Findings Of Fact At all times pertinent to this proceeding Respondent, HOWARD P. HAUSER, was eligible for licensure and licensed in this state by the Florida Department of Insurance as a Life and Health Insurance Agent; General Lines Insurance Agent - Property, Casualty, Surety, and Miscellaneous Lines; and Legal Expense Insurance Agent. At all times pertinent hereto, Respondent was the registered agent and an officer or director of Hauser and Associates Insurance Agency, Incorporated of 7770 Davie Road Extension, Hollywood, Florida. Beginning on or about January 1, 1986, and continuing through August 31, 1987, Respondent represented to one of his clients that he had obtained insurance coverage for that client's three restaurants. This representation of coverage was false. Respondent received from the client insurance premium payments of $56,550.00, more or less, for the insurance of the client's three restaurants. These funds were obtained by Respondent under false pretenses. Respondent provided the mortgagee of one of the restaurants owned by his client with a document purporting to be a certificate of insurance on that restaurant from Scotsdale Insurance Company insuring the restaurant for the period December 11, 1985, to December 11, 1986. Respondent further provided the mortgagee with a declaration sheet stating that Protective Insurance Company would insure the restaurant from January 1, 1987, to January 1, 1990. Respondent falsified these declaration sheets. Respondent's client suffered no loss, other than the loss of his premium dollars, because of Respondent's misrepresentations as to coverage. Respondent was charged with one count of Grand Theft of the Second Degree, a second degree felony, based on the dealings with his client. Respondent entered a plea of nolo contendere to the charge of Grand Theft of the Second Degree. The Circuit Court, in and for Broward County, Florida, placed Respondent on probation for a period of three years and withheld adjudication of guilt. As a condition of the Order of Probation, the court required that Respondent make restitution to his client in the amount of $56,550.00 and further required that $15,000.00 be paid toward restitution on October 24, 1988, the date Respondent entered his plea of nolo contendere and the date the court entered the Order of Probation. Respondent made a restitution payment of $15,000.00 on October 24, 1988. Respondent has been licensed by Petitioner since April 1972. Although Petitioner has received other complaints about Respondent, no formal action has been previously taken against him. Respondent has been a good citizen, except for this misconduct, and a good family man. Respondent regrets his misconduct. Respondent timely requested a formal hearing after the Administrative Complaint was served upon him.
Recommendation Based on the foregoing findings of fact and conclusions of law it is RECOMMENDED that the Department of Insurance enter a final order which revokes all licenses issued by the Department of Insurance to Respondent, Howard Paul Hauser. DONE and ENTERED this 21st of July, 1989, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 904/488-9675 Filed with the Clerk of the Division of Administrative Hearings this 21st day of July, 1989. APPENDIX The proposed findings addressed as follows: of fact submitted on behalf of Petitioner are 1. Addressed in paragraph 1. 2. Addressed in paragraph 2. 3. Addressed in paragraph 6. 4. Addressed in paragraph 3. 5. Addressed in paragraph 4. 6. Addressed in paragraphs 3-4. The proposed findings of fact submitted on behalf of Respondent are addressed as follows: Addressed in paragraph 9. Addressed in paragraph 6. Addressed in paragraph 6. Rejected as being unnecessary to the conclusions reached. Addressed in paragraph 7. Addressed in paragraph 5. Addressed in part in paragraph 7. Rejected in part as being speculative. Rejected as being a conclusion of law and not a finding of fact. COPIES FURNISHED: Robert G. Gough, Esquire, (at the hearing) and Charles Christopher Anderson, Esquire, (on the proposed recommended order) Office of Legal Services 412 Larson Building Tallahassee, Florida 32399-0300 Gary D. Weiner, Esquire, Glendale Federal Building Suite 209 901 Southeast 17th Street Fort Lauderdale, Florida 33316 Honorable Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, FL 32399-0300 Don Dowdell, General Counsel Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, FL 32399-0300
The Issue Whether the licensure and eligibility for licensure as an insurance agent in Florida held by Respondent Michael David Garrett should be disciplined based on the allegations of the Administrative Complaint filed against him and, if so, the extent of such discipline.
Findings Of Fact Petitioner is the state agency that is responsible for the regulation of insurance agent conduct and licensure. Respondent is currently eligible for licensure as an insurance agent and is licensed in this state as a life, variable annuity and health agent, life and health agent, and health agent. The Association for Independent Managers (AIM) is an entity that was founded in 1979 for the purpose of providing educational and other services or benefits to a membership base that is comprised primarily of small businesses. In February 2002, Jack Winebrenner, AIM’s chief executive officer, desired to secure health insurance benefits for AIM’s members. On or about February 7, 2002, Winebrenner delivered applications for health insurance and a cashier’s check in the amount of $23,920.77 to Respondent. The pertinent applications were intended to secure health insurance with an entity known as Mutual Service Life Insurance Company and/or an entity known as United States Life Insurance Company. Winebrenner agreed to gather the applications on behalf of AIM and to forward them to Respondent and Respondent’s company, known as Eastwich Re, Inc. Respondent had represented that he was a licensed insurance agent. The identifying number of the $23,920.77 cashier’s check referred to hereinabove that was delivered to Respondent is 381524555. Respondent’s company, Eastwich Re, Inc., had a business checking account at Flagship National Bank (Flagship) in Sarasota, Florida. On February 12, 2002, the $23,920.77 check that Winebrenner had delivered to Respondent was deposited into Eastwich Re’s Flagship account. Respondent was a signatory on Eastwich Re’s Flagship account. Respondent did not secure health insurance from United States Life Insurance Company or Mutual Service Life Insurance Company or any other company for any of the AIM applicants. Respondent did not forward any premium moneys in the year 2002 to United States Life Insurance Company or Mutual Service Life Insurance Company for the purpose of securing health insurance for any of the AIM applicants. Respondent returned only $10,000.00 from the amount that Winebrenner gave to him in the $23,920.77 cashier’s check. Winebrenner testified that he requested several times of Respondent that the full amount ($23,920.77) of the cashier’s check be returned, once it was clear that no health insurance had been secured for any AIM applicants. AIM engaged private counsel to seek return of the entire $23,920.77 amount, but the efforts of private counsel were not successful. No reason was offered for Respondent only returning $10,000.00. On September 19, 1991, Respondent’s licenses and appointments as an insurance agent were surrendered as part of a Consent Order into which he entered with the Department of Insurance. In 1996, Respondent’s application for licensure as an insurance agent was denied. Respondent’s application for licensure was denied based on information “indicating that Respondent transacted insurance in 1992, in violation of the September 19, 1991 Consent Order which resulted in the surrender of all licenses and appointments held by Respondent . . . [and] had the same force and effect as a revocation.” Respondent was again granted a license as an insurance agent in 1997. Respondent was a licensed insurance agent in Florida at the relevant times that are material to the Administrative Complaint that is the basis for the instant action.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order finding Michael David Garrett guilty of violating the provisions of Section and Subsections 626.561(1); 626.611(7), (9), (10), and (13); 626.621(6); 626.9521; and 626.9541(1)(o)1., Florida Statutes. As penalty for these violations, it is recommended that Petitioner (1) revoke Respondent's insurance licenses and eligibility for licensure; (2) that Respondent be required to pay an administrative fine of $20,000.00; and (3) that Respondent be required to pay restitution to AIM for the benefit of the defrauded insurance applicants in the amount of $13,920.77. DONE AND ENTERED this 28th day of June, 2005, in Tallahassee, Leon County, Florida. S JEFF B. CLARK 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 28th day of June, 2005.
The Issue The issue for consideration in this case is whether the Respondent's license as a viatical settlement provider in Florida should be disciplined because of the matters alleged in the Administrative Complaint dated June 29, 2000.
Findings Of Fact At all times relevant to the issues herein, the Petitioner, Department of Insurance (Department), was the state agency in Florida responsible for the licensing of viatical settlement providers and the regulation of the viatical settlement industry in this state. The Respondent, Accelerated Benefits Corporation (ABC), was licensed as a viatical settlement provider in Florida. Pursuant to an investigative subpoena issued by the Department, in November and December 1999, investigators of the Department examined the records of the Respondent, as well as other viatical settlement providers operating within the state, looking into the viatical settlement industry's practices in Florida. As a part of the investigation, Janice S. Davis, an examiner/analyst with the Department, copied records of the Respondent relating to at least six individual viatical settlement transactions in which the Respondent was involved. These files relate to Counts 5 through 7 and 9 through 11 of the Administrative complaint. Ms. Davis also obtained from the Respondent the information regarding the location of several other cases, the files for which had been confiscated by the Statewide Prosecutor as a part of an ongoing investigation into the viatical settlement industry, and subsequently obtained copies of those files from the office of the Statewide Prosecutor. Those files relate to Counts 1 through 4 and 8 of the Administrative Complaint. As outlined in Count Five of the Administrative Complaint, in May 1998, D.K. applied to The United States Life Insurance Company (US Life) for a $250,000 life insurance policy. As a part of the policy application, D.K. stated that he had not consulted with any physician or other practitioner within the five years prior to the application. On July 29, 1998, Life Benefit Services (LBS), a viatical settlement broker used by ABC, obtained a "Confidential Application Form" completed by D.K. which revealed that sometime in 1982, D.K. had been diagnosed as HIV positive. LBS prepared a "Policy Summary Sheet" regarding D.K.'s application on which it noted that D.K. had been diagnosed with HIV/AIDS. LBS also had records from D.K.'s physician reflecting that D.K. had been under a doctor's care during the preceding five years. The policy was issued to D.K. on or about August 1, 1998. Notwithstanding the information it had on hand, LBS brokered the sale of the instant policy to ABC. On or about August 25, 1998, D.K. and the Respondent entered into a contract which called for the Respondent to purchase D.K.'s $250,000 life insurance policy for $25,000. At that point, the policy was still contestable. As a part of the transaction, the Respondent gave D.K. written instructions not to contact his insurance company until advised to do so by ABC. The Respondent also had D.K. sign an addendum to the purchase contract in which he agreed to not advise US Life that he had sold his policy and acknowledged his recognition that his life insurance policy was still contestable. D.K. was also asked and agreed to sign an undated change of ownership form for use by ABC at the expiration of the period of contestability. While the policy was still contestable, an employee of the Respondent, Jennifer Grinstead, paid the annual premium on the policy out of her personal checking account. This served to conceal the fact that D.K. had sold the policy to the Respondent. Ms. Grinstead was reimbursed for the premium payment by American Title Company of Orlando. American Title was the Respondent's trustee. The Respondent did not report any of the information it had regarding D.K.'s actual health history to US Life or the Department. A review of the documentation related to this transaction reflected that the Respondent purchased the policy rights from D.K. after it knew, or with the exercise of reasonable diligence should have known, that D.K. had made material misrepresentations regarding his health to US Life, and nonetheless attempted to conceal those misrepresentation from US Life. With regard to Count Six, the evidence of record indicates that on May 4, 1997, W.E. applied for a $45,000 life insurance policy from Life USA Insurance Company (Life USA). On the application form he signed and submitted, W.E. specifically stated he had not received any medical or surgical advice or treatment within the preceding five years, had not been advised by a medical doctor that he had AIDS or ARC, and was not, at the time, taking any medication. Based on the representations made by W.E., the policy was issued on November 12, 1997. Notwithstanding the representations made by W.E. to Life USA, W.E. also advised United Viatical Settlements (UVS), the settlement broker used by the Respondent, on December 17, 1997, through a corollary application form, that he had been diagnosed with HIV "a few years ago," and several different other forms utilized by the Respondent reflect that the Respondent knew W.E. had AIDS or HIV, and was under a doctor's treatment for the condition during the preceding five years. Nonetheless, UVS brokered the sale of this policy to the Respondent. In late December 1997, at which time the policy was still contestable, the Respondent entered into a contract with W.E. for the purchase of the $45,000 policy for $4,914.25. As a part of the sales procedure, the Respondent issued to W.E. instructions not to contact his insurance company until instructed to do so by the Respondent's representative, and it also had W.E. sign an addendum to the purchase agreement in which W.E. acknowledged that the policy in issue was still contestable. W.E. was also asked to agree not to inform Life USA of the sale of the policy to the Respondent and to sign an undated change of ownership form for use by the Respondent to transfer ownership when the contestability period had expired. The arrangement between the Respondent and W.E. called for Jennifer Grinstead to pay the annual premium on the policy for W.E. from her personal account and to receive reimbursement for those payments from American Title Company, the Respondent's trustee. This arrangement served to conceal from Life USA the fact that W.E. had sold the policy to the Respondent. The Respondent did not report the fact that it had knowledge of W.E.'s medical condition to the Department. The evidence of record reflects that at the time of the purchase of W.E.'s policy, the Respondent knew or should have known that W.E. had made material misrepresentations regarding his medical state to Life USA on his application for life insurance from that company, and it thereafter took actions which served to conceal those material misrepresentations from the company. In the Case of Count Seven, on April 26, 1997, A.T. applied for a life insurance policy from Lincoln Benefit Life (Lincoln) in the amount of $48,000. On the application form, A.T. specifically stated that he had not been under medical observation or treatment within the preceding five years, and that he had not been diagnosed as having AIDS or ARC, or tested positively for HIV. The policy was issued by the company on or about June 2, 1997. Notwithstanding those representations, on January 14, 1998, Medical Escrow Society, a viatical broker used by the Respondent in its dealing with Lincoln, received an application form from A.T. on which A.T. indicated he had tested positive for HIV on August 8, 1989, had been diagnosed with AIDS ON August 10, 1994, and was under the care of a physician. Medical Escrow Society nonetheless brokered the sale of the policy to the Respondent. Shortly after the contestability period on this policy expired. On June 25, 1999, the owner of the policy, Ralph Cahall, entered into a contract with the Respondent whereby the Respondent bought Cahall's interest in the proceeds for $29,238.72. At the Respondent's request, ownership of the policy was changed from Cahall to American Title Company of Orlando, the Respondent's trustee without either Lincoln or the Department being informed of the transfer. The file relating to this policy indicates that the Respondent brought about the transfer from Cahall after it knew or, in the exercise of reasonable diligence should have known, that A.T. had made material misrepresentations regarding his health on the application to Lincoln, and that the Respondent, though it did not report what it knew to the Department, also thereafter undertook a course of action which was designed to conceal that information from Lincoln. With regard to Count Nine, the evidence indicates that on or about September 30, 1996, R.M. submitted an application for a $100,000 life insurance policy to Interstate Assurance Company (Interstate). On the application, R.M. indicated he had not been diagnosed with an immune system disorder within the preceding ten years, and the policy was issued on October 9, 1996. Notwithstanding that representation, on July 18, 1997, R.M. completed an application form for Benefits America, a broker used by the Respondent with regard to this policy, in which he stated he had been tested positive for HIV on February 11, 1994. A "Policy Acquisition Worksheet" utilized by the Respondent on or about July 22, 1997, when R.M. was dealing with Benefits America regarding the viatication of his life insurance policy, reflects that the company was aware at that time that R.M. had been diagnosed with HIV in 1994. Even with that knowledge, the Respondent went through with the viatication, and on July 31, 1997, while the policy was still within the contestability period, bought the policy for $15,430. On August 4, 1997, R.M. executed an addendum to the purchase agreement at the behest of the Respondent, wherein he recognized the policy was still contestable and agreed, among other things, not to contact his insurance company or tell them he had sold the policy to a viatical settlement provider. He also was asked to sign, and signed, an undated change of ownership agreement for use by the Respondent at the end of the contestability period. Jennifer Grinstead, an employee of the Respondent, paid R.M.'s annual premium on the policy during the contestibility period out of her personal checking account. This action, when done in conjunction with R.M.'s failure to advise the insurance company of the sale, served to conceal the transfer of ownership from R.M. to the Respondent. Ms. Grinstead was reimbursed for the premium payments by the Respondent's trustee. The Respondent did not report to Interstate or to the Department that R.M. had made material misrepresentations regarding his health in procuring the issuance of the policy even though it knew or, in the exercise of due diligence, should have known that the material misrepresentations had been made. As to Count Ten, on May 12, 1997, J.R. submitted an application to Interstate for a life insurance policy on his life in the amount of $980,000. On his application, J.R. indicated he had not been diagnosed with an immune system disorder within the preceding ten years, had not been treated by a member of the medical profession in the preceding five years, and was not, at the time, on medication or undergoing treatment or therapy. The policy was issued on May 19, 1997. Notwithstanding those representations, on July 9, 1997, J.R. filled out an application form for the Respondent's broker for this transaction, Life Benefit Services, on which he indicated he had been diagnosed as HIV positive in May 1996. A "Mortality Profile" provided to the Respondent by AVS indicated that J.R. was first diagnosed as being HIV positive in August 1995, nine months or so earlier than he admitted, and that he had been undergoing treatment by a doctor and receiving medications well within the five years preceding the application. On August 20, 1997, J.R. entered into a contract with the Respondent calling for the sale of this insurance policy to ABC for a net sum of $107,800. At this point, the policy was still contestable. At that time, the Respondent instructed J.R. in writing not to contact his insurance company until told to do so by the Respondent's representative. The Respondent also had J.R. sign an addendum to the purchase agreement in which he acknowledged the policy was still contestable, that he would not inform Interstate of the sale, and that he would sign an undated change of ownership form for use by ABC when the contestability period expired. Notwithstanding that the Respondent knew of the material misrepresentations made by J.R. as to his health when he procured the policy, it did not report what it knew to the Department, and took steps to insure Interstate was not informed of what was going on. With regard to Count Eleven, on May 16, 1996, the same J.R. applied to Massachusetts General Life Insurance Company, later, Conseco Life Insurance Company (Conseco), for a $99,900 life insurance policy. On his application, J.R. stated he had never had any medical tests or any known indication of diseases, conditions, or physical disorders which were not mentioned on the form. AIDS, ARC, and HIV positive were not mentioned on the form, and if known to have been present, should have been noted. About a year and three months later, on July 9, 1997, J.R. submitted an application form to Life Benefit Services, the broker used by ABC on this policy, on which he stated he had tested positive for HIV in May of 1996. By letter dated July 28, 1997, Life Benefit Services advised ABC that J.R. was terminally ill and had been on medication and undergoing treatment by a physician within the preceding five years. In addition to this information, the Respondent had available to it the information regarding J.R.'s condition discovered as a result of the purchase of the Interstate policy. Notwithstanding this knowledge, on September 17, 1997, while the policy was still contestable, ABC purchased the Conseco policy from J.R. for the net sum of $13,986. By letter dated September 17, 1997, the Respondent advised J.R. not to contact his insurance company until instructed to do so by Ms. Holman, the Respondent's Director of Contracts, and requested he execute an addendum acknowledging those instructions and that the Conseco policy was still contestable. He was also asked to agree to sign an undated change of ownership assignment for use by ABC after the contestability period had expired. While the policy remained contestable, the annual premiums due from J.R. were paid from her personal checking account by Ms. Grinstead, an ABC employee, who was reimbursed therefor by American Title, ABC's trustee. None of the above information was reported by the Respondent to Conseco or the Department even though it knew or, with the exercise of reasonable diligence should have known that J.R. had made material misrepresentations regarding his physical health in his application for life insurance to Massachusetts General Life Insurance company, and it appears the Respondent attempted to conceal those misrepresentations from Conseco.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Insurance enter a Final Order dismissing Counts One through Four and Eight of the Administrative Complaint, but finding the Respondent guilty of Counts Five though Seven and Nine through Eleven of the Complaint, and both revoking its license and its eligibility for licensure as a viatical settlement provider in Florida. DONE AND ENTERED this 28th day of December, 2000, in Tallahassee, Leon County, Florida. ___________________________________ ARNOLD H. POLLOCK 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) 921-6947 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of December, 2000. COPIES FURNISHED: Michael H. Davidson, Esquire Department of Insurance 200 East Gaines Street 612 Larson Building Tallahassee, Florida 32399-0333 Mark K. Logan, Esquire Smith, Ballard & Logan, P.A. 403 East Park Avenue Tallahassee, Florida 32301 The Honorable Bill Nelson State Treasurer/Insurance Commissioner The Capitol, Plaza Level 02 Tallahassee, Florida 32399-0300 Daniel Y. Sumner, General Counsel Department of Insurance The Capitol, Lower Level 26 Tallahassee, Florida 32399-0307
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: At all times pertinent to this proceeding, the respondent Jules Maxwell Hanken was licensed as an ordinary life, including disability, agent in Florida, and was the President of Gulf Health/Life, Inc. in St. Petersburg, Florida. Though some administrative and supervisory duties were delegated to other individuals, respondent was the ultimate supervisor of insurance agents and employees at Gulf Health/Life. Respondent assumed the primary and major responsibility for training, directing and instructing employees to work as insurance salesmen within the agency. COUNTS I and VI The American Benevolent Society, Inc. was formed by the respondent and others in mid-1978, and was incorporated on November 22, 1978. The organization was described as "a society devoted to the welfare and benefit of independent Americans." Among its stated purposes was the provision of information and referral services dealing with medical, legal, benevolent, financial and recreational matters. The ABS also provided a newsletter and discounts to its members from numerous area businesses and dining establishments, as well as travel discounts and information. The membership fee was $15.00 for an individual and $25.00 for a family. New members were advised that one of the functions of the ABS was to solve the problem of high medical costs, and that members having difficulties with insurance claims could receive aid from the ABS. The offices of the ABS were located in the same building as Gulf Health/Life, Inc., but a separate telephone number and listing was maintained for the ABS. Employees of Gulf Health/Life, Inc. who answered the ABS telephone were instructed to not let callers know that the ABS office was in the Gulf Health office and to inform ABS callers that their insurance agent was not located at that office. In the sale of accident and health insurance, which was a major portion of the insurance sold at Gulf Health/Life, Inc., efforts were made by the respondent to offer insurance which would provide a discount in premium to members of the ABS. Apparently, respondent attempted to have the ABS endorse various insurance companies in return for members of the ABS receiving a "group" or "association" premium which would be less than the premium for an individual purchasing the same insurance. CNA did provide such a plan on one of its policies for individual members of the ABS, as well as for other associations, whereby the premiums for ABS members were slightly lower (approximately $10.00 per individual) than for members of the general public purchasing the same insurance. Neither Massachusetts Indemnity and Life Insurance Co. nor Founders Life Assurance Co. offered any group rate or reduction in insurance premiums to members of the ABS. Insurance salesmen employed at Gulf Health/Life, Inc. were instructed and directed by the respondent to also sell membership in the ABS. They received a commission for each membership sold and most sales were made at the same time as sales of insurance policies were made. It is estimated that approximately ninety-five percent (95 percent) of the ABS members also had insurance with a company represented by Gulf Health/Life, Inc. Respondent's insurance salesmen were directed in writing to always explain to the customer the difference between the ABS and the insurance company, to always collect separate checks and give separate receipts for the ABS membership fee and the insurance premium, and to require new ABS members to sign a form whenever they purchased insurance expressly acknowledging that the ABS was not the insurance company and that the endorsement and recommendation of insurance by the ABS did not imply or guarantee any discount in insurance premium. The respondent's agents were also required to place their signature on this form. In addition, the printed application form for membership in the ABS stated, in relevant part, as follows: I . . . am not joining as a prerequisite to obtaining insurance . . . and I realize that the A.B.A. insurance endorsement in no way implies or guarantees any discount or deviation from the ordinary premium established for the policies included. It is understood that the Society is not the insurance company." Respondent's salesmen were directed to obtain from each new ABS member the names of other persons who might be interested in ABS membership, and the amount of the salesman's commission for each ABS sale was dependent upon the number of referrals contained in each application. For example, an individual application for ABS membership with no referrals earned the salesperson a commission of $4.50, while an application with three referrals merited a commission of $7.50. Membership agents for the ABS, who were also licensed insurance agents, were required to sign a document acknowledging their understanding that monies collected for ABS were to be maintained separately from insurance premiums, that no preferential recommendations were to be made for insurance plans endorsed by the ABS over other plans which the agent was licensed to represent and "that solicitation of ABS members is in no way connected to or reliant upon insurance plans, programs, or policies, as no person's ability to obtain any insurance is helped or hindered by ABS membership; however, membership must be established prior to insurance solicita- tion through the American Benevolent Society. In contrast to the above-discussed specific written instructions and disclaimer forms requiring the signatures of agents and new customers, several agents employed by the respondent were of the opinion that those written forms and instructions were not consistent with what agents were verbally directed by respondent to use as a sales presentation. These agents believed that respondent, during the training sessions, was instructing them to blur together the presentations for sales of insurance and ABS membership so that the customer would believe that they could obtain better insurance (either in terms of coverage or lower premiums) through membership in the ABS. The agents were instructed in a sales technique which would begin with an explanation to the customer as to how difficult it is, because of the customer's age and/or physical condition, to obtain proper insurance coverage and then to explain that the ABS was formed for the purpose of solving those problems, could help its members in obtaining better and lower cost insurance, and could ultimately help them in their claims with the various companies. These agents admitted that they were instructed to avoid the term "group insurance," but stated that they were to use other terminology to suggest an association or group. Several former agents and employees testified that they received a "negative commission," or a reduction in their usual insurance commission, if they sold insurance to a customer without simultaneously selling that customer a membership in the ABS. No documentary evidence was offered to substantiate this testimony. Some of the respondent's insurance agents did tell customers that they had to be a member of the ABS before they could obtain certain insurance. These agents did, however, sell insurance without ABS membership and did sell ABS membership without insurance. They also sold ABS memberships simultaneously with the sale of insurance policies with companies which offered no benefits for ABS members. As noted above, CNA did offer a slight discount in premium on one of its policies to members of the ABS. The only three customers called as witnesses by the petitioner in this proceeding did join the ABS in order to acquire what they believed to a be a cheaper, group rate for their CNA policies, and to obtain discounts on other products. These customers did receive the discount provided to ABS members on at least one of the CNA policies purchased through respondent's agents. The agent did not explain the exact amount of the discount to them as compared with the ABS membership fee, nor did the agent compare the premiums with individual, as opposed to group, premiums. No other members of the ABS (which at one time had a membership of 700 or 800 persons) or the general public were called by the petitioner to testify in this proceeding. 1/ The only other member of the ABS who testified was called by the respondent, and he testified that he purchased a membership in the ABS after he bought insurance from one of the respondent's agents. He was told membership in the ABS would bring him certain services, benefits and discounts, but was not told he would receive a discount or reduction in his insurance premium. This witness was named in the Administrative Complaint as being one of the victims of the deceptive sales practices directed or authorized by the respondent. Insurance agents at Gulf Health/Life used various titles on their business cards and in reference to themselves. Some utilized the word "counselor," while others were referred to as "Regional Group Director." The purpose of utilizing the term "counselor" was not to disguise the fact that an agent was an insurance salesman, but rather to avoid the often poor public image associated with an insurance salesman. Upon inquiry to the State Insurance Commissioner's Office, the respondent's office was informed by letter dated January 21, 1980, that there was no statutory prohibition against use of the term "counselor" by insurance agents. An Insurance Department rule was referenced which prohibits the representation by an agent that he is a "counselor, advisor or similar designation" for any group or association of medicare eligible individuals, which representation does not reflect the true role of the agent in the solicitation of insurance. Salesmen were encouraged by respondent to avoid discussions with customers regarding the commission they may make on a potential sale. This was emphasized in training sessions for the purpose of illustrating what the proper attitude of an insurance salesman should be; to wit: to sell customers what they need and not what the salesman desires in terms of a commission. Respondent's employees and agents were not instructed to inform customers that they were not insurance salesmen or that they did not receive remuneration by way of commission. COUNT II Some thirty years ago, Earl Jacobs, a professional photographer prior to joining respondent's insurance company, constructed what he calls a "safe light." This is a wooden box which has a lightbulb in it and a glass filter across the face. The light can be openly used in a darkroom while working with light-sensitive photography paper. For some period of time, this device was kept on the premises of Gulf Health/Life, Inc. because the agency was putting together a brochure with each agent's picture. The restroom area was considered to be an ideal darkroom facility for the processing of prints. The "safe light" is referred to as a "light box" in the Administrative Complaint. Former employees and agents observed this device either in the closet of the woman's restroom or under the desk of Lynda C. Rushing, Vice President of Gulf Health/Life, Inc. Five witnesses observed the device in use by Lynda Rushing while either kneeling on the floor near her desk or while in another room. While it appeared to these witnesses that Ms. Rushing was using the device to trace customers' signatures onto insurance documents, no such documents were produced, no insured's name was given, nor did any customer or member of the general public present testimony as to a signature which was not genuine. 2/ Respondent ordered the device removed immediately after he was informed by a secretary that an irate customer had been in the office complaining that a signature on an insurance policy was not his signature. Applications and other insurance documents were frequently returned to respondent's agents for the purpose of obtaining an omitted signature. There was no testimony or other evidence in this proceeding to indicate that respondent Hanken ever used the device known as a "light box," or that he directed other employees to use this device to trace signatures. COUNT III Many, if not most, of the individuals employed by the respondent as insurance agents had no prior insurance experience. Sales techniques and practices were taught them by the respondent through extensive training sessions and the use of a sales manual called Psaleschology, which was primarily authored by the respondent. Agents were instructed to learn and were tested on the concepts expressed in the sales manual. The training sessions involved role- playing between the respondent and an agent, utilizing the concepts expressed in the manual. During the early stages of an agent's training, he was required to complete a form when he did not effectuate a sale, listing which steps in the manual were not followed by the salesman. While some salesmen believed that they were expected to follow the manual "verbatim" in their sales presentation, others, including the respondent, felt that the manual and the concepts expressed therein were simply guidelines or reminders of the principles of the psychology of salesmanship. Respondent considered the manual's purpose to be one of introducing to the salesman a formal attitude about selling and a demonstrative learning instrument. The sales manual under which the respondent's agents were trained does utilize the concepts of "MID/TIA" (Make It Difficult/Take It Away"); fear and greed, and fabrication. As explained by the respondent, these concepts of reverse psychology, motivation by relating to strong human emotion and demonstrations of risk are common techniques in salesmanship. They can as readily be described as concepts concerning the theory of supply and demand, the recognition of people's concerns and desires as motivating factors and the personalization of real events by fabrication of the characters. During a training session, the respondent related to his salesmen that he had once used the technique of telling an insurance customer who was reluctant to speak with him that he had come there to give the customer a Maas Brothers gift certificate. This was cited as an example of a method to persuade the unreceptive customer to open the door. There was no testimony that any of the respondent's salesmen ever actually used that technique or that respondent ever actually directed his employees to use such a technique. Maas Brothers gift certificates were in fact given to customers by Gulf Life/Health employees for a period of time when the customer gave an agent referrals for other sales. The respondent's manual does contain suggested techniques of reinstating lapsed policies by providing option or adjustment alternatives. One agent, who testified that he followed the respondent's manual literally during his early months with the company, stated that he would tell customers whose policies were about to lapse that they had a specific refund or monetary adjustment due them. This technique was utilized to gain entrance to the customer's home and to resell them insurance. This agent's technique was reported to the respondent by another agent, and respondent directed him to cease using the "refund" approach to reinstate lapsed policies. There was no testimony from any purchaser of insurance, potential insurance customer or other member of the general public that the techniques set forth in the respondent's sales manual or emphasized in his training sessions were actually practiced to the extent that the customer was frightened, coerced or deceived into purchasing insurance from the respondent's agency. 3/ COUNT IV Prior to becoming licensed to sell policies for Massachusetts Indemnity and Life Insurance Company, agent Edmund Shoman solicited and obtained applications for insurance with that company. Vice President Lynda Rushing, who was licensed with that company, signed these applications for him. At the time, Mr. Shoman was licensed to sell insurance with another company. There was no evidence to suggest that respondent had any knowledge that Ms. Rushing signed applications brought into the office by Mr. Shoman, or that Mr. Shoman received any commissions on these sales Bradley Wasserman had never sold insurance prior to being employed by the respondent. After one week of training, and prior to receiving his license, according to Bradley Wasserman, he was given leads, made contacts and sold two insurance policies by himself. He signed his brother Phillip's name to the applications and, according to him, received a commission on the two sales. Bradley's brother, Phillip, was employed as a licensed insurance agent by the respondent, was one of the respondent's top producers, and was also in law school at the time. Phillip recalled that respondent gave his approval to this practice, but could not recall whether he knew in advance that Bradley would be signing his name to the applications. During his first two weeks of employment with the respondent, Bradley Wasserman entered into and signed a "Training Agreement," acknowledging that during his training program he would be given a training allowance for his presence with a licensed instructor during a sale. The specific oral agreement was that Wasserman was to receive $25.00 for each presentation of two or more hours which he observed. Between February 20 and March 6, 1981, three checks were made payable to Bradley Wasserman in the amounts of $150.00, $150.00, and $100.00. Each check bore the words "training remuneration" or "training allowance." These amounts do not correspondent with the amounts claimed by Bradley Wasserman as his commission on the two sales of insurance. COUNT V Howard Cunix, at a time when he was not a licensed life agent, referred a life insurance customer, Mr. Miller, to Phillip Wasserman. Phillip Wasserman, who was licensed to sell life insurance, made the sale, but received only one-half of the commission for that sale. What happened to the remainder of the commission was not known by Mr. Wasserman and was not otherwise established. At that time, Mr. Cunix was a salaried employee and received the same amount of remuneration each week. He did receive one-half a production or referral credit on a board maintained at Gulf Health/Life to illustrate the production level of the various agents.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the Amended Administrative Complaint dated April 29, 1982, be DISMISSED. Respectfully submitted and entered this 8th day of February, 1983, in Tallahassee, Florida. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 8th day of February, 1983.
Findings Of Fact The Respondent, Teresa Jean Watson, at all times material to this proceeding was licensed as an ordinary life agent, a disability insurance agent and a general lines insurance agent. She was the only general lines agent licensed to sell insurance at the T. J. Watson Insurance Agency, Inc. and all insurance sold by that firm at times pertinent hereto was sold and issued under authority of her license. During times material to this proceeding, Teresa Jean Watson sold insurance coverage under authority of her general lines license either as direct agent for various insurance companies for whom she was general agent or, on behalf of MacNeill and Son, Inc. (MacNeill), her managing agency, which represented various insurance companies for whom the Respondent wrote coverage. Between February 1st and February 15, 1982, a homeowner's insurance policy was sold to Tony and Martha Williams by the Respondent's agency under the authority of the Respondent's general lines insurance agent's license. That homeowner's policy required a premium of $211.00. The policyholder, Tony Williams, wrote two checks to the T. J. Watson Agency dated January 22, 1982 and February 12, 1982. Those two checks totalled $174.00. The checks were cashed by the Respondent's agency on January 26, 1982 and on February 6, 1982. The Independent Fire Insurance Company issued the policy to Tony and Martha Williams and on August 4, 1982 a representative of the Independent Fire Insurance Company wrote the Respondent to advise her that she owed that company a balance of $179.35, as of May 1982. Petitioner asserts that the $179.35 represents the amount of Tony Williams' premium owed to the insurer, less the Respondent's commission, which if added together would equal the $211.00 premium on the Williams' policy. Although it was established that $179.35 was owed by the Respondent to the Independent Fire Insurance Company, and never paid, it was not established that it represented the premium due specifically for the Williams' policy as was charged in count 1 of the Administrative Complaint. For instance, the checks paid by the Williamses to the Watson Agency total $174.00 and therefore there is a discrepancy between the total of those checks and the $179.35 amount Independent Fire Insurance company was owed by the Respondent. This fact coupled with the fact that the dates on the checks from the Williamses (January and February) substantially predate the May 1982 billing date to Respondent from Independent Fire, renders it unproven that the checks written to the Watson Agency which Respondent negotiated and retained the benefit of, related to the amount of unremitted premium owed by Respondent to the Independent Fire Insurance Company. In short, it was established that $174.00 was paid the Respondent and her agency by the Williamses. But, it was not established that the premium paid by the Williamses became misappropriated fiduciary funds converted by the Respondent to her own use and benefit. It was merely established that as of May 1982 the Respondent owed the Independent Fire Insurance Company $179.35 as a past-due account It was not established that the Williamses ever suffered a lapse of insurance coverage or were otherwise harmed by the Respondent's failure to pay Independent Fire the $179.35. Indeed, the $179.35 figure was not proven to be more than a mere debt owed by Respondent to Independent Fire Insurance Company. The figure was not shown to have been related to any particular policy. The Respondent and her insurance agency in the regular course of business wrote insurance coverage for companies represented by MacNeill and Son, Inc., the Respondent's managing agency. The regular business practice between the Respondent and MacNeill was for the Respondent to write coverage on behalf of insurers represented by MacNeill and to remit on a regular open account" basis insurance premiums due MacNeill on behalf of its insurance company principals on a monthly basis. The Respondent became delinquent in submitting premiums to MacNeill and Son in November 1981. After unsuccessful efforts to collect the delinquent premium funds from the Respondent, MacNeill and Son, Inc. suspended T. J. Watson Insurance Agency and the Respondent from writing further coverage for companies they represented in January 1982. The Respondent purportedly sold her agency to one Thomas Zinnbauer in December 1981, but had already fallen into a pattern of failing to remit insurance premiums over to MacNeill before that time. In any event, the purported sale to Thomas Zinnbauer was a subterfuge to avoid collection of delinquent premiums inasmuch as the Respondent held herself out, in correspondence with MacNeill, (See Petitioner's Exhibit 4) to be the president of the agency at least as late as April 1982 and, at that time and thereafter, the agency continued to sell insurance under the aegis of the Respondent's license. After the Respondent made up the delinquency in premium remissions to the MacNeill Agency that agency restored her underwriting authority in January 1982. Shortly thereafter however, the Respondent and the T. J. Watson Agency again became delinquent in remitting insurance premiums to the MacNeill Agency and followed a quite consistent pattern of failing to forward these fiduciary funds to MacNeill for some months. Ultimately the Respondent and her agency failed to forward more than $6500.00 in premium payment funds to MacNeill and Son, Inc. as was required in the regular course of business. MacNeill and Son, Inc. made repeated futile attempts to secure the misappropriated premium payments from the Respondent and her agency. MacNeill made several accountings of the amount of the acknowledged debt to the Respondent. The Respondent communicated with MacNeill concerning the delinquent premium payments and acknowledged the fact of the debt, but sought to reach an amicable arrangement for a repayment schedule. Re- payment was never made, however, and ultimately the Petitioner agency was informed of the deficiencies and prosecution resulted. The Respondent knew that the premiums had been collected by herself and her agency and had not been forwarded to those entitled to them. She knew of and actively participated in the improper withholding of the premium payments. This withholding and diversion of premium payments from the agency and companies entitled to them was a continuing pattern of conduct and Respondent failed to take action to halt the misappropriation of the premium payments. Further, it is established by the testimony of Matthew Brewer, who investigated the delinquent premium accounts for MacNeill, that Ms. Watson failed to advise MacNeill of the purported sale of her agency until November of 1982, almost a year after it is supposed to have occurred and then only in response to Brewer's investigation. When confronted by Mr. Brewer concerning the ownership of her agency Ms. Watson refused to tell him to whom she had sold the agency. When Mr. Brewer learned that Thomas Zinnbauer had apparently bought the agency from the Respondent Mr. Brewer conferred with him and he refused to release the agency records unless Ms. Watson gave her permission. This fact, together with the fact that Ms. Watson held herself out as president of the agency some four months after she had purportedly sold the agency to Zinnbauer, establishes that Respondent, by representing to Brewer and other personnel of MacNeill and Sons, Inc. that she had sold her agency, was attempting to evade liability for failure to forward the fiduciary premium funds obtained under the authority of her agent's license. As a result of the failure to forward the above- mentioned premium payments some of the insureds who had paid those premiums suffered lapses in coverage and cancellations of policies because MacNeill and Company and the insurers they represented believed that no premiums had ever been paid. Ultimately, MacNeill and Company learned that the premiums had been paid by the policyholders, but not remitted by the Respondent and her agency and undertook steps to reinstate coverage, but those policyholders in some instances had substantial periods of time when their coverage was lapsed due to the Respondent's failure to remit the premium funds to the managing agency and the insurance companies involved. MacNeill and Company ultimately reimbursed the appropriate insurers and insureds at its own expense, incurring substantial financial detriment as a result of the Respondent's failure to have premium payments obtained under her licensed authority properly forwarded. Had the insureds who had their policies cancelled suffered losses for which claims could have been filed during the period of the lapses of coverage, they could have encountered substantial financial difficulty.
Recommendation Having considered the foregoing Findings of Fact and Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses and the pleadings and arguments of the parties, it is therefore recommended that the General Lines Insurance Agent's license of Respondent Teresa Jean Watson be revoked. DONE and ORDERED this 27th day of December, 1985, in Tallahassee, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway Tallahassee, Florida 32301 (904)488-9675 FILED with the Clerk of the Division of Administrative Hearings this 27th day of December, 1985. APPENDIX RULING OF PETITIONER'S PROPOSED FINDINGS OF FACT: Accepted. Accepted, although the amount represented by the two subject checks totalled $174.00 instead of $175.00. Accepted. Rejected as not comporting with the competent, substantial credible evidence adduced. Rejected inasmuch as it was not established that the amount of $179.35 owed the Independent Fire Insurance Company represented the premium on the Williamses' insurance policy. Accepted. Accepted. Accepted. Accepted, although the last sentence in that Proposed Finding constitutes, in reality, mere argument of counsel. Accepted. Rejected as not comporting with the competent, substantial credible testimony and evidence actually before the Hearing Officer. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. RULINGS ON RESPONDENT'S PROPOSED FINDINGS OF FACT: Respondent submitted a post-hearing document entitled "Proposed Findings of Fact." There are few actual Proposed Facts in that one-and-a-half page pleading which is interlaced throughout with argument of counsel. However, to the extent the six paragraphs of that document contain Proposed Findings of Fact they are ruled on as follows: This Proposed Finding is rejected, but for reasons delineated in the above Conclusions of Law, Count 1 has been recommended to be dismissed anyway. This Finding is accepted but is immaterial and irrelevant to, and not necessary to, the Findings of Fact reached herein and the Conclusions of Law based thereon. Paragraph Number 3 does not really constitute a Proposed Finding of Fact or even multiple Proposed Findings of Fact in the same paragraph. In reality, it constitutes argument of Respondent's counsel concerning admissibility of certain documents into evidence which have already been ruled to be admissible by the Hearing Officer during the course of the hearing. To the extent that the last two sentences in the third paragraph of the Respondent's Proposed Findings of Fact are proposed findings of fact, they are accepted, but are immaterial, irrelevant and unnecessary to the findings of fact made herein and the conclusions predicated thereon and recommendation made herein. Rejected as not being in accordance with the competent, substantial credible testimony and evidence adduced. Rejected as constituting mere argument of counsel and not being in accordance with the competent, substantial, credible evidence adduced. Rejected as not in accordance with the competent, substantial, credible evidence presented as to Count 2. In reality, counsel obviously intended to refer to the two checks referenced in Count 1 of the complaint which has been recommended to be dismissed anyway. COPIES FURNISHED: Dennis Silverman, Esquire Department of Insurance 413-B Larson Building Tallahassee, Florida 32301 Mark A. Steinberg, Esquire Post Office Box 2366 Ft. Myers, Florida 33902 Bill Gunter Insurance Commissioner and Treasurer The Capitol Tallahassee, Florida 32301
The Issue The issue for consideration is whether the Respondent's license as an insurance agent should be disciplined because of the misconduct alleged in the Administrative Complaint filed herein.
Findings Of Fact At all times pertinent to the issues herein, Respondent, Shirley Ann Cramer, was licensed as a life, health and general lines insurance agent in Florida, and was the sole owner and operator of Consolidated Insurance Associates, Inc., an incorporated general lines life and health insurance agency in Clearwater, Florida. The Department of Insurance was and is the state agency responsible for the licensing and regulation of insurance professionals in this state. In February, 1987, Mercedes Wescott went to the Respondent's agency in Clearwater where she spoke with whom she assumed to be an employee, an individual named Jack. "Jack" is Jack Jarr, Respondent's former husband and a licensed insurance professional who works in a different agency from Respondent, but who was licensed with Respondent's agency at the time in question as well. Ms. Wescott wanted a policy of life insurance, and after talking with Jack, wrote and delivered a check for $167.00, payable to Consolidated Insurance Associates, Inc., as initial down payment therefor. About a week later, she took the required insurance physical but never received the policy she had bought. She called the agency several times about the matter and was repeatedly told the policy was coming. Finally, in June, 1987, she received a letter from American Health and Life Insurance Company, the company with whom, apparently, she was to be insured, advising her that her application for insurance was being cancel led because certain required information was not received. When she called the agency, (Jack), to get her money back, he promised to send it but never did. As a result, she finally called Respondent who, in November, 1987, mailed her a check on the account of Consolidated Insurance Associates, Inc., dated November 24, 1987, in the amount of $117.00, $50.00 less than the initial payment. Ms. Wescott admittedly did not deposit that check immediately. For one thing, it was not for the correct amount, and in addition, she overlooked it. When she finally did deposit it for collection, it was dishonored and returned because of insufficient funds, and she was charged a $12.00 service charge. On January 9, 1988, Ms. Wescott wrote to Respondent outlining what had happened and requested a replacement check in the amount of $179.00, ($167.00 plus $12.00). In this letter, which was mailed to Respondent's home address since the agency had, in the interim, been sold, Ms. Wescott recited the lack of Respondent's response to prior calls and threatened to report the matter to the Insurance Commissioner. Even with this, she received no response from Respondent. Ms. Wescott determined that Respondent was working at a real estate office and when called there, too, failed to return calls. Ms. Wescott ultimately received a check for the entire amount from, she believes, the Department of Insurance. Though she is not sure from whom the check was received, she is certain it was not Respondent or Respondent's agency. When she contacted the new owner of the agency, her request for reimbursement was denied and the new owner suggested she contact the Department. Admittedly, Ms. Wescott dealt only with Mr. Jarr up until the time the cancellation letter was received. Only at that point did she talk with Respondent, and the check, purportedly in reimbursement for the premium paid, which was dishonored, was signed by Respondent. Respondent claims that she was only the subagent for the company with whom Mr. Jarr placed Ms. Wescott but paid Ms. Wescott back herself with a check she claims was good when written. However, since the check in question is dated November 24, and even though held by Ms. Wescott for a while, it had been deposited and dishonored by January 9, 1988 when Ms. Wescott's letter to Respondent was written. This accounts for a total time of 46 days from date of check to date of letter, and with mail times and bank processing times deducted, the time the check was held before deposit cannot be considered unreasonable. Ms. Cramer sold the agency in December, 1987 to an individual who was to assume all the agency liabilities. At the time she sent Ms. Wescott the check for $117.00, she was, she claims, unsure of the amount owed since she no longer had the books in her possession. Considering the probabilities of her testimony and it's corroboration or lack thereof by other evidence of record, it is considered unworthy of belief. On April 4, 1988, Thomas J. Secondo, who was, at the time, having a personal relationship with the Respondent, went to her to get insurance on his two automobiles. He wrote a check that day for $1,641.00 for what he believed was the total premium for the coverage sold and gave it to Respondent personally. He never received a policy of insurance for his money but on June 9, 1988, was notified that his coverage would be cancelled on June 18, 1988 for "underwriting reasons." Somewhat before that time, he also received a book of payment coupons, the reason for which he could not fathom, since it was his understanding he had paid for his policy in full by the check he had given Respondent. Documents introduced into evidence by the parties reflect that on May 18, 1988, Mr. Secondo's policy, purportedly with American United Insurance Company, was to be financed through Express Premium Finance, Inc. in Hollywood, Florida. Mr. Secondo denies having signed the premium finance agreement which bears what is purported to be his signature, and examination of that document clearly reveals that the signature thereon is not his. Just as all this was happening, Respondent contacted Mr. Secondo in writing on June 15, 1988 and requested he come to the office to sign a new application for the requested coverage. Enclosed with that request was a copy of an insurance binder for auto coverage with Bankers Insurance Company, to be effective on June 18, 1988. Again, Mr. Secondo was sent a premium finance notice by Bankers representing a total premium of $1,358.00. This notice, dated August 29, 1988, reflected the first premium of $14.30, due on August 12, 1989, the second in the amount of $193.34, and the remainder, also at $193.34, due on the 28th of each month thereafter. By memo of August 19, 1988, Bankers Insurance Company notified Mr. Secondo that his policy was being cancelled for nonpayment of the initial $14.30 premium. However, by notice of September 1, 1988, the company reinstated the coverage and included a new billing schedule reflecting a slightly higher monthly premium of $197.54. On August 16, 1988, Respondent wrote to Mr. Secondo informing him of a change in policies and noting that the new policy was somewhat less expensive than the former. Notwithstanding this, by letter dated September 25, 1988, she advised him of the need for him to pay an additional $171.31. Mr. Secondo did not understand the reason for this additional charge in light of the fact that the second policy, that issued, was less costly than the first which was never issued. This discrepancy was not successfully explained at hearing nor has it yet been clearly explained. Notwithstanding his confusion, on the advice of a representative from the Department's St. Petersburg office, Mr. Secondo paid the additional sum requested. Ms. Cramer claims that all she asked from Mr. Secondo at the time she sold him the insurance was the down payment on the policy. However, he insisted on giving her more money to impress her with how much money he had. She further claims she put the balance over the down payment in the account of ASAP Insurance, (not further identified). On examination, she claimed this was a unique situation and she never does business this way. Ms. Cramer has been licensed as an insurance agent in Florida for almost 20 years and claims never to have had a problem with the Department before now. There is no evidence of any prior complaints against her or of prior disciplinary action. She had known Mr. Secondo for about 3 months before he came to her for insurance on his vehicles. She admits to having received his check for $1,641.00 for the premium for that coverage. Because of some difficulty with his driver's license, which she discussed with him at the time, she processed the application, sending in only the required 30% down payment so that if the application was rejected, he would not have to wait to get back the full amount of his premium. She claims to have advised him at the time there might be a problem and that the policy, when issued, might carry a higher or lower premium. When she sent the deposit for the auto insurance to the broker with whom she was dealing, he required a premium finance agreement which she filled out and sent in without, she claims, affixing Mr. Secondo's signature thereto. She claims to have no knowledge as to who signed it, but this is unworthy of belief. The automobile insurance was not issued by the first company because of some underwriting problem. Respondent claims she told Mr. Secondo this but by then he had received a payment schedule and was upset about that. Ms. Cramer claims that Mr. Secondo had been fully advised that only a part of the $1,641.00 he had paid originally was to go to payment of premium, but she does not explain where the balance went, other than into the account of ASAP. She also claims to have procured insurance for him from Bankers Insurance Company without financing any part of the premium, but it is clear from the documents introduced that this coverage was financed as well. Her exculpatory comments are confusing and far less than convincing, and are not believed. Respondent asserts she made the premium payments for Mr. Secondo, (presumably from the sums deposited to ASAP), until she got an accounting from the company. She then wrote to Mr. Secondo, (their personal relationship having dissolved by then), and claimed the amount she felt was due her, (the $171.31). She admits that in the interim, while she was awaiting the refund from the first policy deposit, she neglected to make the initial $14.30 premium payment on the second policy, causing it to be cancelled. At that point, she made the payment to have the policy reinstated. The reinstatement notice, however, does not show the policy paid in full, but calls for continuing installments. Ms. Cramer now claims that the $1,641.00 figure she gave Mr. Secondo was tentative and subject to change and that he knew it. She claims the discrepancy involving his policy was a bookkeeping error, and at no time did she intend to take his money and not get him insurance. The evidence, however, shows otherwise.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that the Insurance Commissioner issue a Final Order in this case suspending Shirley Ann Cramer's license and eligibility for license as an insurance agent of any kind in Florida for one year. RECOMMENDED this 6th day of August, 1990, in Tallahassee, Florida. 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 6th day of August, 1990. COPIES FURNISHED: Robert V. Elias, Esquire Department of Insurance Division of Legal Services 412 Larson Building Tallahassee, Florida 32399-0300 John L. Waller, Esquire 100 2nd Avenue, North Suite 210 St. Petersburg, Florida 33701 Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Don Dowdell General Counsel Office of the Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300
The Issue The issue for consideration is whether Respondent's licenses and eligibility for licensure as a life agent, a life and health agent, a general lines agent, a health agent and a dental health care contract salesman in Florida should be disciplined because of the matters set forth in the Administrative Complaint filed herein.
Findings Of Fact At all times pertinent to the matters in issue herein, the Department of Insurance and Treasurer was the state agency in Florida responsible for the licensing of insurance agents and regulation of the insurance industry in this state. Respondent, Michael Charles Peppe was and is currently licensed and eligible for licensure in Florida as a life insurance agent, a life and health insurance agent, a general lines agent and a health insurance agent. He was an officer and director of M. Peppe Agency, Inc., a Florida corporation. During the period in issue herein, Respondent's agency had a brokerage agreement with William Sanner and Mary Lou Sanner who were employed as sub- agents. Constance Abraham, an 85 year old widow first met William Sanner when she moved to Ft. Lauderdale, some 20 or so year ago. They were neighbors in the same apartment building. At that time she was insured with Mutual of Omaha and her policy was transferred to him, an agent for that company, for service. Over the years she purchased quite a bit of other insurance from him. They were all different kinds of health insurance policies and over time, she estimates, she purchased somewhere around 50 policies. During the period between 1985 and 1991, Mrs. Abraham purchased numerous health policies for both herself and her son through Mr. and Mrs. Sanner, though she does not recall ever having dealt with Mrs. Sanner. Records disclose that her coverage was placed with nine different companies and provided coverage in such areas as Medicare Supplement, nursing home insurance, cancer insurance, and hospital expense - indemnity insurance. Over the years approximately 60 policies were issued through Respondent's agency to either Mrs. Abraham or her son. The applications were taken by Sanner who would collect the initial premiums and forward both to Respondent's agency for processing to the various insurers. Some policies were signed by Sanner as agent of record and some were signed by Respondent in that capacity. Only a few were signed by Mrs. Sanner. Mrs. Abraham claims she didn't realize how much health insurance she had. Mr. Sanner would come to her apartment and talk to her about a new policy and she would abide by his advice. Her purchases amounted to approximately $20,000.00 per year in premiums which she would pay by check to Mr. Sanner. At no time did she ever deal with or meet the Respondent, Mr. Peppe. She did not question Sanner deeply about why he was selling her so much insurance. Whenever she asked about a new policy, he would usually have what appeared to he to be a good reason for it such as something was lacking in her coverage. Even when she recognized he was selling her duplicate coverage, he told her it was a good idea to have more. At no time did he or anyone else tell her she had too much insurance. Mrs. Abraham claims to know nothing about insurance herself. However, she was cognizant of the nature of the policies she had, utilizing without prompting the terms, "indemnity", "supplemental", and "accident." Mr. Sanner would come to her home at least once a month She trusted him to help her with her health insurance and would talk with him whenever a policy came up for renewal. On some occasions he would recommend she renew and on others would recommend she drop that policy in favor of another. At no time was she aware, however, of the fact that she was duplicating policies. She also claims she never had to tell Mr. Sanner what she wanted from her coverage. He always seemed to know and would handle not only the purchase of her policies but also the filing of her claims. She can recall no instance where she asked for any coverage and he tried to talk her out of it. Mrs. Abraham denies she was the person who complained to the Department. It was her daughter who noticed what was going on and took matters into her own hands. At no time did either Sanner or the Respondent attempt to contact her after the complaint was filed. Mrs. Abraham and her husband had four children. Her son, Lewis, who is somewhat retarded, lives with her and she also purchased some policies for him. Over the years she has had many occasions to file claims under her policies. It is important to her that she have protection to provide full time care if necessary because she has no family locally to provide that care for her. She had coverage that provided nursing care, a private room in the hospital, and some policies which provided for extended or nursing home care. She recognizes that such care is expensive and wanted enough policies to give her total coverage without out of pocket expense if the care was needed. She keeps track of the policies she has on her personal computer and has been doing so for some six or seven years. She apparently is sufficiently computer literate that she knows what she has and what she is doing. Mrs. Abraham owns a condominium at the Galt Ocean Mile apartment in Ft. Lauderdale. The $20,000.00 figure in policy premiums she mentioned were for her policies only. Those for her son were extra. She has sufficient income from stocks and bonds to pay her premiums, pay her mortgage, and still live comfortably. Her son has his own income from a trust fund and his own investments. At one point in time, when Mrs. Abraham had some recurring health problems and was in and out of hospitals regularly, she received in benefits far more than her actual expenses and made a tidy profit. Nonetheless, she adamantly disclaims she purchased the policies she had for that purpose claiming instead that she wanted merely that both she and her son be able to pay for the best medical care possible in the event it is needed. To that end, Lewis Abraham has filed very few claims against his carriers. Most, if not all, of the companies which provided the coverage for Mrs. Abraham and her son have limits on the amount of total coverage any one policy holder can have in any line of insurance. The limit is cumulative and not limited to policies with a specific company. Taken together, the policies in force for Mrs. Abraham in some cases exceeded that limit and had the insurers been made aware of the totality of her coverage, their policies would not have been issued. This information was not furnished to the companies, however, by either Sanner or Respondent. In addition, on many of the policies the mental condition of a policy holder must be disclosed if that person is retarded or not fully competent. Respondent did not know of Lewis' condition though Mr. Sanner was fully aware of it both as it related to his retardation and his drop foot. On none of the policy applications relating to him, however, was either ever mentioned. Some companies indicated that if Lewis's mental and physical condition had been properly disclosed on the application, they either would not have issued the coverage or, at least, would have referred the matter to the underwriter for further evaluation and a determination as to whether to issue the policy and if so, at what premium. Even more, Lewis' physical and mental condition may have caused the company to decline payment of a claim within two years of issuance of any policy actually written. Respondent received monthly statements from the various insurers with whom his agency did business detailing the transactions for that month. Commissions on each sale were paid by the insurers to Respondent's agency and thereafter, pursuant to an agreement between Respondent and Sanner, the commissions were divided. The commissions paid to Respondent's company by the insurers on all these policies amount to in excess of $18,000.00. Respondent asserts that Mrs. Abraham knew exactly what she was doing and was, in effect, conducting if not a scam, at least an improper business activity through the knowing purchase of duplicative policies and redundant coverage. This well may be true, but even if it is, Mr. Sanner was a knowing accomplice and participant. In addition, while it is accepted that Respondent might not know the status of every policy purchased through his agency or the total activity with any particular client, when his name appears as signatory on policy applications forwarded to a company for whom he accepts or solicits business, as here, it is hard to find he did not have at least a working familiarity with the business written by his sub-agents . This finding is supported by the analysis done of Respondent's pertinent activities here by Milton O. Bedingfield, a 39 year insurance agent and broker for 10 companies, a Certified Life Underwriter, and an expert in life and health insurance. Mr. Bedingfield concluded, after a review of all the policies written for the Abrahams through Respondent's agency, there was a gross oversale of policies and repeated omissions of pertinent information on policy applications. He found a duplication of benefits and overlapping coverage, all without legitimate purpose, especially for an 85 year old woman. Since the average hospital stay is less than 2 weeks, she would not likely benefit from her insurance for the stay. He could not see where Mrs. Abraham would get back in benefits what she has paid in premiums. In Mr. Bedingfield's opinion, this is the worst case of oversale he has seen in his 39 years in the insurance business. He contends the agent stands in almost a fiduciary capacity to his clients - especially the aged who rely on their agent to properly advise them on adequate coverage. There is often an element of fear involved that the unscrupulous agent can profit from. Here, he feels, Respondent's practice falls far short of the state's standard of acceptability on the sale of Medicare Supplemental insurance. On balance, however, Mr. Bedingfield does not know if all the policies he saw stayed in force throughout the period of the policy. Many could have lapsed or been cancelled. In all fairness, as well, where insurance is brokered, as here, the ultimate placing agent normally does not meet the client but must rely on what he is told by the offering agent.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that the Administrative Complaint filed against the Respondent in this case, Michael C. Peppe, be dismissed. RECOMMENDED this 11th day of December, 1992, in Tallahassee, Florida. 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 11th day of December, 1992. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 92-2708 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. & 2. Accepted and incorporated herein. Accepted and incorporated herein. - 9. Accepted and incorporated herein. Accepted and incorporated herein. & 12. Accepted and incorporated herein. 13. & 14. Accepted and incorporated herein. 15. - 18. Accepted and incorporated herein. Accepted. Accepted. & 22. Accepted. Rejected as not supported by evidence or record except for the fact that Respondent sign and processed applications and premium payments and received a financial benefit from the sales. Accepted. FOR THE RESPONDENT: Accepted so far as it relates Ms. Abraham was well informed and aware of her coverage. Not established, but insufficient evidence of actionable misconduct. Accepted. - 6. Not proper Findings of Fact but more Conclusions of Law. Accepted. Not a proper Findings of Fact. COPIES FURNISHED: James A. Bossart, Esquire Division of Legal Services 412 Larson Building Tallahassee, Florida 32399-0300 Thomas F. Woods, Esquire Gatlin, Woods, Carlson & Cowdrey 1709-D Mahan Drive Tallahassee, Florida 32308 Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Bill O'Neil General Counsel Department of Insurance The Capitol, PL-11 Tallahassee, Florida 32399-0300
The Issue The issue to be resolved in this proceeding concerns whether the Respondent violated various provisions of the Florida Insurance Code, as alleged in the Amended Administrative Complaint, and if so, what penalty, if any, is warranted.
Findings Of Fact The Petitioner is an agency of the State of Florida charged with regulating and licensing the entry of insurance agents into the profession of insurance and with regulating the practice of agents and other insurance professionals already licensed by the State of Florida. The Respondent, at all times pertinent hereto, was and is licensed by the State of Florida as a non-resident life and health insurance agent. The Respondent procured applications for life insurance to be issued from Pacific to the 30 named individuals and entities set forth in the Amended Administrative Complaint in its 25 counts. Pacific was not authorized to transact insurance business in the State of Florida because the company was not yet licensed. However, it was in the process of becoming licensed and licensure was imminent. The company Regional Director, C. Manley Denton, and other company officials, when they recruited the Respondent to sell insurance policies in Florida, assured him that licensure was imminent, that there was no impediment to finalization of the licensure procedures in the very near future, and that the Respondent could legally obtain life insurance policy applications and sell policies in Florida if he took the applications and dated them in and from his Tulsa, Oklahoma, office. He was assured that this procedure would render his activities legal. In reliance on these representations by officials of Pacific, the Respondent undertook to and did obtain the applications for, and sell the insurance policies, referenced above and in the Amended Administrative Complaint. The Respondent, for many years, has transacted insurance business as a general agent of life and health insurance in Oklahoma and in Florida. He is a resident of both states, spending part of each year in each state. Many of the policyholders referenced above and in the Amended Administrative Complaint were clients of the Respondent, who had already had other insurance policies issued by him through companies he represents. In the particular instances involved in this proceeding, many of these clients had been policyholders of the First Capital Life Insurance Company, which had experienced financial difficulties and gone into receivership. Because of his policyholders' concern and his own concern about the possibility of the future inability to pay claims by the company in receivership, the affected clients and the Respondent were desirous of replacing those policies with policies in a different and sounder insurance company. This desire dovetailed neatly with the desire by the executives at Pacific to obtain a large block of insurance policy business in Florida and in other states in the mainland United States. This desire by Pacific executives was due to a recent merger of that company with the Hawaiian Life Insurance Company, a company which was owned by Meiji Mutual Life of Tokyo Japan (Meiji). The resulting merged company, Pacific, was owned by Meiji. The executives at Pacific, which had historically been headquartered in San Jose, California, desired to continue to maintain the company domicile and their own personal residences in California and avoid having to relocate to Hawaii. This was the reason they desired to secure a large block of insurance business very rapidly in order to enhance the sales record of the "stateside branch" of the company. They believed that this would insure that their relocation would not have to be accomplished. With this interest in the forefront of their plans, the executives of Pacific began to search for the best insurance agents in the nation who have a record of successfully writing large volumes of life insurance policy business. The Respondent is such an insurance agent. He had recently achieved a nationally-recognized ranking as one of the highest volume life insurance producer agents in the country. Because the Respondent was desirous of placing a high-dollar volume of life insurance policies for the clients referenced above, who had had policies in the financially-troubled First Capital Life Insurance Company, the Respondent agreed, at the behest of the officials of Pacific, to attempt to write a large block of life insurance business in the State of Florida. The Respondent is a well-respected general life insurance and health insurance agent. He is widely known throughout the insurance profession and industry, throughout the United States, as an ethical, competent and successful life insurance policy producer. He has no blemish on his licensure and practice record as an agent, throughout the approximate 40 years he has engaged in the profession. When the Respondent obtained the insurance policy applications and policies at issue in this proceeding, he engaged in one course of conduct. That is, he contacted the clients and obtained their applications and arranged for the sale of the insurance policy contracts to them, as either new policies and clients, or as replacement policies for his existing clients, as the case might be. He engaged in this essentially-identical transaction with all 30 of these policyholders, in the genuine, good-faith belief that he was legally writing insurance policy business in the State of Florida based upon the circumstances related to him by officials of Pacific, upon which he relied. He candidly acknowledges, through counsel, that, in so relying, he knew that the company was not actually licensed in the State of Florida, but that that eventuality was imminent in the very near future, and that based upon the method the company assured him of writing the policies through the Tulsa, Oklahoma, office, he would be obtaining and transacting this business in a legally acceptable way. He also candidly acknowledges that, in fact, he understands, from his contact with the Department since that time, this was not the case and that he was writing the business for a company not legally authorized to do business in the State of Florida. The Respondent has freely admitted these above-found facts and does not dispute that he was in violation of the portion of the charges that do not depend on intent. He has established, however, through the exhibits admitted as explanatory hearsay and the agreed-upon proffer of his counsel, that the transactions at issue, all of which were the result of one essentially-identical course of conduct, were accomplished with no intent to defraud the policyholders, the company, or the Florida Department of Insurance. There was no willful, dishonest or deceitful intent by the Respondent during the course of his engagement in these transactions. There was no such willful wrongful intent in the course of his contact and relations with the company, those policyholders, or the Department of Insurance since that time. No policyholder or company suffered any financial detriment as a result of the Respondent's conduct, nor did any insurance coverage lapse at any time. Although there were some 30 policyholders who were sold insurance by the Respondent, as the agent for a company not actually licensed in the State of Florida, that circumstance had no effect on the validity of the policy coverages involved and there were no actual "victims" of the Respondent's conduct.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered by the Petitioner, Department of Insurance, finding the Respondent, Wayne Harland Creasy, guilty of a violation of Section 626.901(1), Florida Statutes, in the manner found and concluded above and that a penalty of $3,000.00 be imposed, together with the award of $500.00 in attorney's fees. DONE AND ENTERED this 1st day of April, 1996, in Tallahassee, Florida. P. MICHAEL RUFF, 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 1st day of April, 1996. APPENDIX TO RECOMMENDED ORDER Petitioner's Proposed Findings of Fact 1-32. Accepted. Rejected, as constituting a conclusion of law and not a finding of fact. Accepted, in part, but subordinate to the Hearing Officer's findings of fact on this subject matter. Accepted, in a technical sense, but not in the sense that any overt, intentional effort to circumvent Florida law was committed by the Respondent. Rather, it was a negligent failure to act in a legal way due to being misled by Pacific Guardian Life Insurance Company, Ltd. or its officers or employees. Accepted, as to the factual allegations of the Administrative Complaint, but not as to their legal import, and subordinate to the Hearing Officer's findings of fact on this subject matter. Respondent's Proposed Findings of Fact The Respondent's proposed findings of fact are not ruled upon or considered because they were not timely filed, being approximately one month out of time with no motion for extension of time, during the originally-set time period, being filed. Consequently, the Petitioner's motion to strike the Respondent's proposed findings of fact and conclusions of law is granted. COPIES FURNISHED: Willis F. Melvin, Jr., Esquire Department of Insurance and Treasurer Division of Legal Services 612 Larson Building Tallahassee, Florida 32399-0333 C. Rabon Martin, Esquire Martin and Associates 403 South Cheyenne Avenue Tulsa, Oklahoma 74103 Bill Nelson, State Treasurer and Insurance Commissioner Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Dan Sumner, Acting General Counsel Department of Insurance and Treasurer The Capitol, PL-11 Tallahassee, Florida 32399-0300
