The Issue The issues are whether the sale of ancillary products to two purchasers of automobile insurance involved sliding, as that term is defined in Subsection 626.9541(1)(z), Florida Statutes (2005)1; whether the alleged acts violated Subsections 626.611(7) and (9), 626.621(6), and 626.9521(1), which respectively prohibit a lack of fitness or trustworthiness to engage in the business of insurance, fraudulent or dishonest practices, and unfair trade practices; and, if so, what penalty should be imposed against Respondent's insurance license.
Findings Of Fact Petitioner is the state agency responsible for regulating insurance and insurance-related activities in Florida pursuant to Chapters 626 and 627. Respondent is licensed as a life, including variable annuity, general lines insurance agent pursuant to license number A085250. From October 22, 2003, through September 2, 2005, Respondent was employed as an insurance agent by Direct General Insurance Agency, Inc. (Direct). Direct is a Tennessee corporation doing business in Florida as Cash Register Insurance (Cash Register). Cash Register employed Respondent in an office located at 6325 North Orange Blossom Trail, Orlando, Florida, which conducts business as Friendly Auto Insurance Company (Friendly). Friendly-Cash Register paid Respondent a salary and commissions. Friendly-Cash Register paid commissions on the sale of ancillary products such as travel protection, accident medical protection, and term life insurance. Commissions comprised 18 percent of the compensation paid to Respondent. The two transactions at issue in this proceeding occurred on July 11 and August 29, 2005. In each transaction, Respondent sold automobile insurance and three ancillary products to Ms. Heather Dickinson and Ms. Carmen Phillips, respectively. Ms. Dickinson subsequently married and testified at the hearing as Ms. Heather Mason. When Ms. Mason and Ms. Phillips entered the Friendly- Cash Register office, each consumer requested the minimum automobile insurance coverage needed to be "legal and on the road." Neither customer left the office understanding she had purchased ancillary products. Ms. Mason purchased automobile insurance for a 1995 Jeep Cherokee 4x4 at an annual premium of $1,175.00. Friendly-Cash Register charged Ms. Mason a total sales price (total price) of $1,609.24. Ms. Mason agreed to pay $194.00 as a down payment and the balance in 12 installments of $117.94 at an annual percentage rate of 25.27 percent. Ms. Mason purchased three ancillary products at a total cost of $278.00. Ms. Mason paid $60.00 for travel protection, $110.00 for accident medical protection, and $98.00 for term life insurance. A finance charge of $151.69 and a charge of $4.55 for Florida documentary stamp taxes comprised other charges that are not at issue in this proceeding. Ms. Phillips purchased automobile insurance for a 1992 Chevrolet Blazer 4x4 at an annual premium of $779.00. Friendly-Cash Register charged Ms. Phillips a total price of $1,271.64. Ms. Phillips agreed to pay $129.00 as a down payment and the balance in 10 installments of $114.26 at an annual percentage rate of 25.06 percent. Ms. Phillips purchased three ancillary products at a total cost of $368.00. Ms. Phillips paid $60.00 for travel protection, $200.00 for accident medical protection, and $108.00 for term life insurance. A finance charge of $120.79 and a documentary stamp charge of $3.85 comprised other charges that are not at issue. Both Ms. Mason and Ms. Phillips signed Friendly-Cash Register forms which disclose that the ancillary products they purchased are optional and entail additional costs. Each customer signed a package of documents numbering approximately 19 pages.2 Page 1 of each package discloses the annual price for automobile insurance. The optional ancillary products and separate charges are disclosed in several additional pages. The package of documents that Ms. Mason signed discloses the annual cost for travel protection on pages 000006 and 000014 through 000016 (hereinafter pages 6, 14, 15, etc.). Pages 8, 9, and 14 through 16 disclose the cost of the accident medical protection. Pages 10 and 12 through 16 each disclose the cost for term life insurance. Pages 7, 9, 14, and 15 expressly provide that the ancillary products are optional. Page 16, the Premium Finance Agreement, separates the charges for mandatory automobile insurance from the optional ancillary products and the other charges. Ms. Mason signed or initialed pages 3 through 11, pages 14 through 17, and page 19. The package that Ms. Phillips signed includes disclosures similar to those in the package signed by Ms. Mason. Ms. Phillips signed or initialed relevant pages in the same manner as Ms. Mason. Ms. Mason and Ms. Phillips had adequate time to review the documents they signed or initialed, but neither customer read the documents. Each consumer is a literate adult with no disability or infirmity that would impede her capacity to understand the transaction. The factual disputes are whether Respondent orally explained the ancillary products that the two customers purchased, and, if so, whether the oral explanation was adequate. For reasons discussed in the Conclusions of Law, Respondent is not required to prove she did explain the ancillary products and that the explanation was adequate. Rather, Petitioner must prove Respondent did not explain the ancillary products or that the explanation was inadequate. Respondent does not recall the specific transactions at issue in this proceeding because she sold as many as 10 insurance policies each day at Friendly-Cash Register for almost two years. However, Respondent does recall that she followed the identical procedure with each customer and that the procedure she followed was carefully scripted by Friendly-Cash Register as a condition of employment. Respondent orally explained each disputed transaction in this proceeding in a manner that was adequate for each consumer to understand the transaction. Respondent orally explained that the ancillary products were optional. Respondent circled the optional items in the documents and explained that each ancillary product entailed an additional cost. The sixth document that Respondent reviewed with each customer is the "Explanation of Policies, Coverages, and Cost Breakdown." That page appears as page 14 in the exhibits, but page 14 is not organized in the exhibits in the same order that Respondent presented it to customers. Respondent orally explained pages pertaining to specific ancillary products after Respondent explained the page entitled "Explanation of Policies, Coverages, and Cost Breakdown." The procedure scripted by Friendly-Cash Register required Respondent to first interview Ms. Mason and Ms. Phillips to gather information needed for input into a computer which printed the 19-page forms utilized by Friendly- Cash Register. The interview included questions regarding life insurance beneficiaries and questions pertaining to the medical condition of each customer. After interviewing Ms. Mason and Ms. Phillips, Respondent entered the information into a computer and printed the 19-page packages. Respondent placed each package in front of the respective customer and discussed each page. Respondent circled the word "optional" when it appeared on a page, obtained the signature or initials of each customer, turned the page over, and proceeded to the next page. The trier of fact finds the testimony of Respondent to be credible and persuasive. As Respondent explained: Q. Did you tell the customers that this quote included those ancillary products? A. Yes. I informed . . . them that they had been quoted with the optional policies. * * * Q. How is page 14 labeled at the top? A. It says "Explanation of Policies, Coverages, and Cost Breakdown." . . . I would circle the items that are circled on here, and then I would present it to the insured. And I would say, you're purchasing the mandatory personal injury protection, bodily injury, [or] there's no property damage, there's no bodily injury. You also have the optional policies for the travel protection plan, accidental medical plan, life insurance, these are the costs, sign here. Q. [A]re you pointing at your circles? A. Yes. I point to each circle and I kind of run my finger down the cost to draw attention to it. Q. You point to the cost? A. Yes. * * * Q. Okay. What do you go over next? A. The next page is the second page of the travel protection plan. Q. This is page 7 of Exhibit 2? A. Correct. Q. How is that labeled at the top? A. "Optional Travel Protection Plan." It says, "American Bankers Insurance Company." I'd point out that there's bail bond coverage, collision of loss of use [sic], personal effects loss from auto rented. Q. Do you make those circles that we see on that page? . . . . A. Yes. I circle them when they're sitting there and then I hand it--hand the paper to them, and I would say, "This is optional coverage, please sign here." * * * Q. Okay. After she signed that, what did you go over with her next? A. Next one would be the accidental medical protection plan. Q. Page 8 of Exhibit 2? A. Yes. Q. Okay. . . . [A]fter she signed that page, what did you do? A. Page 9. Q. Page 9 of Exhibit 2? A. Your cost is $110. The annual benefit is $45,625. . . . Please sign here. Q. Did you make those circles on a piece of paper? A. Yes. Before I handed it to her, I circled the items that are circled on it and drew the line. * * * Q. [A]fter she signed this page, what would you do next? A. Okay. The next page is page 10, which is the life insurance policy. Q. This is page 10 of Exhibit 2? A. Yes. Q. Okay. How would you explain this page to a customer? A. This 10,000 [sic] term policy. The premium is $108. It's not replacing any other previous life insurance policy. Q. Did you make those circles? A. Yes, I did. . . . * * * Q. This is page 13 of Exhibit 2? A. Yes. It's a statement of policy cost and benefit information that I would just run my finger down and just say, "These are your benefits and the cost, please sign here." Transcript (TR) at 251-270. Petitioner proposed in its PRO a finding that Respondent did not orally explain the ancillary products to the two consumers. However, Ms. Mason and Ms. Phillips did not remember what Respondent said to them. Testimony that a witness does not remember what Respondent said is less than clear and convincing evidence that Respondent did not explain the ancillary products adequately. The testimony of Ms. Mason during cross examination is illustrative. Q. Would you say that what you were really paying attention to when you conducted this transaction was how much it was going to cost you? A. Yeah. Yes. Q. Cause you . . . you talked [on direct] about your recollection about these things. And it was interesting that some things you were able to say you don't recall, but [counsel for Petitioner] was able to get you to commit to certain things that you absolutely said would not have happened. Such as, you know that if . . . the word "optional" had been used that you would not have accepted the product, correct? A. If it would have cost more, then I would not have accepted it. Q. Okay. But you don't specifically recall what was discussed in the course of your meeting with Ms. Fitzgerald, correct? A. No. Q. And you acknowledged that at least when confronted with some of the paperwork, things like a beneficiary on the $10,000 benefit for the life insurance policy, that was certainly discussed with you, right? A. I--yes, I guess. I don't--like I said, I feel so stupid because I don't--I know I said my brother's name and he's down for a beneficiary, but I don't remember why I would have--I don't understand why I did that. . . . * * * Q. You thought that the questions that were being asked to you about the life insurance policy--you thought that they were actually part of car insurance? A. I don't remember being asked questions about life insurance. Q. Do you remember being given a series of questions asking you about your health and about treatment-- A. Yes. * * * Q. So when . . . I ask you the question about whether or not you were told what your lump sum was going to be and you say, "I don't remember," that doesn't mean you weren't told? A. Correct. Q. It just means you don't remember? A. Correct. * * * Q. Turn to page 14. . . . Do you recall what explanation was given about this particular page? A. No. * * * Q. If you turn to page 15, please. . . . Fair to say that you don't recall what was said about this page? A. Yes. TR at 156-170. The oral explanation that Respondent provided to Ms. Mason and Ms. Phillips did not include a statement that each customer could have saved 17.27 and 28.94 percent of the total price, respectively, by declining the ancillary products. Nor did the oral explanation include a suggestion that either customer use the money to buy automobile insurance with a smaller deductible or more complete insurance.3 The omissions discussed in the preceding paragraph are not alleged in the Administrative Complaint as grounds for the statutory violations charged in the Complaint (the un-alleged omissions). Rather, the Complaint limits the alleged grounds to a failure to "inform" Ms. Mason and Ms. Phillips that the ancillary products were: . . . separate from and not a part of the automobile insurance she had requested, was not required by law or a lien holder, was optional, or that there was an additional charge for this product. . . . Administrative Complaint, paragraphs 7, 11, 15, 32, 36, 41, and 45. The un-alleged omissions did not involve the exercise of discretion by Respondent and were not willful. While it is clear that Respondent was the office manager, it is less than clear and convincing that Respondent was in charge of scripting the oral explanation for Friendly-Cash Register.4 Rather, Friendly-Cash Register required the omissions as a condition of Respondent's employment. As Respondent explained in her testimony: Q. . . . I don't see where [this script] asks the consumer if they actually want the optional policies. . . . So how would you know to quote the ancillary products if they had not asked for it yet? A. We were required to offer them to everybody. Q. And the method that Direct General instructed you to use was to just . . . include them in the quote; is that correct? A. State that they were optional, yes, and include them in the quote. * * * A. I would have preferred not to quote with them on the policy-- Q. Why? A. . . . I just preferred it that way, you know. . . . I didn't like it. Q. Do you feel like the way Direct General had you quote these consumers . . . may have led consumers possibly buying policies without full informed consent? A. No. TR at 280 and 295. On September 2, 2005, Respondent voluntarily left the employment of Friendly-Cash Register. Respondent is now employed by Car Insurance.com. Petitioner argues in paragraph 47 of its PRO that the Friendly-Cash Register forms are "vague or ambiguous and make it difficult to decipher (document-deficiency)." The Administrative Complaint does not allege document-deficiency as a ground for the charged violations. The alleged grounds are limited, in paragraphs 7, 11, 15, 32, 36, 41, and 45, to the "failure to inform" the consumers that they were purchasing ancillary products. Moreover, Petitioner acknowledges in paragraph 43 of its PRO that the "optional nature of the ancillary products is evident" from a review of the documents. If it were found that an allegation of document- deficiency is implied in the Administrative Complaint, the trier of fact finds that the ancillary products purchased by Ms. Mason and Ms. Phillips were not mis-labeled or illusory. They provided benefits to each purchaser. Travel protection primarily provided daily rental reimbursement of $25.00 up to 10 days during repairs for collision damage and up to five days during travel interruption. The accident medical protection plan provided medical expense reimbursement up to $1,000.00 and daily hospital coverage of $125.00 up to 365 days. The term life insurance provided a death benefit of $10,000.00. Even if the relevant forms were found to be deficient, any deficiency is rendered moot because each consumer testified that she did not read or rely on the content of the Friendly-Cash Register forms.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order finding Respondent not guilty of the allegations in the Administrative Complaint. DONE AND ENTERED this 18th day of January, 2008, in Tallahassee, Leon County, Florida. S DANIEL MANRY 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 18th day of January, 2008.
The Issue The issue for determination is whether Respondent committed the offenses set forth in the administrative complaint and, if so, what action should be taken.
Findings Of Fact At all times material hereto, Maria Amelia Pou (Respondent) was licensed as a general lines insurance agent. Pursuant to Chapter 626, Florida Statutes, the Department of Insurance (Petitioner) has jurisdiction over Respondent’s insurance license and appointments. At all times material hereto, Respondent was an officer of General Insurance Group, Inc. (GIG), located in Hialeah, Florida. GIG is a Florida incorporated general lines insurance agency. At all times material hereto, Respondent was an officer of Victoria Insurance Agency, later changed to General Insurance Group II, both hereinafter referred to as GIG II, located at 4583 NW 7th Street, Miami, Florida 33126. GIG II is a Florida incorporated general lines insurance agency. Respondent was, and is, personally and fully liable and accountable for the wrongful acts, misconduct, or violations of any provision of the Florida Insurance Code that she knew or should have known were committed by any person, over whom she had direct supervision and control, acting on behalf of GIG II. Respondent was, and is, personally and fully liable and accountable for wrongful acts, misconduct, or violations of any provision of the Florida Insurance Code that she committed. At all times material hereto, Respondent maintained an escrow account, with account no. 008-1027286, at Republic National Bank of Miami in Miami, Florida. Respondent had joint signatory authority over the escrow account. Premiums, returned premiums, and other funds belonging to insureds, insurers, and others received in transactions under Respondent's license are trust funds held by Respondent in a fiduciary capacity. On November 22, 1994, Carlos Vidal and his wife, Teresa Vidal, purchased a new vehicle from Ocean Mazda, a Mazda dealership located on Lejeune Road, Miami, Florida. Before leaving the dealership with his new vehicle, Mr. Vidal attempted to obtain insurance coverage for the vehicle from his insurance company, State Farm. However, when he went to State Farm's office, no one was present and it appeared to be closed. Mr. Vidal returned to the dealership and informed the dealer's salesperson, Mr. Munoz, of his problem. The salesperson called several insurance companies without success before reaching GIG II. Mr. Munoz engaged in all communication over the telephone with GIG II. Neither Mr. Vidal nor Mrs. Vidal spoke with GIG II. Mr. Munoz obtained a quote of $997 from GIG II for the annual premium for the insurance coverage on the vehicle and informed Mr. Vidal of the cost. Mr. Vidal requested his wife to complete a check to GIG in the quoted amount. She complied. The check was given to and accepted by Mr. Munoz. GIG II faxed an insurance binder to Mr. Munoz. He gave the binder to Mr. Vidal. The binder indicated that the insurance was to be issued by Clarendon National Insurance Company. Having obtained the insurance binder, Mr. and Mrs. Vidal left the dealership with their new vehicle. Although the premium was paid in full, GIG II completed an insurance premium finance contract (finance contract) to finance the premium with World Premium Finance Company (WPF), dated November 22, 1994, for Mr. Vidal. Ninety-five percent of Respondent's premiums are premium financed. The finance contract reflects the alleged signatures of Mr. and Mrs. Vidal. However, neither Mr. Vidal nor Mrs. Vidal signed the finance contract. An inference is drawn and a finding is made that GIG II signed the names of Mr. and Mrs. Vidal on the finance contract. Respondent signed the finance contract as the broker or agent. Also, the finance contract reflects GIG II as the agent and the insured as both GIG II and Mr. and Mrs. Vidal, with only GIG II's address as the address for both GIG II and the Vidals. Further, the finance contract reflects a premium of $907, cash down payment of $273, and three monthly payments of $225.18. The monies totaled $948.54 for the finance contract price. The $997 check was deposited into GIG II's escrow account. At all times material hereto, the money remained in the escrow account. GIG II completed an application for the insurance coverage, dated November 22, 1994, with Associated Insurance Brokers, Inc. (AIB) to be issued by Clarendon National Insurance Company. The application reflected a total policy premium of $907. Respondent signed the application as brokering agent. Also, the application reflects the alleged signatures of Mr. and Mrs. Vidal. However, neither Mr. Vidal nor Mrs. Vidal signed the application. An inference is drawn and a finding is made that GIG II signed Mr. and Mrs. Vidal's names to the application. Approximately, two to three days after November 22, 1994, Mr. Vidal brought the vehicle to GIG II for pictures to be taken of it for insurance purposes. A Florida Motor Vehicle Preinsurance Inspection Report, dated November 22, 1994, reflects the alleged signature of Mr. Vidal. To the contrary, Mr. Vidal did not sign the Report. Regarding the premium for the insurance, Respondent utilized computer software to compute the premium. The software requires a vehicle's VIN number. Respondent's software was not current due to her not having received, at the time of the transaction, the updated software which would reflect a recent rate increase. The total premium by the software was lower than the premium should have been. It is customary in the insurance industry to use the computer software used by Respondent for the insurance premiums. Also, it is not unusual for a delay to occur for the updated software to be received by an insurance company after a rate increase is approved and effective. In the insurance industry, it is not unusual for a miscalculation of a premium to occur. No gross miscalculation occurred in this instance which would cause the miscalculation to be unusual and suspect. Due to the miscalculation of the premium, by letter dated January 12, 1995, AIB notified Mr. Vidal that an additional $120 was due on the premium. Further, the letter provided that he had three options: (1) pay the $120 by February 10, 1995; or (2) cancel the insurance policy by February 26, 1995, and demand return of unearned premiums; or (3) take no action and the insurance policy would be cancelled by February 26, 1995. Mr. Vidal decided to cancel the insurance policy. On January 30, 1995, Mr. Vidal went to GIG II and executed a Cancellation Request Form cancelling his insurance. Respondent's signature appears on the Form as the agent. At some point in time, the cancellation form was forwarded by GIG II to AIB. By notice dated February 6, 1995, WPF notified Mr. Vidal, among other things, that he had ten days to pay his monthly installment ($225.18) due on February 1, 1995, 1 plus a late charge of $10, totaling $235.18 and that, if he failed to pay, his insurance would be cancelled. The address for Mr. Vidal on the notice was GIG II's address. By notice dated February 16, 1995, WPF notified Mr. and Mrs. Vidal, among other things, that their insurance policy was cancelled due to nonpayment of the monthly installment. The address for Mr. and Mrs. Vidal on the notice was GIG II's address. By letter dated February 14, 1995, to AIB, Mr. Vidal notified AIB that he had chosen to cancel his insurance policy and had executed a cancellation form on January 27, 1995, 2 and demanded a refund of the unearned premiums. Further, Mr. Vidal indicated in the letter that he had neither heard from AIB or received a refund and that he was notifying it of his cancellation and demand for a refund. As a result of the cancellation by Mr. Vidal, AIB issued WPF a check dated February 22, 1995, in the amount of $549.67. Subsequently, on or about March 1, 1995, WPF issued GIG II a check in the amount of $79.31 Even after Mr. Vidal cancelled the insurance coverage and Respondent had received a refund from WPF, Respondent failed to adjust her conduct to conform with the Vidals' situation which was that the insureds, the Vidals, had paid the quoted premium in full. Not having received a refund, on April 17, 1995, approximately two and one-half months after signing the cancellation form, Mr. Vidal filed a request for assistance with Petitioner. By check dated July 10, 1995, more than five months after Mr. Vidal signed the cancellation form, Respondent issued Mr. Vidal a refund in the amount of $239.33 for insurance coverage that he had in effect for a little over two months. The refund check was issued from GIG II's escrow account. The refund monies included $49 which represented the difference between what the Vidals paid for the coverage ($997) and the finance contract price ($948.54). Consequently, Mr. Vidal was assessed the interest charged on a finance contract which never should have existed in his situation as the quoted premium was paid in full. In a premium finance situation in which a refund is due an insured, it is customary in the insurance industry for a three-step process to take place: (1) the insurance company issues a check to the premium finance company for the refund and forwards the check to the premium finance company which may take at least 30 days; (2) the premium finance company issues a check to the agent for the refund and forwards the check to the agent which may take at least another 30 days; and (3) the agent issues a check to the insured for the refund and sends the check to the insured. The same refund procedure was followed in this situation but with less time involved for steps (1) and (2). Moreover, in this instance, an important factor which makes this situation different is that Respondent had in her escrow account the full premium paid by the insureds, the Vidals. After receiving Mr. Vidal's request for assistance, Petitioner conducted an investigation. At first, Petitioner determined that no violation of the Insurance Code had occurred and Petitioner closed its file. However, subsequently, Petitioner re-opened its investigation which led to the filing of the administrative complaint against Respondent. After filing of the administrative complaint and more than one year after Respondent refunded the $239.33 to Mr. Vidal, Respondent acknowledged that more monies were due Mr. Vidal. Having reviewed the computations with Petitioner, Respondent refunded the additional monies to Mr. Vidal. An individual who is not licensed by Petitioner may qualify for a license by experience. Petitioner prescribes the activities in which an unlicensed person may engage. Over the years, Respondent has had unlicensed employees who were attempting to qualify for licensure by experience. Respondent identified two unlicensed employees, Maria Cancio and Maritza Inclant, who provided premium quotes to customers. Approximately ten percent of Ms. Cancio's time was devoted to providing premium quotes. However, more than ten percent of Ms. Martiza's time was devoted to providing premium quotes. Petitioner presented no evidence as to the time periods, i.e., six months or twelve months to which the percentages were applicable.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Insurance and Treasurer enter a final order Finding in Count I that Maria Amelia Pou violated Subsections 626.561(1), 626.611(4), (5), (7), (10) and (13), 626.621(2) and (12), and 626.9541(1)(k)1 and (o) 1 and 2; Dismissing Count II; and Suspending the license of Maria Amelia Pou for nine months. DONE AND ENTERED this 15th day of April, 1997, in Tallahassee, Florida. ERROL H. POWELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 15th day of April 1997.
The Issue Whether First American Title Insurance Company's ("First American" or "Petitioner") five Uniform Commercial Code policy forms and 17 endorsements, Filing Number 05-07521, should be approved.
Findings Of Fact OIR is an agency of the State of Florida charged with licensing and regulating certain businesses and professions, including the regulation of title insurance. First American is a company duly-authorized by OIR to engage in the business of title insurance in the State of Florida. During the 2005 Legislative Session, the Florida Legislature approved HB 75, which amended Section 624.608, Florida Statutes, broadening the definition of title insurance. Subsection 624.608(2), Florida Statutes, provides that title insurance is insurance of owners and secured parties of "the existence, attachment, perfection, and priority of security interests in personal property under the Uniform Commercial Code." On June 24, 2005, First American made a form filing with OIR identified as FCC 05-07521. In FCC 05-07521, First American sought the approval of five forms and 17 endorsements for use in Florida. The five forms are: The EAGLE 9® The Insured Search; the EAGLE 9® The Insured Filing™; the EAGLE 9® UCC Insurance Policy for Lenders; the EAGLE 9® UCC Insurance Policy for Buyers; and the EAGLE 9® Insurance Vacation Interest Policy. The 17 endorsements are: the Sellers Lien Endorsement, the Tax Lien Endorsement, the Renewal Endorsement, the Tracking Endorsement, the Lender's Aggregation Endorsement, the Mezzanine Endorsement, the Pledged Equity Endorsement, the Change of Name of Insured Endorsement, the Waiver of Attorney Subrogation Rights Endorsement, the Springing Control Endorsement, the Post Policy Tax Lien Endorsement, the Endorsement for Issuance of Post Policy Date Judgment Lien Endorsement, the Borrower's Status Endorsement, the Buyers Aggregation Endorsement, the Increase In Tax Lien Coverage Endorsement, the Buyer's Equity Ownership Endorsement, and the Amendment to Buyers Policy Insuring Clause Coverage Limitation Endorsement. On February 28, 2006, Peter Rice from OIR sent a letter to James Predergast of First American regarding Filing FCC 05- 07521. On April 4, 2006, James Prendergast sent a letter to Peter Rice in response to the February 28, 2006, letter, asking OIR for a clarification on the meaning of "existence" as the term is used in Subsection 624.608(2), Florida Statutes. OIR did not specifically respond to this letter. On August 24, 2006, Peter Rice sent a letter to Douglas A. Mang, Esquire, disapproving Filing FCC 05-07521. That letter set forth the reasons for OIR's disapproval of the proposed forms. The August 24, 2006 letter stated that the filing was denied for the following reasons: The forms violate the intent and meaning of Section 624.608(2), Florida Statutes, which requires that title insurance provide coverage for the existence, attachment, perfection, and priority of security interests in personal property under the Uniform Commercial Code; The forms violate the intent and meaning of Section 627.7485(1), Florida Statutes, which stipulates that a title insurer may not issue a title insurance commitment, endorsement, or title insurance policy until the title insurer has caused to be conducted a reasonable search and examination of the title or the records of the Uniform Commercial Code filing office, as applicable, has examined such other information as may be necessary, and has caused to be made a determination of the existence, attachment, perfection, and priority of a Uniform Commercial Code security interest, including endorsement coverages, with sound underwriting practices; and Since the forms do not comply with the meaning and intent of Sections 624.608(2) and 627.7485(1), Florida Statutes, the forms do not meet the definition of title insurance and, therefore, their issuance by First American Title Insurance Company would violate the meaning and intent of Section 627.786(1), Florida Statutes. First American does not contest OIR's disapproval of the EAGLE 9® The Insured Search, the EAGLE 9® The Insured Filing, the EAGLE 9® UCC Insurance Policy for Buyers, and the EAGLE 9® Insurance Vacation Interest Policy. The EAGLE 9® UCC Insurance Policy for Lenders was not approved because OIR concluded that the policy did not cover "existence." The policy form does not specifically insure for the "existence" of a security interest, nor does it contain the term "existence." OIR has no agency rules interpreting Subsection 624.608(2), Florida Statutes. "Existence" is not defined under Florida law. The four policy form disapprovals Petitioner chose not to contest at the hearing, the UCC Insurance Policy for Buyers, the UCC Insurance Vacation Interest Policy, the UCC Search Insurance Policy, and the UCC Filing Insurance Policy, each specifically insures for the "existence" of a security interest under the "Covered Risks" section of those proposed policies. If the term "existence" appeared in the appropriate insuring agreement for EAGLE 9® UCC Insurance Policy for Lenders, the policy would have met the statutory requirement for approval. If the EAGLE 9® UCC Insurance Policy for Lenders was approved, the Sellers Lien Endorsement would have been approved if a page number was added to the form. If the EAGLE 9® UCC Insurance Policy for Lenders was approved, the Tax Lien Endorsement would have been approved if a page number was added to the form. If the EAGLE 9® UCC Insurance Policy for Lenders was approved, the Tracking Endorsement would have been approved if a page number was added to the form and a premium set. If the EAGLE 9® UCC Insurance Policy for Lenders was approved, the Lenders Aggregation Endorsement would have been approved if a page number was added to the form. If the EAGLE 9® UCC Insurance Policy for Lenders was approved, the Mezzanine Endorsement would not have been approved, because OIR concluded that such coverage does not require the search of UCC filing office records. If the EAGLE 9® UCC Insurance Policy for Lenders was approved, the Pledged Equity Endorsement would not have been approved, because OIR concluded that such coverage does not require the search of UCC filing office records. If the EAGLE 9® UCC Insurance Policy for Lenders was approved, the Change of Name of Insured Endorsement would have been approved if a page number was added to the form. If the EAGLE 9® UCC Insurance Policy for Lenders was approved, the Waiver of Attorney Subrogation Rights Endorsement would have been approved if a page number was added to the form. If the EAGLE 9® UCC Insurance Policy for Lenders was approved, the Springing Control Endorsement would not have been approved, because OIR concluded that such coverage does not require the search of UCC filing office records. If the EAGLE 9® UCC Insurance Policy for Lenders was approved, the Post Policy Tax Lien Endorsement would have been approved if a page number was added to the form. If the EAGLE 9® UCC Insurance Policy for Lenders was approved, the Post Policy Date Judgment Lienholders Endorsement would have been approved if an exhibit, which was not included in the original submission, was approvable and if a rate was set for the endorsement. If the EAGLE 9® UCC Insurance Policy for Lenders was approved, the Borrower's Status Endorsement would have been approved if a page number was added to the form. Unlike traditional title insurance where priority is obtained by filing, some transactions under the UCC obtain priority by possession or control of the collateral. To create a security interest in a general intangible such as a patent or contract, a security interest may only be perfected by the filing of a security agreement with the appropriate UCC filing office. A security interest in inventory can be created by filing with the appropriate UCC filing office or by taking possession of the inventory. A security interest in a depository account can be perfected by entering into a control agreement with the depository institution. Such an interest cannot be perfected by filing or possession. Mezzanine lending is a specialized form of financing that fills the gap between the loan to value restrictions of a lender and the ultimate cost of the item being purchased. Typically, the subjects of such financing are large, highly- expensive buildings. Mezzanine financing involves the creation of a limited liability corporation (LLC) that holds as its primary asset a 100 percent interest in the building being purchased. The mezzanine lender extends credit to the partners or other equity owners of the LLC, with the lender taking a pledge of the parties' equity interests in the LLC. This allows the purchasers to borrow the full purchase price of a building. Since the purchasers are pledging their interest in the LLC and not specifically in collateral, the first mortgage holder avoids any prohibition against pledging the collateral for a second mortgage or additional financing. Many lenders as well as Moody's, a rating agency, now expect to see UCC insurance in all such transactions, which are also known as CMBS (collateralized mortgage-backed securities) transactions. In mezzanine lending a security interest is perfected by possession or control of the certificated or un-certificated securities of the LLC. No centralized UCC filing office exists that would allow a title insurer or lender to make a reasonable search and examination to discover an existing security interest that was perfected by possession or control. First American currently sells the UCC EAGLE 9® Lenders Policy in all 50 states and an analogous product in Canada. The coverage offered in the UCC EAGLE 9® Lenders Policy is currently being written by First American in about half the states as a property and casualty product and in the other half as a title insurance product. First American believes it could currently write the policy at issue as a property and casualty product in Florida. The current industry practice is to write this product out of a Delaware LLC. UCC title insurance is typically written by attorneys who are exempt from licensure as a title insurance agent. If this product is written through a property and casualty company, attorneys will not be eligible to receive a commission unless they are properly licensed through Respondent as property and casualty insurance agents. First American is primarily a database company that insures the accuracy of its search of databases and the results of the search. No mezzanine lender would use a form that includes the term "existence" in the insuring clause since most mezzanine lending is securitized. Neither the rating agencies nor law firms would deal with the policy if it is different from the standard form. Petitioner takes the position that the term "existence" is superfluous to Section 627.7485, Florida Statutes. A security interest is an interest in personal property. Petitioner asserts that a security interest cannot exist apart from the debtor having rights in the collateral. A security interest is an interest in personal property that secures the payment or performance of an obligation. The term "existence" is not defined in the UCC. Petitioner asserts that the term is subsumed in the term "attachment." Petitioner's interpretation of the UCC is that "creation," "existence," and "attachment" are thoroughly synonymous. According to Mr. Prendergast, a security interest does not come into enforceable being until the elements of attachment are present. However, he admits it is possible to have a transaction where a security agreement is signed, thus creating a security interest in the collateral, and the attachment date could be six months later. By definition in the UCC, a security interest is created by a security agreement, not by attachment. Respondent asserts that an enforceable security interest may not exist without attachment; an enforceable security interest may not exist without perfection; and an enforceable security interest may not exist without priority, but the amended statute lists these three elements plus a fourth, existence, in order to comply. UCC insurance policies, such as the EAGLE 9® UCC Insurance Policy for Lenders, pays claims based upon the face value of the policy, the indebtedness outstanding, or the value of the collateral. There cannot be a claim under the policy unless there is collateral and an enforceable security interest. A security interest is not enforceable as a matter of law unless value has been given, the debtor has rights in the collateral, and there is a security agreement. First American takes the position that it did not use the word "existence" in the EAGLE 9® UCC Insurance Policy for Lenders because it has no meaning different from attachment. Petitioner asserts that including the term "existence" in the policy would result in the policy having two insuring clauses insuring the same thing. Further, by this being the only policy in Florida containing the term "existence," Petitioner argues that it would not be received well by rating agencies and law firms that deal with the policies. First American testified that it would continue to conduct a search of UCC filing office records even if it issued the EAGLE 9® UCC Insurance Policy for Lenders or any of the proposed endorsements to the policy. An endorsement is not a stand-alone form, and can only be used as part of an existing insurance policy. OIR, through General Counsel Steve Parton and others, was involved in the legislative process and provided input into the drafting of the statute at issue, as did representatives of the title industry. OIR has interpreted the statute as written to require that a valid UCC title insurance policy must address the four distinct elements listed in the statute, namely, "existence," "attachment," "perfection," and "priority."
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Office of Insurance Regulation issue a Final Order disapproving the EAGLE 9® UCC Insurance Policy for Lenders and the associated endorsements. DONE AND ENTERED this 3rd day of July, 2007, in Tallahassee, Leon County, Florida. S ROBERT S. COHEN 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 3rd day of July, 2007. COPIES FURNISHED: Richard J. Santurri, Esquire Wendy Russell Wiener, Esquire Mang Law Firm, P.A. Post Office Box 11127 Tallahassee, Florida 32399-0333 Jeffrey W. Joseph, Esquire Office of Insurance Regulation 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-4260 Kevin M. McCarty, Commissioner Office of Insurance Regulation 200 East Gaines Street Tallahassee, Florida 32399-0305 Steve Parton, General Counsel Office of Insurance Regulation 200 East Gaines Street Tallahassee, Florida 32399-0305
The Issue The issue in this case is whether J&K Enterprises of Lee County owes Petitioner money for sod.
Findings Of Fact On January 29, 1994, Petitioner invoiced Respondent J&K Enterprises for five loads of Bermuda sod that Petitioner had sold and delivered to Respondent. Pursuant to the agreed-upon price, the amount of the invoice was $3139. On February 10, 1994, Petitioner invoiced Respondent J&K Enterprises for four loads of Bermuda sod that Petitioner had sold and delivered to Respondent. Pursuant to the agreed-upon price, the amount of the invoice was $2776. On February 24, 1994, Petitioner invoiced Respondent J&K Enterprises for five loads of Bermuda sod that Petitioner had sold and delivered to Respondent. Pursuant to the agreed-upon price, the amount of the invoice was $3946. On March 3, 1994, Petitioner invoiced Respondent J&K Enterprises for one load of Bermuda sod that Petitioner had sold and delivered to Respondent. Pursuant to the agreed-upon price, the amount of the invoice was $736. On March 10, 1994, Petitioner invoiced Respondent J&K Enterprises for one load of Bermuda sod that Petitioner had sold and delivered to Respondent. Pursuant to the agreed-upon price, the amount of the invoice was $656. The total of the five invoices is $11,253. Respondent J&K Enterprises made the following payments on account: April 10, 1994--$1000; April 29, 1994--$1000; May 17, 1994--$1000; May 25, 1994--$1000; June 24, 1994-- $1000; September 23, 1994--$2000; October 21, 1994--$500; and December 15, 1994--$250. The total of the eight payments is $7750. Respondent J&K Enterprises still owes Petitioner the difference of $3,503. Despite repeated demands, Respondent refuses to pay the remaining balance. The parties agreed on the delivery tickets that Respondent J&K Enterprises would pay 18 percent on all unpaid balances after 30 days. Respondent has paid in full the first two invoices. Respondent paid all but $2111 of the third invoice, which balance began to earn interest on March 24, 1994. The fourth invoice of $736 began to earn interest on April 3, 1994, and the last invoice of $656 began to earn interest on April 10, 1994. Interest through March 1, 1995, on the February 24 invoice is $355.02 plus $1.04 per day thereafter. Interest through March 1, 1995, on the March 3 invoice is $120.38 plus $0.36 per day thereafter. Interest through March 1 on the March 10 invoice is $104.64 plus $0.32 per day thereafter.
Recommendation It is hereby RECOMMENDED that the Department of Agriculture and Consumer Services enter a final order ordering J&K Enterprises of Lee County to pay the amount set forth above and, if said amount is not paid, ordering Preferred Mutual Insurance Company to pay said amount, up to its maximum liability on the bond. ENTERED on February 16, 1995, in Tallahassee, Florida. ROBERT E. MEALE 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 on February 16, 1995. COPIES FURNISHED: Hon. Bob Crawford Commissioner of Agriculture The Capitol, PL-10 Tallahassee, FL 32399-0810 Richard Tritschler, General Counsel Department of Agriculture The Capitol, PL-10 Tallahassee, FL 32399-0810 Brenda Hyatt, Chief Bureau of Licensing and Bond Department of Agriculture 508 Mayo Building Tallahassee, FL 32399-0800 Larry Perkins Florida Sod of Hendry County, Inc. P.O. Box 159 LaBelle, FL 33935 J&K Enterprises of Lee County 2290 Bruner Lane Ft. Myers, FL 33912 Preferred Mutual Insurance Co. Legal Department P.O. Box 40-7003 Ft. Lauderdale, FL 33340-7003
The Issue Whether the Respondent violated Section 626.611(7), Florida Statutes, and, if so, what is the appropriate penalty?
Findings Of Fact At all times material to this proceeding, Respondent was licensed by the Department as a life insurance agent, health insurance agent, and as a life and health insurance agent. The subject matter of this proceeding concerns Respondent's sale of enhanced automobile receivables (EARS), which involves the sale of high interest automobile financing. Respondent first learned of a company called First Choice Management Services, Inc. (First Choice), in the fall of 1999 when he received a brochure and a letter. As a result of receiving those, he called a man named Darin Roberts whom Respondent understood to be First Choice's marketing director. Following that telephone conversation, Respondent received a letter from Mr. Roberts regarding the "financial product" offered by First Choice. The letter was dated December 1, 1999, and included the following representations: -5 year proven track record -11% APR for client -Short-term participation -Qualified and non-qualified funds accepted -$10,000 minimum investment -Receivables insured through Lloyds of London -Individual accounts set up through Merrill Lynch -Monthly interest checks available -Up to 5% surrender penalty reimbursement Following receipt of the letter, Respondent engaged in several more telephone conversations with Mr. Roberts in an effort to understand the product offered by First Choice. He requested more information as to the insurance policy of Lloyds of London as referenced in the December 1, 1999, letter. As a result of these phone calls with Mr. Roberts, Respondent called Tamarack Funding Corporation (Tamarack) of Texas, which is the company which owned and sold the automobiles. Respondent also called the Better Business Bureau in the Texas location of Tamarack to inquire about Tamarack. Respondent placed these calls in an effort to learn more about the company and the product which is the subject of this dispute. Respondent requested and received a copy of a document with a cover sheet that stated "INSURANCE POLICY" on First Choice letterhead. That is followed by "Lloyd & Associates" at the top of the second page and "Renewal Certificate Underwriters at Lloyd's London" at the top of the third page followed by several pages entitled, "Lloyd's of London Vendors Consumer Single Interest Insurance Certificate." Tamarack Funding Corporation is identified as the insured. Respondent called the telephone number identified in this document for Lloyd & Associates and spoke with an agent there. He called Merrill Lynch to verify that First Choice had a Merrill Lynch Account. After Respondent reviewed the Lloyd's of London document and spoke to persons at First Choice, Tamarack Funding, Lloyd & Associates, and Merrill Lynch, it was Respondent's understanding and belief that this policy would provide protection for the investors concerning the potential investments in EARS. Respondent then called Mr. James R. Leone, an attorney for First Choice, who provided him with a draft of a legal opinion. Respondent's primary motive in calling Mr. Leone was to get assurances that the subject product did not constitute a security, as he was not licensed to sell securities. He also called the Florida Department of Insurance again with the motivation of making sure this was not a security. Respondent was satisfied that this did not constitute a sale of securities. Respondent then requested and received names of references of investors. Respondent called these investors to ascertain their satisfaction with their investments and was satisfied with their responses. It was Respondent's understanding and belief that there were several safety features in place which put the investor at minimal risk. Having reached that conclusion, Respondent made an initial investment of $15,000.00 with First Choice in the form of an IRA rollover with the understanding and belief that he would receive 11 percent interest on his investment and that his investment was insured. Respondent then began the process of preparing to sell the First Choice products to others. He received a brochure and a flip chart from First Choice. He began using the written information provided to him in his presentations to potential clients. The written material he used in illustrating the product to potential clients reads in pertinent part: What are Consumer Finance Receivables? In this case, the receivables purchased are finance contracts that have been entered into between a qualified car buyer and an automobile retail center. Through the services of First Choice, you purchase the receivable from the automobile retail center and you can, through First Choice, manage your personal account that you set- up [sic] for this purpose. * * * O.K., How Does It Really Work? You open a personal Merrill Lynch account by making a deposit in your name and give First Choice the authority to purchase and manage receivables on your behalf. * * * What About the Safety of Receivables? -Should a receivable default, First Choice will replace it with another receivable. -First Choice will recover the loss on the defaulted receivable through their insurance with Lloyd's of London. -You, the owner, never miss a month's distribution! * * * How to Get Started as a Consumer Receivables Owner: -Fill out the First Choice Application -Determine the amount you wish to open your Merrill Lynch personal account with -Choose the option for income that best suits your needs -Depending on your management choice, you begin earning up to an 11% APR equivalent from the day of your deposit -The program is kept secured by our default coverage through Lloyd's of London (emphasis in original) Respondent began marketing the First Choice product by using this brochure in his presentation to existing clients and by posting a flyer at a local school. Respondent sold EARS to several persons including the following: Christopher Duren and his wife, Robbie Duren; Joan McLeod; Roger Saunders; William C. Granberry; and Hiram Tison. Based on his understanding and belief, Respondent represented to these clients that there would be an 11 percent return per year and that it was guaranteed against loss by Lloyds of London. Respondent visited Christopher and Robbie Duren in their home. The Durens rolled over moneys from their retirement IRAs for a total of $66,000.00 to purchase the EARS. The Durens did not fully understand what an EAR was, but relied upon the representations of Respondent. They understood that they would receive an 11 percent return. They were not aware that there was substantial risk to this investment. Joan McLeod, a Holmes County School District employee, responded to a flyer placed in her mailbox regarding the EARS. Respondent visited her at her workplace to discuss a rollover of her IRA into the First Choice product. Ms. McLeod apparently did not fully understand the nature of the investment and would not have invested this money in this way if she understood the risk involved. Ms. McLeod invested $10,000.00 with First Choice. Roger Saunders became aware of the First Choice product from a friend who had invested in it. He invested $13,000.00 with First Choice. He invested believing that he would receive an 11 percent return and that it was a safe, low risk investment insured by Lloyd's of London. William Granberry learned of the First Choice product from a friend. Mr. Granberry contacted Respondent and rolled over $63,415.00 from a 401(K) retirement plan to purchase the First Choice product. Mr. Granberry made this investment understanding that it was fully insured and that he would receive a 12 percent return.1 Hiram Tison, a Holmes County school teacher, received an advertisement or flyer regarding the First Choice product. He invested $10,000.00 with First Choice with the understanding that he would receive 11 percent interest and that it was insured by Lloyd's of London. First Choice and its owner, Gary Van Waeyenberghe, are currently defendants in Securities and Exchange Commission v. First Choice Management Services, Inc. and Gary Van Waeyenberghe, Case No. 3:00CV044RM in federal district court in Indiana. Joseph Bradley, Esquire, is the court appointed receiver and is operating First Choice as an ongoing business in an attempt to recover as much of the investors' assets as possible. Neither Respondent nor his clients enumerated above ever received any funds in return for their investment. It is uncertain as to when and whether Respondent and the other investors will receive any portion of their money as a result of the federal court case. Respondent has lost a total of $28,500.00 in investments with First Choice. He received commissions of approximately $12,500.00 resulting in a net personal loss of approximately $16,000.00. The Lloyd's of London policy did not, in fact, guarantee the investments made by Respondent and his clients. At the time Respondent made his representations to his clients regarding First Choice, he did not know that his representations regarding First Choice were false or misleading. When he realized that there was a problem with the First Choice investments, Respondent took steps to protect the investments of his clients and kept his clients informed as to the information he received from the Receiver in the federal court case.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law set forth herein, it is RECOMMENDED: That the Department of Insurance enter a final order dismissing the Administrative Complaint against Respondent, Cameron Alexander Pouncey. DONE AND ENTERED this 19th day of December, 2002, in Tallahassee, Leon County, Florida. BARBARA J. STAROS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 19th day of December, 2002.
