h]ich is added the first day of $11, 959.00. Your account will start with $131,548.00. With an 8% guaranteed growth for income. With no risk. Mitchell After the meeting, the Wests decided to go forward with Storfer's recommendation for K.W.'s investments. On August 8, 2008, the Wests returned to Storfer's office and K.W. agreed to transfer the funds. She signed the applications and contracts including 14 documents, which would transfer the money and invest in the annuity. K.W. did not read everything that she was signing because she couldn't understand all the terminology and trusted and relied upon Storfer. Storfer told K.W. that even after she signed, if she didn't like the product, she could call and everything would get put back to the way it was before. K.W. thought she was purchasing one policy. Respondent sold her two policies numbered 693752 ("the SunTrust transfer" or "the 80K contract") and 693755 ("the AXA transfer" or "the 215K contract"). Both applications indicate each is replacing an AXA policy. K.W.'s SunTrust is not mentioned in the 80K application. The documents attached to the applications K.W. signed without reading also detail that the American Equity Bonus Gold (BG) has a 10 percent bonus; Various "values"; and the minimum guaranteed interest rate is only one percent. The Lifetime Income Benefit Rider (LIBR) document states "a lifetime income that you cannot outlive" is tied to the owner's age. On the BG contract, the income account value (IAV), the second option, was checked at a rate of eight percent rider guaranteed income. The cash surrender penalty listed for the BG contract in the application is 80 percent of the first year premiums.13 The BG application also described a nine percent interest crediting method. Out of the nine options listed, Respondent admitted that he chose the S&P monthly Pt. to Pt. w/Cap & AFR for K.W. The option was not defined in the application, and K.W. had to rely solely on Storfer to define and explain the product. Specific terms and conditions of the annuity such as the penalty free withdrawals14 were defined in the policy contracts, which K.W. never received.15 In the car on the way home from the August 8, 2008, meeting, K.W. looked at the back page of the brochure for American Equity Insurance and read that she could only earn one percent a year with the annuity. This caused her some concern. Subsequently, K.W. called her son-in-law, a director at Merrill Lynch on Wall Street, who agreed to review the documents during K.W.'s upcoming visit to New York. K.W. then called Storfer's office back and left a message not to process the applications. The Wests also attempted to fax Storfer a letter that stated, "I do have to hold off on any changes . . . do no process until I review all papers." On Saturday, August 9, 2008, the Wests met briefly with Storfer in his office16 to request the original paperwork back that had been signed on Friday and stop the process. K.W. instructed Storfer to do nothing until her son-in-law approved it. She and her husband were pleased that Storfer agreed not to process the forms until her son looked at them and said that the investment was good.17 Stofer gave K.W. a yellow manila envelope with copies of the paperwork West had signed and a note. At some point, Storfer processed K.W.'s application for the purchase of the American Equity annuity, contrary to his agreeing not to finalize the purchases until the Wests gave the go-ahead.18 The Wests left for North Carolina to start their vacation on Sunday, August 10, 2008. While on vacation, K.W. opened the manila envelope and discovered that it did not contain the originals of the signed forms she had requested. Additionally, a letter was enclosed dated August 11, 2009,19 on Seniors stationary that stated: Dear Kikuko, Attached is transfer paperwork to transfer the brokerage account from Suntrust to us. We will not sell any investments until you approve them. If you and your son in law have any questions please contact me I will be more then happy to assist. Sincerely, K.W. had her son-in-law review the investment paperwork and requested that he talk to Storfer. After K.W. talked to her son, she decided the investment was not good for her. Ultimately, K.W. learned that her money had been transferred out of the Suntrust account without her permission. She called Storfer's office numerous times to get him to cancel the annuity transactions, but was unable to reach him.20 K.W. was eventually provided Kretzmar's contact information and he instructed her how to reverse the transfer of funds. K.W. had communications with Kretzmar and representatives from American Equity that lead to her funds being refunded. The American Equity annuities were ultimately cancelled. Viewing the evidence as a whole, the undersigned determines that Respondent made false promises not to process K.W.'s annuity applications in connection with the investments and did so contrary to K.W.'s instructions, as well as made false misrepresentations to her regarding the details of the annuity. Doris Jorgensen Ms. Doris Jorgensen ("Jorgensen") was born in New York City on December 20, 1921. She grew up in Connecticut. She married William Jorgensen. While married she owned and operated an antique shop out of her house in Connecticut. She started investing with her husband, William, before he passed in 1999. She and her husband would discuss their investments and decide how to invest together. She has no children and lives alone in Sebastian, Florida. Prior to meeting with Storfer, Jorgensen was the owner of an Integrity Life Insurance Company (Integrity) variable annuity with a contract date of July 28, 2003, and Aviva Life and Annuity Company (Aviva; formerly AmerUs) deferred annuity with a contract date of December 26, 2003. Jorgensen's net worth, before meeting Respondent was approximately a million dollars. Jorgensen attended two luncheon seminars presented by Respondent on April 2, 2007, and on October 23, 2007. She was 86 years old at the time. At the first seminar, Jorgensen filled out a Senior Financial Survival Workshop Evaluation Form, indicating she was a widow, had an estate from $25,000-$200,000, and had concerns in the area of Social Security Tax Reduction, Variable Annuity Rescue, and Equity Index Annuity. When Jorgensen attended the second workshop, she filled out the form identical to the previous one, except she also circled Asset Protection from Nursing Home as a concern. On or about November 5, 2007, Jorgensen met Storfer in his office for the first time. Storfer prepared her client profile and Jorgensen described her risk tolerance as "none" and indicated that she was unwilling to lose any of her life savings through investments. She also informed him that she intended to leave her entire estate to numerous charities and had set up a trust for that purpose. Jorgensen provided Storfer income information at the meeting that indicated that she lived off her monthly social security and pension payments, a total monthly income of $1,800.00, and her expenses were $1,100.00. She also had $120,000 cash and a net worth of $900,000.00. At another meeting, Jorgensen provided Storfer her financial portfolio to review. One meeting Jorgensen had with Storfer was attended by her brother, who did not provide her any advice regarding what to do with her investments. Ultimately, Storfer recommended and sold Jorgensen an Allianz Life Insurance Company Equity Indexed Annuity. Upon his advice, Jorgensen surrendered her $208,015.74 Integrity Life Policy #2100073292 issued on July 28, 2003. The transfer resulted in the initial funding of the Allianz MasterDex,21 which became effective November 16, 2007. Jorgensen told Respondent that she had a problem with monetary loss and Storfer said he could make it up with the Allianz Life. The policy provided that she could start withdrawing the money in five years and then must annuitize the policy and withdraw the money over a 10-year period. The Allianz annuity was delivered on December 12, 2007. The Allianz Life contract, a MasterDex, contract #70610993, included a 10 percent bonus. Respondent placed 100 percent of Jorgensen's funds in the S&P 500 index like the Grubicys. Later, on or about January 16, 2008, Storfer also had Jorgesen authorize an additional transfer of $306,507.21 in funds from her Aviva/AmerUS policy purchased December 1, 2003, to Allianz. The policy was $330,137.95. Surrender charges on the AmerUs annuity would have expired December 1, 2014. On February 4, 2008, the money was sent to Allianz into contract #70610993. Together, Jorgensen's transfers totaled over half-a million dollars and she incurred surrender charges totaling in excess of $29,000. Jorgensen was unable to understand the annuity application and contract language. She trusted Storfer and took him at his word and signed a lot of forms without filling them out or asking questions. Jorgensen testified that she always followed the directions of whoever gave her business advice. Jorgensen also testified in this matter that she was "not certain," "I don't really remember," and "I have no idea whether it was or not" regarding numerous questions relating to the transactions and policy receipts. At some point, Jorgensen attended another investment seminar presented by insurance agent, Ms. Jones ("Jones").22 On February 11, 2008, Allianz gave Jorgensen a receipt for her payment of $306,423.03. Jorgensen contacted Allianz and directed the company to return the transferred funds to Aviva. Jorgensen directed Allianz to "rescind this policy in full." On or about February 14, 2008, Jones also helped Jorgensen with a typewritten letter dated February 15, 2009, from Jones' office to Allianz following up the request. Jorgensen ultimately dealt with Storfer instead of Jones regarding rescission of the Aviva/AmerUs to Allianz transaction. Storfer ultimately placed the funds with Old Mutual/OM Financial annuity ("OM"). An application, transfer/1035 exchange, was executed in Jorgensen's name and other documents relating to the OM annuity on or about March 14, 2008. The policy is signed Doris Jorgensen not "Doris R. Jorgensen." Jorgensen testified she typically signs her name to include the middle initial "R" "Doris R. Jorgensen" on official papers.23 Jorgensen discovered the policy when she received the annuity confirmation letters from OM. Respondent earned a commission of nearly $7,000 on the OM transaction. The policy delivery receipt dated May, 1, 2008, six weeks after the purchase date of the OM policy, also has a signature without a "R" initial and Jorgensen denies the signature is hers. Storfer's signature is not on OM's required policy delivery certification form. The Delivery Receipt for the OM policy is dated May 1, 2008. Jorgensen still has the OM annuity. The undersigned finds that the evidence fails to show that Storfer misrepresented the sale of the two annuities or made false representations regarding the annuities sold to Jorgensen.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED the final order be entered by the Department (1) finding that Mitchell Storfer violated the provisions of Chapter 626, Florida Statutes, described, supra, and (2) revoking his licensure. DONE AND ENTERED this 31st day of December, 2009, in Tallahassee, Leon County, Florida. JUNE C. McKINNEY 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 31st day of December, 2009.
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
