The Issue Whether Petitioner is entitled to receive retroactive retiree health insurance subsidy benefit payments in addition to those already received.
Findings Of Fact Respondent is charged with managing, governing, and administering the Florida Retirement System (FRS). The FRS is a state-administered retirement system as defined by Florida law. The health insurance subsidy (HIS) benefit is a program provided by Florida Statutes to help offset the cost of a retiree's monthly medical insurance premiums. Currently, the amount paid is $5 times the years of creditable state service at the time of the retirement calculations. Only those people who were members of the FRS, who apply for and receive monthly retirement benefits are eligible for the HIS. Ms. Shaul worked for the Florida Department of Children and Families (DCF), and its predecessor, the Department of Health and Rehabilitative Services, for 35 years. She was enrolled in the defined benefit plan of the FRS and earned creditable service in the FRS. In October 2001, Ms. Shaul began her participation in the FRS Deferred Retirement Option Program (DROP). In June 2006, the Division provided Ms. Shaul certain forms, brochures and informational material relevant to her DROP participation termination. Via the cover letter, Ms. Shaul was advised in pertinent part: When your name is added to the retired payroll, you will receive a "retiree packet" that contains an information letter, "After you Retire" booklet, W-4P "Withholding Certificate for Pension Payments," Health Insurance Subsidy application, and Direct Deposit Authorization. The retiree packet is mailed approximately one week before you receive your first monthly benefit. In September 2006, Ms. Shaul completed the DROP termination forms and returned them to the Division. On October 1, 2006, Ms. Shaul retired from her state position. As a prior state employee, Ms. Shaul is a member of the FRS. In mid-October 2006, the Division paid Ms. Shaul her DROP payout. At the end of October 2006, the Division paid Ms. Shaul her first monthly service retirement benefit. A copy of the retiree packet sent to Ms. Shaul is not reflected in her file, as the Division did (and does) not place copies of forms or booklets sent automatically. It is the Division's practice to send each retiree added to the system a retiree packet that includes, among other things, an application for the HIS and an explanation of the subsidy, as well as a booklet containing an explanation of all of the benefits available to retirees and beneficiaries under the FRS. There was no evidence that these forms or booklets were not automatically sent to Ms. Shaul. It is the responsibility of an FRS retiree to apply for the HIS benefit. In the event an FRS retiree does not apply for the HIS benefit, the Division will send a reminder memorandum notifying each retiree that their HIS application has not been received and encouraging them to file for it. In January or early February 2007, Ms. Shaul received a statement indicating that her HIS benefits were not being paid. Ms. Shaul contacted the Division and requested that the appropriate application form be provided to her. Ms. Shaul received the application and completed it; however, she did not return the application in a manner that could be traced, i.e., via certified or registered mail. The Division has no record of receiving this 2007 application. For the next several years, Ms. Shaul did not follow up on the HIS benefit to ensure that she was being properly reimbursed. Each year she would receive her financial statement from the State and immediately provide it to her accountant for tax preparation. In January 2010, Ms. Shaul telephoned the Division to inquire about the HIS benefit. During the 2007-2012 period, the Division sent out newsletters and other notices to all retirees specifically referencing the HIS.2/ The Division reviewed Ms. Shaul's service folder via its Integrated Retirement Information System. The Division established Ms. Shaul's HIS benefit effective date as July 1, 2009, based on her January 2010 telephone call to the Division, and the fact that her health insurance premiums were being deducted from her monthly service retirement benefit payment. The Division's record substantiates that Ms. Shaul was paid HIS benefits totaling $1,200.00 ($300 for the months of January and February 2010, and $900 for the six months of retroactive benefits from July 1, 2009, through December 2009).3/ The Division issued a notice of final agency action on October 24, 2012, wherein Ms. Shaul was advised that her verbal application for the HIS benefit during the January 2010 telephone call was the earliest record of a HIS benefit being requested on her behalf. The issue is not whether Ms. Shaul remembers completing the HIS benefit application, but when the Division received the application. The credible, persuasive evidence in the record establishes that Ms. Shaul contacted the Division in January 2010 and received the HIS benefit payment for the prior six months.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Management Services, Division of Retirement, issue a final order denying Ms. Shaul's request for additional HIS benefits retroactive to the date of her termination of DROP. DONE AND ENTERED this 5th day of June, 2013, in Tallahassee, Leon County, Florida. S LYNNE A. QUIMBY-PENNOCK 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 June, 2013.
The Issue The issue for consideration herein is whether the Petitioner is entitled to reimbursement from the Florida Flexible Benefits Plan Medical Reimbursement Account for expenses incurred prior to March 8, 1990.
Findings Of Fact At all times pertinent to the matters in issue here, the Petitioner, Quintin A. Clark, was a full-time employee of the Department of Health and Rehabilitative Services in its Sarasota County Public Health unit, and the Respondent, Department, was the state agency responsible for administering all state insurance plans for state employees in the State of Florida. As a part of its insurance program, the state offered the Florida Flexible Benefits Plan, (Plan). This is a benefit program for employees under which specified, incurred medical expenses may be reimbursed. The plan extends for the fiscal year December 1 to November 30 of each year. There is a reimbursement maximum of $2400.00 per year and the maximum reimbursement may not be substantially in excess of the total premium paid for the participant's coverage. During the month of October, 1989, the Respondent conducted an open enrollment period of all state employees who wished to enroll in the plan. Petitioner did not enroll during that open enrollment period. However, in February, 1990, after the birth of his daughter on January 11, 1990, he elected to enroll in the plan and was accepted on the basis that the birth of his child was considered a qualifying status change event. Mr. Clark elected to contribute $1,650.00 per year in the Medical Care account to fund reimbursement payment for medical expenses, and authorized deductions of $82.50 per paycheck for 20 biweekly pay periods. By the same token, he also elected to contribute $1,700.00 to the Dependent care account for dependent care reimbursement and authorized a payroll deduction for that expense of $85.00 per biweekly payroll cycle. Mr. Clark submitted his Form FB-2, Enrollment/Qualifying Status Change Form, on February 6, 1990. A copy of that form, revised in December, 1989, reflects, on the back of the employee's pink copy: The effective date of plan participation or qualifying status change will be the date the signed and properly completed form is received by DSEI. The form signed by Mr. Clark does not indicate it is a copy of the revised form, but there is no evidence to indicate the forms are different in this particular. Notwithstanding Mr. Clark submitted his completed form on February 6, 1990, the form was not received by Respondent, DSEI, until March 8, 1990. No explanation was given for the delay of approximately 32 days between the time the form was submitted by Petitioner and the day it reached the Department. On April 24, 1990, Mr. Clark submitted claims for medical reimbursement for his wife and infant daughter for services incurred on the following dates: 6/89 - 1/90. prenatal $130.00 11/6/89 pregnancy 30.00 11/13/89 " 30.00 11/20/89 " 30.00 12/16/89 Hosp. visit 20.30 1/10/90 Sara. Mem. 466.25 1/11/90 Epidural 112.00 1/12/90 Sara. Mem. 789.95 1/12 - 13/90 well baby care 39.00 1/26/90 " " " 37.00 3/9/90 " " " 3.70 Among these claims, the total value of which exceeded $1,386.20, were included claims for services rendered prior to the date DSEI received Petitioner's enrollment form on March 8, 1990. All these claims incurred prior to that date were denied by the Respondent for that reason. Only the March 9, 1990 claim was considered as qualifying and eligible for payment. Petitioner claims that the information contained in the literature on the program given out by the Department is unclear and contradictory. Specifically he refers to the sample instructions which are outlined on Page 17 of the September, 1989 edition of the plan brochure made available to prospective participants. In that portion entitled "Instructions & Information", which appears to be the reverse of the sample form found on Page 16, at 5, the form reads: Expenses must occur within the plan year and while the employee was a plan participant to qualify. The plan year runs from December 1 through November 30. That provision does not appear to be inconsistent with the Department's denial of reimbursement for the expenses claimed prior to March 8, 1990.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that a Final Order be entered denying Petitioner, Quintin A. Clark, reimbursement for the expenses incurred prior to February 6, 1990. RECOMMENDED this 13th Tallahassee, Florida. day of November, 1990, in ARNOLD H. POLLOCK, 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 13th day of November, 1990. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 90-4345 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. FOR THE PETITIONER: 1. Accepted and incorporated herein except that Petitioner was a participant in the plan at the time the expenses were incurred. FOR THE RESPONDENT: 1 - 9. Accepted and incorporated herein. COPIES FURNISHED: Quintin A. Clark 1025 Putnam Drive Sarasota, Florida 34234 Augustus D. Aikens, Jr., Esquire General Counsel Department of Administration 435 Carlton Building Tallahassee, Florida 32399- 1550 Aletta Shutes Secretary Department of Administration 435 Carlton Building Tallahassee, Florida 32399-1550
The Issue The issues in the case are whether the Respondent erred in 2006 when a life insurance program applicable to retired state employees was amended to provide for two levels of benefits with separate premiums, and, if so, whether the beneficiary of a retired, now deceased, state employee should receive a different life insurance benefit than was paid.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Management Service, Division of Group State Insurance, enter a final order determining that the life insurance benefit for James W. Black is $2,500.00. DONE AND ENTERED this 13th day of March, 2009, in Tallahassee, Leon County, Florida. S WILLIAM F. QUATTLEBAUM 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 13th day of March, 2009. COPIES FURNISHED: Sonja P. Mathews, Esquire Department of Management Services Office of the General Counsel 4050 Esplanade Way, Suite 260 Tallahassee, Florida 32399 Gregory D. Swartwood, Esquire The Nation Law Firm 570 Crown Oak Centre Drive Longwood, Florida 32750 John Brenneis, General Counsel Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950
The Issue Whether Respondent owes $1,568,399.00 or $2,323,765.60 as a penalty for failing to secure workers' compensation insurance for its employees, as required by Florida law.
Findings Of Fact Based on the evidence adduced at hearing, and the record as a whole, the following findings of fact are made to supplement and clarify the sweeping factual stipulations set forth in the parties' June 1, 2005, Joint Stipulation3: Legislative History of the "Penalty Calculation" Provisions of Section 440.107(7), Florida Statutes Since October 1, 2003, the effective date of Chapter 2003-412, Laws of Florida, Section 440.107(7)(d)1., Florida Statutes, has provided as follows: In addition to any penalty, stop-work order, or injunction, the department shall assess against any employer who has failed to secure the payment of compensation as required by this chapter a penalty equal to 1.5 times the amount the employer would have paid in premium when applying approved manual rates to the employer's payroll during periods for which it failed to secure the payment of workers' compensation required by this chapter within the preceding 3-year period or $1,000, whichever is greater. Prior to its being amended by Chapter 2003-412, Laws of Florida, Section 440.107(7), Florida Statutes, read, in pertinent part, as follows: In addition to any penalty, stop-work order, or injunction, the department shall assess against any employer, who has failed to secure the payment of compensation as required by this chapter, a penalty in the following amount: An amount equal to at least the amount that the employer would have paid or up to twice the amount the employer would have paid during periods it illegally failed to secure payment of compensation in the preceding 3-year period based on the employer's payroll during the preceding 3- year period; or One thousand dollars, whichever is greater. The Senate Staff Analysis and Economic Analysis for the senate bill that ultimately became Chapter 2003-412, Laws of Florida, contained the following explanation of the "change" the bill would make to the foregoing "penalty calculation" provisions of Section 440.107(7), Florida Statutes4: The department is required to assess an employer that fails to secure the payment of compensation an amount equal to 1.5 times, rather than 2 times, the amount the employer would have paid in the preceding three years or $1,000, which is greater. There was no mention in the staff analysis of any other "change" to these provisions. The NCCI Basic Manual The National Council on Compensation Insurance, Inc. (NCCI) is a licensed rating organization that makes rate filings in Florida on behalf of workers' compensation insurers (who are bound by these filings if the filings are approved by Florida's Office of Insurance Regulation, unless a "deviation" is permitted pursuant to Section 627.11, Florida Statutes). The NCCI publishes and submits to the Office of Insurance Regulation for approval a Basic Manual that contains standard workers' compensation premium rates for specified payroll code classifications, as well as a methodology for calculating the amount of workers' compensation insurance premiums employers may be charged. This methodology is referred to in the Basic Manual as the "Florida Workers Compensation Premium Algorithm" (Algorithm). According to the Algorithm, the first step in the premium calculating process is to determine the employer's "manual premium," which is accomplished by applying the rates set forth in the manual (or manual rates) to the employer's payroll as follows (for each payroll code classification): "(PAYROLL/100) x RATE)." Adjustments to the "manual premium" are then made, as appropriate, before a final premium is calculated. Among the factors taken into consideration in determining the extent of any such adjustments to the "manual premium" in a particular case are the employer's loss experience, deductible amounts, premium size (with employers who pay "larger premium[s]" entitled to a "Premium Discount"), and, in the case of a "policy that contains one or more contracting classifications," the wages the employer pays its employees in these classifications (with employers "paying their employees a better wage" entitled to a "Contracting Classification Premium Adjustment Program" credit). Petitioner's Construction of the "Penalty Calculation" Provisions of Section 440.107(7), Florida Statutes In discharging its responsibility under Section 440.107(7), Florida Statutes, to assess a penalty "against any employer who has failed to secure the payment of compensation as required," Petitioner has consistently construed the language in the statute, "the amount the employer would have paid," as meaning the aggregate of the "manual premiums" for each applicable payroll code classification, calculated as described in the NCCI Basic Manual. It has done so under both the pre- and post-Chapter 2003-412, Laws of Florida, versions of Section 440.107(7). This construction is incorporated in Petitioner's "Penalty Calculation Worksheet," which Florida Administrative Code Rule 69L-6.027 provides Petitioner "shall use" when "calculating penalties to be assessed against employers pursuant to Section 440.107, F.S." (Florida Administrative Code Rule 69L-6.027 first took effect on December 29, 2004.) Penalty Calculation in the Instant Case In the instant case, "1.5 times the amount the [Respondent] would have paid in premium when applying approved manual rates to [Respondent's] payroll during periods for which it failed to secure the payment of workers' compensation" equals $2,323,765.60.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner order Respondent to pay a $2,323,765.60 penalty for failing to secure workers' compensation insurance for its employees. DONE AND ENTERED this 5th day of August, 2005, in Tallahassee, Leon County, Florida. S STUART M. LERNER 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 5th day of August, 2005.
The Issue Whether Petitioner, Judith Richards, is eligible for the health insurance subsidy offered to Florida Retirement System retirees.
Findings Of Fact In November 2011, Petitioner was hired by the Osceola County Sheriff’s Office to work as a crossing guard. The Osceola County Sheriff’s Office is an FRS-participating employer, and the position held by Petitioner was in the 2 It is well established that issues related to subject matter jurisdiction can be raised at any time during the pendency of a proceeding. 84 Lumber Co. v. Cooper, 656 So. 2d 1297 (Fla. 2d DCA 1994). “Regular Class” of FRS membership. In 2011, newly hired eligible employees (members) of the Osceola County Sheriff’s Office were required to participate in either the FRS pension plan or the investment plan. Petitioner elected to participate in the investment plan. Generally, the pension plan offers eligible employees a formulaic fixed monthly retirement benefit, whereas an employee’s investment plan benefits are “provided through member-directed investments.” Pursuant to section 112.363, Florida Statutes, retired members of any state-administered retirement system will receive an HIS benefit if certain eligibility requirements are satisfied. Section 112.363(1) provides that a monthly subsidy payment will be provided “to retired members of any state- administered retirement system in order to assist such retired members in paying the costs of health insurance.” Section 112.363(3)(e)2. provides that beginning July 1, 2002, each eligible member of the investment plan shall receive “a monthly retiree health insurance subsidy payment equal to the number of years of creditable service, as provided in this subparagraph, completed at the time of retirement, multiplied by $5; … [and] an eligible retiree or beneficiary may not receive a subsidy payment of more than $150 or less than $30.” On July 18, 2019, Petitioner’s employment with the Osceola County Sheriff’s Office ended, and at that time she had 7.77 years of FRS creditable service.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that the Department of Management Services, Division of Retirement, enter a final order denying the application for retiree health insurance subsidy submitted by Mrs. Richards. DONE AND ENTERED this 3rd day of March, 2021, in Tallahassee, Leon County, Florida. S LINZIE F. BOGAN Administrative Law Judge 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 3rd day of March, 2021. COPIES FURNISHED: Gayla Grant, Esquire Department of Management Services 4050 Esplanade Way, Suite 160 Tallahassee, Florida 32399 David DiSalvo, Director Division of Retirement Department of Management Services Post Office Box 9000 Tallahassee, Florida 32315-9000 Judith Richards 2337 Louise Street Kissimmee, Florida 34741 William Chorba, General Counsel Office of the General Counsel Department of Management Services 4050 Esplanade Way, Suite 160 Tallahassee, Florida 32399-0950
The Issue The issues to be resolved in this proceeding concern whether the Petitioner, as a surviving spouse, is entitled to a continuing benefit from the Florida Retirement System (FRS) based on the retirement account of her deceased husband, George S. Bohler. More specifically, it must be determined whether the forgery of the spousal acknowledgement form renders the member's election of the "Option 1" retirement benefit payment, which precludes a survivor's benefit for his spouse, invalid and void.
Findings Of Fact George Bohler, the FRS member at issue, was employed, at times pertinent, as a Professor of Economics at Florida Community College in Jacksonville. The College is an FRS employer and Mr. Bohler was a member of the FRS retirement system. The Division of Retirement is an administrative agency charged with regulation and operation of the Florida retirement system, including calculation of and determination of entitlement to retirement benefits, under various options and member circumstances. On March 22, 1999, Mr. Bohler filed a completed Florida Retirement System Application for service retirement and the Deferred Retirement Option Program (DROP). This was accomplished through his filing of "Form DP-11." The Form provides a retiree with information pertaining to four options by which his retirement benefits may be paid. One full page of that form provides an explanation of each option. Mr. Bohler selected Option 1, a retirement benefit pay-out plan which provides the highest monthly benefit. The Option 1 selection provides that this highest monthly benefit is payable for the lifetime of the retiree only. Upon his death, the benefit would stop and his beneficiary, here his spouse, the Petitioner, would receive only a refund of any contributions the member might have paid into the FRS which exceeds the amount he had received in benefits. Option 1 provides no continuing or survivor benefit to a beneficiary or surviving spouse. The DP-11 Form filed with the retirement application contained an apparent spousal acknowledgement purportedly signed by Deborah T. Bohler, the spouse of member George Bohler. It appears to acknowledge that the member had elected either Option 1 or Option 2, which provide no survivor/spouse benefit. The DP-11 Form indicated to the Division that the member was married. The parties have stipulated, however, that the Petitioner's signature on the FRS application for service retirement and the DROP program was actually forged. George Bohler, the member, was an FRS member from August 19, 1968, to March 31, 2005. He received FRS retirement benefits based upon the above-referenced application from the Division from April 1, 2000, to October 31, 2007. The Form DP-11 contained a statement to the effect that the retiree member understood that he could not add additional service, change options, or change his type of retirement once his retirement became final. Mr. Bohler began participation in the DROP program on April 1, 2000. Thereafter, his last date of employment was March 31, 2005, and he passed away on October 18, 2007. He received FRS benefits from April 1, 2000, until October 31, 2007. For 28 years, until his death on that date, Mr. Bohler was legally married to the Petitioner, Deborah Bohler, during which time they were never separated or divorced. On March 10, 1999, Mr. Bohler executed the FRS Application for Service Retirement and the DROP program. He had his signature notarized as required for that form. Joint Exhibit 1, in evidence. Mr. Bohler designated the Petitioner as his primary beneficiary on the DROP Application. He elected to begin participation in the DROP program as of April 1, 2000, and to retire from state employment effective March 31, 2005, which he did. There are four options which an FRS member may select for his or her retirement benefits to be paid to the member or to the survivors/beneficiaries. Mr. Bohler selected "Option 1" on his DROP Application form. This results in a significantly higher retirement monthly benefit than does Options 3 or 4, which have survivorship rights. The acknowledgement section on the DROP Application form requires that a member's spouse be notified and must acknowledge a member's selection of Option 1 or Option 2 by signing that DROP Application form, so that the FRS is thus informed that the spouse made a knowing, intelligent waiver of survivorship rights to benefits. The spousal acknowledgement provision or section does not require that the member's spouse's signature be notarized. The form also does not require a member to swear under oath that the spouse was notified. The parties have stipulated that the Petitioner's apparent signature shown on Mr. Bohler's retirement application form was forged. The Petitioner had no knowledge that her name had been placed on the form by some other person, nor did she have any knowledge that Mr. Bohler had selected Option 1 prior to his death. The Petitioner first learned that her husband had selected Option 1 when she contacted the Respondent, after his death, to request that his retirement benefits now be paid to her. She believed that she was entitled to survivorship benefits. Her husband never informed her that he had selected a retirement option which would not pay her survivorship benefits, nor had they discussed the matter before or since his retirement. In their marital and family relationship, the Bohlers had divided certain duties in such a way that Mr. Bohler, the FRS member at issue, handled all financial matters himself. The Petitioner, Mrs. Bohler, dealt with any tax issues or filings the couple was required to make during the years of their marriage. The Petitioner is a certified public accountant. The Petitioner was simply aware that her husband received retirement benefits, and knew the amount of them, but did not know that they represented benefits for Option 1 rather than Option 3 or 4. The Petitioner's signature on the spousal acknowledgment section of the DROP Application form is stipulated to have been forged. The fact of the forgery, and the Petitioner's un-refuted testimony, establishes that she was never notified, nor did she ever acknowledge that her husband had selected Option 1. She was not aware that an attempt to waive or extinguish her survivor's benefits had been made. She believed, during his lifetime, that she was to be accorded survivor benefits. Testimony presented by the Respondent shows that the Respondent Division will not accept a retirement application form, or process it, if a member fails to complete the spousal acknowledgement section or, alternatively, to submit a signed statement explaining why that section is left blank, or the signature of the spouse has not been obtained. The fact that the Division will not accept a retirement or DROP Application form or process the related benefits if the acknowledgement section is unsigned or blank establishes the mandatory nature of the requirement that a spouse acknowledge a member's election to receive benefits under an option which would preclude a spouse's survivorship benefits. The acknowledgement is thus not an optional requirement. In fact, the legislature clearly placed that requirement in the statute, Section 121.091(6)(a), Florida Statutes, as a mandatory requirement so a spouse would know of any such attempt to waive the spouse's survivorship rights and benefits. It is an acknowledgement that the spouse has a vested or property right in such benefits, which must be knowingly and intelligently waived. The Statute says, in fact, that the spouse of any member "shall be notified of and shall acknowledge any such election." Therefore, obtaining a spouse's signature is not the only desired result set forth by the legislature (and under the rule adopted pursuant thereto) because it requires actual notification of the spouse, not merely the obtaining of a spouse's signature, whether genuine or forged. Actual notification is what must be accomplished. The required notification and indeed the obtaining of the Petitioner's signature was not accomplished in the facts of this case. In light of these facts, the act of declaring and accomplishing retired status, and selection of the related benefit option, was never completed. The Option selection was obviously a nullity and void ab initio because the mandatory condition precedent never was accomplished by the member.
Recommendation Having considered the foregoing findings of fact, conclusions of law, the evidence of record, the candor and demeanor of the witnesses and the pleadings and arguments of the parties, it is RECOMMENDED that a final order be entered by the State of Florida, Department of Management Services, Division of Retirement, awarding the Petitioner retirement benefits based upon her status as a surviving spouse and joint annuitant, in the manner described above, adjusted to reflect re-calculation and recoupment of overpayment based upon the amount of benefits already paid from the subject retirement account pursuant to Option 1. DONE AND ENTERED this 10th day of November, 2009, in Tallahassee, Leon County, Florida. S P. MICHAEL RUFF 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 10th day of November, 2009. COPIES FURNISHED: Elizabeth Regina Stevens, Esquire Department of Management Services Office of the General Counsel 4050 Esplanade Way, Suite 160 Tallahassee, Florida 32327 T. A. Delegal, Esquire Delegal Law Offices, P.A. 424 East Monroe Street Jacksonville, Florida 32202 Sarabeth Snuggs, Director Division of Retirement Department of Management Services Post Office Box 9000 Tallahassee, Florida 32315-9000 John Brenneis, General Counsel Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950
The Issue The ultimate issue is whether Julie E. Reeber, Alexander Reeber and Christine Tadry are entitled to receive survivor benefits payable under the Florida Retirement System (FRS) for Marjorie A. McCollum, deceased, under the facts and circumstances of the Case. The factual issue is whether Marjorie A. McCollum was incompetent when she made the designation of beneficiary and under the undue influence of her daughter Suzanne L. Benson.
Findings Of Fact In August of 1991, Ms. Marjorie A. McCollum, a member of the Florida Retirement System (FRS) applied for disability retirement benefits. (Deposition of Stanley Colvin). As part of her application for disability retirement benefits on Form FR-13 (Florida Retirement System Application for Disability Retirement), Ms. McCollum designated her daughter, Suzanne L. Benson, as her beneficiary. (Exhibit 1 of the deposition of Stanley Colvin). The designation reads, "All previous beneficiary designations are null and void. The beneficiary whom I designate to receive the benefit or refund at my death is Suzanne L. Benson." (Deposition of Stanley Colvin, Exhibit 1). According to the date on the form, Ms. McCollum signed the application on August 28, 1991, and was properly witnesses by a notary public, John T. West. (Testimony of Mary Shere). According to the application, Ms. McCollum was suffering from cancer. She selected the Option 2 retirement benefit. (Exhibit 1 of Stanley Colvin deposition). Ms. McCollum's application for disability retirement benefits, with the Option 2 retirement benefit, was approved by the Division of Retirement with an effective date of September 1, 1991. (Deposition of Stanley Colvin, Exhibit 9). Prior to receiving her first check, Ms. Marjorie McCollum died on September 23, 1991. (Deposition of Stanley Colvin, Exhibit 9). On November 4, 1991, the Division, by letter, notified Suzanne L. Benson that as designated beneficiary of Ms. Marjorie McCollum, she was entitled to the Option 2 benefit in the amount of $280.69 per month through August 31, 2001, for ten years. On November 19, 1991, the Division received a letter from Julia Reeber, another daughter of Ms. McCollum (the deceased), disputing the designation of her sister Suzanne L. Benson as the beneficiary. (Deposition of Stanley Colvin, Exhibit 16). As a result of the notice of dispute by Julia Reeber, the Division on November 26, 1991, notified Ms. Benson by letter that payment of the Option 2 benefit would not be forthcoming until the dispute was resolved. (Deposition of Stanley Colvin, Exhibit 12). The designation of beneficiary executed by Ms. McCollum was properly executed and filed with the Division of Retirement in accord with the Florida Statutes and rules pertaining to the designation of beneficiaries for Florida retirement benefits. (Deposition of Stanley Colvin). Suzanne L. Benson was the properly designated beneficiary, and the Division intended to pay the Option 2 benefit to Suzanne L. Benson in accord with the Division's rules. (Deposition of Stanley Colvin). Ms. McCollum suffered some deterioration of her mental faculties prior to her death because of her illness, she could no longer handle her financial matters, and needed aid from her children in the payment of her bills. However, at no time was the Petitioner legally declared incompetent. Testimony of Julie Reeber). Despite suffering from the ravages of the disease, Ms. McCollum was at times able to function in a normal matter without evidence of diminished mental capacity. (Testimony of Mary Shere). On August 23, 1991, the deceased came to the office of Ms. Mary Shere. Ms. McCollum had been a regular customer of Ms. Shere's beauty parlor and later her accounting service. Ms. Shere had known Ms. McCollum for over ten years. (Testimony of Mary Shere). On August 23, 1991, Ms. McCollum and Ms. Shere talked for an hour to an hour and a half regarding her illness and her application for disability retirement. Ms. McCollum expressed her desire for Ms. Shere to notarize the application for disability retirement benefits. Ms. McCollum told Ms. Shere that Ms. McCollum wanted her daughter Suzanne to be the beneficiary of her death benefits. However, they could not complete the designation of beneficiary because the form had not come. Another discussion concerning the arrival of the forms took place by telephone on August 24, 1991, between Ms. Shere and the Deceased. On August 26, 1991, Suzanne Benson telephoned Ms. Shere advising Ms. Shere that her mother had been hospitalized, and that she needed to come to the hospital in order to notarize the disability application. (Testimony of Mary Shere). On August 26, 1991, Ms. Shere accompanied by one of her employees, John West, visited Ms. McCollum in the hospital. In her presence, the application was signed by Ms. McCollum and notarized by John West. (Testimony of Mary Shere). Ms. Shere's very credible testimony was that Ms. McCollum knew what she was doing, was aware of what she possessed and knew she was terminal. Ms. McCollum made a knowing and rational decision to designate Suzanne L. Benson as her beneficiary.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law set forth herein, it is, RECOMMENDED: That a Final Order be entered by the Division holding that Marjorie McCollum retired with an Option 2 retirement benefit and that Suzanne L. Benson, her designated beneficiary, receive the Option 2 benefit. DONE and ENTERED this 29 day of May, 1992, in Tallahassee, Florida. STEPHEN F. DEAN, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 29 day of May, 1992. COPIES FURNISHED: Julie E. Reeber 133 Kirkwood Drive Debary, FL 32713 Larry D. Scott, Esquire Department of Administration Cedars Executive Center, Building C 2639 North Monroe Street Tallahassee, FL 32399-1560 Rhonda B. Goodson, Esquire Post Office Box 4319 South Daytona, FL 32121 A. J. McMullian, III, Director Division of Retirement Cedars Executive Center, Building C 2539 North Monroe Street Tallahassee, FL 32399-1550 John A. Pieno, Secretary Department of Administration 415 Carlton Building Tallahassee, FL 32399-1550
The Issue The issues are whether Respondent's licenses as an insurance agent should be disciplined, and if so, what penalty should be imposed.
Findings Of Fact At all times relevant to these proceedings, Respondent was eligible for licensure and licensed in Florida as a life insurance agent and a life and health insurance agent. Respondent has been licensed to sell insurance for 23 years. He has no history of a prior disciplinary action being filed against his licensure. Over the years, Respondent has won several awards in his profession. Counts I and II In March 1985, Respondent sold Joel and Kay Majors a whole life insurance policy, Sun Life Assurance Company of Canada (Sun Life) policy No. 9007333. This policy, with a specified face amount of $200,000, insured the life of Joel Majors. The monthly premium on this policy was $258.83. In June 1989, Respondent sold the Majors a last- survivor whole life insurance policy, Sun Life policy No. 5978802. The purpose of the second policy, with a face amount of $500,000, was to pay estate taxes after the death of the last survivor of Mr. and Mrs. Majors. The annual premium on this policy was $4,585.00. Respondent represented to the Majors that the policy premiums on the second Sun Life policy, policy No. 5978802, would be paid using accumulated cash and dividends from the first Sun Life policy, policy No. 9007333. Respondent explained to the Majors that they would never have to pay out-of-pocket premiums on the second policy. Based on Respondent's representations, the Major's believed that Sun Life policy No. 9007333 would generate sufficient cash and dividend values to pay the premiums on Sun Life policy No. 5978802. Respondent did not explain to the Majors what it would mean for them to use the cash value of one policy to pay the premiums on another policy. The cash value of a whole life insurance policy is essentially the amount the policy owner may borrow against that policy. Because the cash value is determined by the amount the policy owner has paid on the policy, use of the cash value is an interest-bearing loan to the policy owner. The loan does not have to be repaid at any particular time, but in the event of a claim or surrender of the policy, proceeds from the policy are reduced by the amount of the loan plus outstanding interest. In November 1991, Respondent sold the Majors a third whole life insurance policy, Sun Life policy No. 9247770. This policy insured the life of Joel Majors in the face amount of $200,000. The Majors never received a copy of this policy. The monthly premium on this policy was $404.83. Each year, when the annual premium for Sun Life policy No. 5978802 was due, Respondent presented Joel Majors with blank forms entitled Policy Service Request. Joel Majors signed the forms without realizing that they authorized interest-bearing loans to be taken out of the cash value of policy No. 9007333 and on one occasion out of policy No. 9247770. These loans were made without the knowledge or informed consent of the Majors. Respondent never mentioned the word "loan" to the Majors. The Majors would never have purchased the Sun Life policy No. 5978802 with the understanding that the premium would be paid with interest-bearing loans from their other policies. All annual premiums on Sun Life policy No. 5978802, except one annual premium, were paid from loans made against Sun Life policy No. 9007333. Page 6 of Sun Life policy No. 9007333 states as follows in relevant part: Interest on all policy loans will accrue from day to day at the rate of 8 percent per annum, and shall be due and payable on each policy anniversary. Any unpaid interest will be added to the principal amount of the policy loan and will bear interest at the same rate and in the same manner as the policy loan. We will accept repayment of any policy loan at any time before the maturity of this policy. When the policy proceeds become due, we will deduct the balance of any outstanding policy loans and accrued interest on such loans, from that amount. If your policy loan balance ever equals or exceeds the net cash value, this policy will terminate 31 days after we mail notice to your last known address . . . . One loan was made against Sun Life policy No. 9247770. According to page 6 of the Sun Life policy No. 9247770, the company sets the policy loan interest rate annually according to the provisions contained therein. The Majors were not aware that any funds from this policy would be used to pay premiums on any other policy. Sometime in 1997, the Majors learned about the loans on policy Nos. 9007333 and 9247770. They realized for the first time that loans were used to pay the premiums on Sun Life policy No. 5978802. The Majors never intended to authorize interest- bearing loans that would deplete the death benefit of one policy to pay policy premiums on another policy. Respondent testified at the hearing that loans from Sun Life policy Nos. 9007333 and 9247770 were used to pay the premiums on Sun Life policy No. 5978802. However, his testimony that the loans were made with the knowledge or informed consent of the Majors is not persuasive. The Majors were not knowledgeable about insurance policies. They placed their trust in Respondent to handle their insurance transactions. Often the Majors did not open mail from the insurance company containing statements about their policies. Count III In July 1990, Respondent sold the Majors a flexible premium deferred annuity, Financial Benefit Life Insurance Company (Financial Benefit) policy No. 818249, with a maturity date of July 13, 2010. The initial deposit for the annuity was $25,000. Later in the year, the Majors deposited an additional $10,000 in the annuity. Respondent promised the Majors that if the interest rate on the annuity dropped, he would "roll-over" the annuity to obtain a higher rate. Respondent also promised that he would pay any penalties associated with the transaction. Respondent did not explain the definition of a "roll-over" to the Majors. In February 1994, Respondent withdrew a portion of the funds (the $10,000 contribution plus accumulated interest) from the Majors' Financial Benefit annuity, policy No. 818249. He used the funds to purchase the Majors a second annuity, Financial Benefit policy No. 707450, with an initial contribution in the amount of $12,503.43. Although the second annuity had a higher interest rate, Respondent made this purchase without the Majors' knowledge or informed consent. Respondent received a commission on this unauthorized transaction. Financial Benefit issued the second annuity but a copy of the policy was never delivered to the Majors. Respondent never disclosed its purchase to the Majors. In 1996, the Majors complained to Respondent that the interest rate had dropped on what they believed was their one Financial Benefit annuity. At that time, the original annuity was worth the initial $25,000.00 contribution plus interest or approximately $33,000.00. Respondent requested the surrender of the remaining funds in the original annuity, Financial Benefit policy No. 818249, to purchase the Majors a third annuity, Financial Benefit policy No. 712937. Financial Benefit assessed a surrender charge in the amount of $2,250.00. Subsequently, on October 10, 1996, Financial Benefit issued policy No. 712937 to the Majors with an initial contribution of $33,477.60 and an October 10, 2016, maturity date. Respondent purchased the third annuity without the knowledge or informed consent of the Majors. The Majors did not receive a copy of the third annuity. Respondent received a commission on this unauthorized transaction. The Majors were not aware that Respondent had purchased the second and third annuities. They continued to believe that they had only one annuity, the one purchased in 1990, which had been "rolled over" to obtain a higher interest rate. However, they eventually became aware of the $2,250.00 surrender charge assessed by Financial Benefit. They complained to Respondent and reminded him of his promise to pay all penalties. Respondent then purchased two money orders from Capital City Bank in the total amount of $2,250.00. Respondent mailed the money order to Financial Benefit with instructions for the company to deposit the funds into the annuity. Knowing that the insurance company would not permit Respondent to make personal contributions to the Majors' annuity, Respondent signed the name of Joel Majors on the money orders. Joel Majors had no knowledge of the money orders and did not authorize Respondent to sign his name. If the Majors had known that Respondent was going to "roll-over" their original annuity by using its funds to purchase two new policies with different maturity dates, they would never have agreed to the transactions regardless of higher interest rates. Instead, they would have let their original policy mature and take their money out for placement in another investment vehicle. Counts IV and V In 1985, Respondent sold Joel and Kay Majors a $50,000.00 life insurance policy, Sun Life policy No. 9009995D. The policy insured the life of the Majors' son, Timothy Majors. About ten years later, Esther Majors, wife of Timothy Majors, was employed as a travel agent. As a full-time employee, Esther Majors was entitled to $110.00 per month from her employer's benefit plan. The money was available to Esther Majors for savings because she did not need to participate in her employer's health insurance plan. Esther Majors could use the money to purchase an Individual Retirement Account (IRA) or other comparable investment. Timothy and Esther Majors sought Respondent's assistance in setting up an appropriate investment for Esther Majors' funds. Respondent first met with Esther Majors' employer to discuss the retirement account. The employer and Respondent discussed using the money to fund a self-directed IRA or annuity that could be rolled over later if Esther Majors changed jobs. Respondent also met with Timothy and Esther Majors. They discussed setting up what Timothy and Esther Majors believed would be an IRA with a monthly contribution of $110.00 for as long as she worked full-time for the same employer. Respondent did not set up the IRA for Esther Majors. Instead, in January 1995, Respondent submitted an application to Time Insurance Company (Fortis) for an adaptable life insurance policy insuring the life of Esther Majors and naming Timothy Majors as the beneficiary. Respondent submitted the application without the knowledge or informed consent of Timothy and Esther Majors. Esther Majors either did not read the application when she signed it or did not understand that she was signing an application for life insurance as opposed to an IRA annuity. Respondent requested that Fortis issue the policy with a face amount of $69,533.00 and with a monthly premium in the amount of $110.000. Fortis issued the policy as policy No. 985698. Timothy and Esther Majors never intended to purchase a life insurance policy. Respondent did not discuss life insurance with Timothy and Esther Majors at any time. Esther Majors could have purchased life insurance through her employer. Thus, Respondent misrepresented the nature of the insurance product that he sold to Timothy and Esther Majors. On or about July 15, 1995, Timothy Majors informed Respondent that Esther Majors would temporarily cease making the $110.00 contribution to what he believed was Esther Majors' IRA because she was going to college and would no longer be working full-time as a travel agent. Timothy Majors assured Respondent that, upon graduation, Esther Majors intended to resume payments and roll her IRA over to a new employer. Respondent replied that Timothy and Esther Majors needed to continue saving for their future. He also told Timothy Majors that the company where Esther's money was invested required a minimum deposit per year in order not to lose the money already deposited. Respondent asked Timothy Majors for a check in the amount of $60.00. Timothy Majors gave Respondent the check. On or about October 25, 1995, Respondent requested a loan for $270.00 to be made from Timothy Majors' Sun Life insurance policy No. 9009995D. Respondent requested this loan without Timothy Majors' knowledge or informed consent. Sun Life mailed a check payable to Timothy Majors in the amount of $270.00 to Respondent's office. Respondent then obtained Timothy Majors' signature endorsement on the check without explaining that the funds would be used to pay the quarterly premium on Esther Majors' Fortis insurance policy. Timothy Majors signed the check unaware that it represented a loan on his Sun Life insurance policy. Respondent used the Sun Life check in the amount of $270.00 and, together with Timothy Majors' check for $60.00, paid another quarterly premium on Esther Majors' Fortis insurance policy in the amount of $330.00. Neither Timothy nor Esther Majors authorized Respondent to make this payment. No further premium payments were made for Esther Major's Fortis insurance policy. Respondent never told Timothy and Esther Majors that the policy would lapse if they stopped paying the premiums. The policy was too new to have any cash value. As a result, the life insurance policy eventually lapsed. Esther and Timothy Majors lost all of the funds used to pay premiums on a life insurance policy that they never knew they owned. Count VI In 1995, Kay Majors arranged for Respondent to sell an annuity to her mother, Bernice Langford. During the initial meeting between Ms. Langford and Respondent, he was informed that Ms. Langford was born on February 5, 1918, and that her age was 77. Respondent filled out an application for a Financial Benefit flexible premium deferred annuity for Ms. Langford. Because Ms. Langford's age made her ineligible to purchase the annuity, Respondent misrepresented her date of birth as February 5, 1928, and her age as 67 on the application. Financial Benefit issued a $60,000.00 annuity, policy No. 711110, to Ms. Langford. Respondent received a commission for selling the annuity to Ms. Langford. Thereafter, Kay Majors became aware of inaccuracies in her mother's age and informed Respondent about them. Respondent indicated that he would take care of the problem. Respondent later sent a letter to Ms. Langford representing that he had notified the company about her correct age and had the records corrected. Although Financial Benefit sells annuities to people up to 100 years old, it would not have issued the annuity in question to Ms. Langford had it known her correct age. The company is aware of the age discrepancy and has not rescinded the annuity. Count VII In 1993, Respondent sold a Sun Life modified benefit whole life insurance policy, policy No. 9292231, to Cheryle Hayes Wood Burch (n/k/a Cheryle Hicks.) This policy had an initial face amount of $91,443.00 and a monthly premium of $100.00. In 1995, Respondent advised Ms. Hicks that he had found her a better policy through Fortis, with identical coverage and premium. Respondent presented the replacement policy to Ms. Hicks as if he had already switched the policies and only needed her signature on some paperwork. Respondent indicated that Ms. Hicks' Sun Life policy had no cash value. Ms. Hicks had not requested that Respondent replace her Sun Life policy. However, she trusted him to act in her best interests. Respondent told Ms. Hicks he would take care of everything. At Respondent's request, Ms. Hicks signed an insurance application dated May 16, 1995. Ms. Hicks either did not read the application before signing it, did not understand what she read, or signed a blank application form presented to her by Respondent. Subsequently, Fortis issued an adaptable life insurance policy, policy No. 994725, to Ms. Hicks. The new policy had a face amount of only $50,000, even though the premium was identical to the Sun Life policy. Ms. Hicks was not aware that her new policy had a reduced face amount. Respondent received a commission on this transaction. Ms. Hicks believed her new Fortis policy had a $100,000 death benefit. She never intended to purchase a replacement policy with only a $50,000.00 death benefit. Respondent misrepresented the terms of the replacement policy for the purpose of receiving a commission. Counts VIII and IX Respondent sold a Sun Life permanent life insurance policy, policy No. 9216228, with a face value of $33,805.00 to Faye Thompson Hoover. Sun Life issued the policy in November 1990. Respondent also sold a Financial Benefit annuity, policy No. 819862, to Ms. Hoover. Financial Benefit issued the policy in November 1990. In December 1993, Respondent urged Ms. Hoover to cancel her Financial Benefit annuity, policy No. 819862, and purchase a new Financial Benefit annuity. Ms. Hoover did not understand why she should purchase the new annuity, but she trusted Respondent and followed his advice. The new annuity was purchased and issued as Financial Benefit policy No. 707176 in January 1994. In 1996, Respondent urged Ms. Hoover to let him cancel her Sun Life policy No. 9216228 and deposit the funds into her Financial Benefit annuity, policy No. 707176. She agreed. Respondent did not cancel Ms. Hoover's Sun Life policy. Instead, he requested Sun Life to issue a loan for the maximum amount allowable for a loan against the Sun Life policy No. 9216228. Sun Life subsequently issued Ms. Hoover a check in the amount of $4,800.00, which represented a loan against the cash value of the policy. Respondent requested the loan without Ms. Hoover's knowledge or informed consent. Sun Life mailed the $4,800.00 check to Ms. Hoover. Upon receipt of the check, Respondent told Ms. Hoover that the proceeds represented the cash value of her Sun Life policy. Based on Respondent's representations, Ms. Hoover incorrectly believed that her Sun Life policy had been cancelled and that the company had sent her the policy's cash value. Respondent's representations regarding Ms. Hoover's Sun Life policy were false. At no time did Respondent disclose that the check she received was a loan against the cash value of her policy and that the policy was still in effect. Next, Respondent requested Sun Life to stop the monthly draft on Ms. Hoover's bank account that paid the premium on her Sun Life policy. He did this by falsely advising Sun Life that Ms. Hoover had changed her bank account. Because the premium payments had ceased and a new bank authorization was never received by Sun Life, the policy lapsed, but only after exhaustion of the policy's remaining cash value. Ms. Hoover became aware that funds in her Sun Life policy had been exhausted when she received a letter dated August 26, 1996, from the company. When Ms. Hoover confronted Respondent about leaving money in her Sun Life account, he told her he would get her funds back. However, he never did secure a refund of the exhausted funds. In the meantime, Ms. Hoover deposited the $4,800.00 Sun Life check into her bank account. She then wrote a check to Respondent for $4,000.00, with instructions for him to deposit the money into her Financial Benefit annuity, policy No. 707176. Respondent accepted the check but did not follow Ms. Hoover's instructions. Rather, he submitted an application to Financial Benefit for an IRA annuity without Ms. Hoover's knowledge or informed consent. He also sent Financial Benefit Ms. Hoover's $4,000.00 check. Financial Benefit issued the IRA annuity, policy No. 712086, with Ms. Hoover as the annuitant. Ms. Hoover never received a copy of the annuity. Respondent received a commission on this transaction. Count X In 1992, Elizabeth R. Maxwell discussed her retirement needs with Respondent. She wanted to invest her funds so that a portion of it would be available to her in five years. She wanted the balance of her funds to be available in seven years. Ms. Maxwell told Respondent she wanted to be able to retire around age 59. Respondent suggested that Ms. Maxwell invest her money in annuities. He was aware that Ms. Maxwell knew very little, if anything, about annuities and that she was relying on his expertise and experience to assist her in making investment decisions. In April 1992, Respondent sold Ms. Maxwell a Financial Benefit IRA annuity, policy No. 823703, with a maturity date of 2012. Ms. Maxwell subsequently deposited $10,947.95 into this annuity as the original contribution. Respondent received a commission for the transaction. Respondent also sold Ms. Maxwell a Financial Benefit regular annuity, policy No. 823568, with a maturity date of 2012. Ms. Maxwell deposited $90,000.00 into this annuity as the original contribution. Respondent received a commission on the transaction. The maturity date of an annuity is the date on which annuity payments begin. In December 1992, Ms. Maxwell gave Respondent $30,000.00 for deposit into what she thought was one of her two existing annuities. Respondent used the money to purchase a USG Annuity and Life Company (USG) annuity, policy No. 128153, without Ms. Maxwell's knowledge or informed consent. This annuity matures in 2042. In January 1993, Ms. Maxwell gave Respondent $50,000.00 for deposit into what she thought was one of her two existing annuities. Respondent used the money to purchase a USG annuity, policy No. 132140, without Ms. Maxwell's knowledge or informed consent. This annuity matures in 2043. In April 1996, Ms. Maxwell gave Respondent $74,672.57 for deposit into what she thought was one of her two existing annuities. Respondent used the money to purchase an additional Financial Benefit annuity, policy No. 712410, without Ms. Maxwell's knowledge or informed consent. This annuity matures in 2016. Respondent received a commission on this transaction. In April 1996, Respondent, without Ms. Maxwell's knowledge or informed consent, cancelled her Financial Benefit annuity, policy No. 823703. He then transferred $18,927.30, representing the surrender value, into a new Financial Benefit annuity, policy No. 712497. The new annuity's maturity date was 2016. Respondent received a commission on this transaction. In May 1996, Respondent, without Ms. Maxwell's knowledge or informed consent, cancelled her Financial Benefit annuity, policy No. 823568. He then transferred $166,182.69, representing the surrender value, into a new Financial Benefit annuity, policy No. 712548. The new annuity matures in 2016. Respondent received a commission on this unauthorized transaction. In November 1996, Ms. Maxwell gave Respondent $25,000.00 for deposit into what she thought was one of her two existing annuities. Respondent used the funds to purchase an additional Financial Benefit annuity, policy No. 713242, without Ms. Maxwell's knowledge or informed consent. The new annuity matures in 2016. Respondent received another commission. Sometime in 1996, Ms. Maxwell became confused and concerned about her annuity investments. Ms. Maxwell asked her accountant for assistance in determining the status of her investments. She took her accountant boxes of documents containing insurance company statements and other insurance correspondence. Some of the documents were in unopened envelopes. The accountant's investigation, which took place over a six-month time period, revealed at least seven annuities. The accountant also determined that the insurance companies had assessed surrender fees on some of the transactions. Ms. Maxwell was shocked at the result of her accountant's investigation. She was unaware of any annuities other than what she understood to be her two Financial Benefit annuities. The accountant requested that Respondent provide copies of Ms. Maxwell's annuities. Respondent did not provide the copies. At the request of the accountant, Respondent signed a statement that he would personally pay any penalties if surrender charges were assessed. Respondent reimbursed Ms. Maxwell for some of the surrender charges. However, Respondent never provided Ms. Maxwell's accountant with documentation accounting for reimbursement of about $6,000.00 in surrender charges. After Ms. Maxwell's accountant became involved, Respondent asked the accountant to approve the "roll-over" of an annuity. The accountant requested information about the old policy and the new policy before making a decision. Respondent refused to provide the information. Respondent told the accountant that he knew more about insurance than the accountant. Respondent stated that the accountant needed to attend to his business and that Respondent would take care of the insurance side of it. The accountant and Respondent have had no subsequent conversations. As of the date of the final hearing, Respondent had not provided Ms. Maxwell or her accountant with sufficient documentation to account for all of her investments. Until November of 1996, Financial Benefit paid its agents commissions on the sale of annuities at the time of the original deposit and on each subsequent contribution. In November 1996, Financial Benefit notified its agents that no commission would be paid for additional contribution into annuities after the third policy year. After Ms. Maxwell learned that Respondent had invested her funds in more than two annuities and despite Respondent's failure to cooperate with the accountant, Ms. Maxwell continued to trust Respondent to invest her money in annuities. She did so with the understanding that each new transaction would increase the interest she would earn. Ms. Maxwell did not understand the effect the new transactions would have regarding penalties and maturity dates. In February 1997, Respondent, without the knowledge or informed consent of Ms. Maxwell, cancelled Ms. Maxwell's USG annuity, policy No. 132140. He then transferred $58,309.01, representing the surrender value, into a new Financial Benefit annuity, policy No. 713549. The new annuity, on which Respondent received a commission, has a maturity date in 2017. In July 1997, Ms. Maxwell gave Respondent $2,005.11 for deposit into an annuity. Respondent used the funds to purchase an additional Financial Benefit annuity, policy No. 714186, without Ms. Maxwell's informed consent. The new annuity matures in 2017. Respondent received another commission. In October 1997, Ms. Maxwell gave Respondent $15,189.66 for deposit into an annuity. Without Ms. Maxwell's informed consent, Respondent used the funds to purchase a USG annuity, policy No. 529581. This annuity matures in 2014. Respondent received a commission. In January 1998, Ms. Maxwell gave Respondent $2,000.00 for deposit into an annuity. Without Ms. Maxwell's informed consent, Respondent used the funds to purchase a Financial Benefit annuity, policy No. 714865. This annuity matures in 2013. Respondent received a commission. In January 1998, Respondent, without Ms. Maxwell's informed consent, cancelled her USG annuity, policy No. 128153. He then transferred $38,498.43, representing the surrender value, into a new Financial Benefit annuity, policy No. 714866. The new annuity, on which Respondent received a commission, has a maturity date in 2013. Ms. Maxwell received a copy of only one of the many policies that Respondent purchased on her behalf. In 1996 or 1997, Respondent took that policy from Ms. Maxwell, telling her the company was going to adjust it and give it back to her. He never gave the policy back to Ms Maxwell. Respondent obtained Ms. Maxwell's signature each time he purchased an annuity on her behalf. On some occasions Ms. Maxwell thought she was signing a form to deposit additional funds into her original two annuities with Financial Benefit. Sometimes Ms. Maxwell did not know what she was signing because she did not see the whole page or did not read the document first. Respondent would tell her he was in a hurry and she should just sign next to the "X." Respondent told her he would date it later. On other occasions, Respondent told Ms. Maxwell that he was "rolling over" an existing fund into a new fund. He told her the "roll-over" would give her a higher interest rate but that nothing else would change. He said that everything would mature at the same time, otherwise Ms. Maxwell would not have agreed to the "roll-over." Respondent told Ms. Maxwell that there would be no penalties and that he did not get paid commissions. At times Ms. Maxwell signed documents referencing the surrender of annuities and associated penalties. On those occasions, Ms. Maxwell thought she was surrendering the annuities so that they could be rolled over. She trusted Respondent's representation that the penalties were not true penalties. None of the annuities that Respondent sold to Ms. Maxwell or purchased in her name had maturity dates in five to seven years from the date of the original transactions. Respondent never disclosed that the annuities would mature between fifteen and forty years from the purchase date. Consequently, the annuities would not have reached maturity, making her funds available for retirement free of any surrender charge in time for her to retire at age 59. Count XI In 1991, Respondent met with Dr. Charles Moore to discuss the purchase of life insurance as a part of Dr. Moore's estate planning needs. Dr. Moore told Respondent that he wanted to be able to retire in about ten years with about $1,000,000.00 in life insurance. As a result of this discussion, Respondent sold Dr. Moore a Sun Life permanent life insurance policy, policy No. 9245964, with a face amount of $250,000.00 and a monthly premium of $788.28. Respondent also sold Dr. Moore a Sun Life permanent life insurance policy, policy No. 9241898, with a face amount of $250,000.00, and a monthly premium of $876.61. This policy had a renewable term rider with an additional benefit amount of $250,000.00, with a premium in the amount of $88.33 for the first year. The premium on the term rider would increase over time. Respondent told Dr. Moore that in approximately ten years, the policies would have sufficient cash value to pay the premiums from their dividends. Respondent stated that the policies would then be "paid-up" that Dr. Moore would no longer have to pay premiums. Respondent told Dr. Moore that at some point in time, the term rider on Sun Life policy No. 9241898 would have to be cancelled because the premium would become too expensive. Dr. Moore would not have purchased these policies but for Respondent's representations. In December 1994, Respondent sold Dr. Moore a Fortis life insurance policy, policy No. 985470, with a face amount of $500,000 and an annual premium in the amount of $13,000.00. Dr. Moore needed additional insurance to cover potential estate taxes on family-owned real estate in another state. Respondent represented that the policy premiums on the Fortis policy would be paid entirely from dividends from Dr. Moore's Sun Life policies without depleting the cash value of those policies. Dr. Moore would not have purchased this policy but for Respondent's representations. Contrary to Respondent's representations, the dividends on Dr. Moore's Sun Life policies, in and of themselves, were not sufficient to pay the premiums on his Fortis life insurance policy. Instead, without Dr. Moore's knowledge or consent, Respondent submitted loan requests for a series of loans on the cash value of Dr. Moore's Sun Life policies, policy Nos. 924564 and 9241898, from 1995 through 1998. The loans against the Sun Life policies, including principle and interest, total in excess of $52,000.00. When Dr. Moore received checks for the loan proceeds from Sun Life, he would endorse them and give them to Respondent. Dr. Moore thought he was endorsing dividend checks. Respondent used the proceeds from the loans to pay the annual premiums on Dr. Moore's Fortis policy. The loans do not have to be repaid at any certain date. However, the amount of the loans, principal and interest, will be subtracted from the death benefits of the policies in the event of a claim or from the value of the policies in the event of surrender. At the time of the hearing, Dr. Moore either had surrendered his Sun Life policies or was in the process of doing so. He was paying for his Fortis policy on a monthly basis. Count XII At all times pertinent herein, an agent's agreement was in effect between Canada Life Assurance Company (Canada Life) and Respondent. In 1994, Respondent sold Mack Wallace Womble a Canada Life whole life insurance policy. Respondent received commissions on the initial and subsequent premiums paid on this policy. Mr. Womble never received a copy of his policy from the insurance company. Eventually, Respondent complained to Petitioner on Mr. Womble's behalf. Petitioner then directed Canada Life to refund all of Mr. Womble's premiums plus interest. The company complied with this directive and rescinded the policy. There is no evidence that Respondent was responsible for Canada Life having to refund Mr. Womble's premiums. There is evidence that the lengthy dispute over the delivery of the policy involved the company, the company's regional representative, and Mr. Womble. The record contains no business record documenting Canada Life's demand that Respondent refund all commissions paid to him for Mr. Womble's policy. Canada Life's representative/record custodian testified that the company had made such a demand at some unknown point in time. Her testimony, in and of itself, is not competent evidence that the company made a formal demand and that Respondent received that demand. However, Respondent admitted in a deposition that he has not refunded the premiums because cancellation of the policy was the company's fault, causing him to lose a valuable client. Respondent's Producer's Contract with Canada Life states as follows in relevant part: PART I GENERAL CONDITIONS * * * 3. REPAYMENT OF INDEBTEDNESS - The company, at its discretion, may: (a) deduct any commissions or other obligations of any nature payable to the individual Producer or estate, or any of their assigns under this or any other Contract with the Company or; (b) require the Producer or estate to pay to the Company on demand any outstanding balances arising from chargebacks, deductions, adjustments and reversals under the terms of this or any other Contract with the Company regarding such income as, but not limited to, commissions. In the event that this Contract is terminated for whatever reason, all outstanding balances shall be immediately due and payable. * * * PART II CONDITIONS GOVERNING PAYMENT OF REMUNERATION * * * 1. In the event that the Company deems it necessary to refund a premium for a policy, the Producer, if called upon by the Company, shall repay on demand any remuneration received by him in connection with such policy. Canada Life's representative/records custodian testified that the subject Producer's Contract was terminated in 1996. There is no business record in evidence to support that testimony. According to Respondent's official licensure records, the contract between Canada Life and Respondent was "not renewed" in 1997.
Recommendation Based on the forgoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That Petitioner enter a final order revoking Respondent's insurance licenses. DONE AND ENTERED this 25th day of August, 2000, in Tallahassee, Leon County, Florida. SUZANNE F. HOOD 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 August, 2000. COPIES FURNISHED: James A. Bossart, Esquire Department of Insurance Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399-0333 William M. Furlow, Esquire Katz, Kutter, Haigler, Alderman, Marks Bryant & Yon, P.A. 106 East College Avenue, Suite 1200 Tallahassee, Florida 32302-1877 Daniel Y. Sumner, General Counsel Department of Insurance The Capitol, Lower Level 26 Tallahassee, Florida 32399-0307 Honorable Bill Nelson State Treasurer and Insurance Commissioner Department of Insurance The Capitol, Plaza Level 02 Tallahassee, Florida 32399-0300
