The Issue The issue for determination is whether Respondent used its best efforts to obtain and maintain adequate property insurance and whether adequate property insurance includes windstorm coverage.
Findings Of Fact The Carillon Association is a Florida not-for-profit corporation organized in 1966. Carillon Condominium consists of eight units. The units are owned by seven unit owners and controlled by the Carillon Association.3 Carillon Condominium is located in Miami Beach, Florida. During its existence of more than 40 years, Carillon Condominium has survived Florida's tropical storms, depressions, hurricanes, and other forms of wind and rain. At the time of the hearing, the Carillon Association was governed by a three-member board, consisting of a president, secretary, (who is also the legal counsel), and treasurer. Section XXVI of the Carillon Condominium's Declaration of Restrictions, Reservations, Covenants, Conditions and Easements (Declaration), titled "Casualty Insurance," provides in pertinent part: Purchase of Insurance: The association shall obtain fire and extended coverage insurance and vandalism and malicious mischief insurance insuring all of the insurable improvements within the condominium, together with such other insurance as the association deems necessary in and for the interest of the association, all unit owners, and their mortgagees, as their interests may appear, in a company, Triple A - best rating or better, in an amount which shall be equal to the maximum insurable replacement value as determined annually; and the premiums for such coverage and other expenses in connection with said insurance shall be assessed against the unit owners as part of the common expenses. * * * (4) Loss Less than "Very Substantial": Where a loss or damage occurs to more than one unit, or to the common elements, or to any unit or units, and the common elements, but said loss is less than "very substantial" (as hereinafter defined), it shall be obligatory upon the association and the unit owners to repair, restore and rebuild the damage caused by said loss. Where such loss or damage is less than "very substantial": * * * In the event the insurance proceeds are sufficient to pay for the cost of restoration and repair, or in the event the insurance proceeds are insufficient but additional funds are raised by special assessment within forty-five days after the casualty, so that sufficient funds are on hand to fully pay for such restoration and repair, then no mortgagee shall have the right to require the application of insurance proceeds to the payment of its loan; provided, however, that this provision may be waived by the Board of Directors in favor of any institutional first mortgages upon request thereof at any time. To the extent that any insurance proceeds are required to be paid over to such mortgagee, the unit owner shall be obliged to replenish the funds so paid over, and said unit owner and his unit shall be subject to special assessment for such sum. Notwithstanding the foregoing provision, any institutional mortgagee shall have the right to require payment to it, and apply against the mortgage, any insurance funds to the extent of its interest therein. The Carillon Condominium's By-Laws provides in pertinent part: Article II Directors * * * Section 5. Powers: The property and business of the corporation shall be managed by the Board of Directors, which may exercise all corporate powers not specifically prohibited by statute, the Certificate of Incorporation, or the Declaration to which these By-Laws are attached. The powers of the Board of Directors shall specifically include, but not be limited to, the following: To make and collect assessments and establish the time within which payment of same are due; To use and expend the assessments collected to maintain, care for and preserve the units and condominium property, except those portions thereof which are required to be maintained, cared for and preserved by the unit owners; * * * E. To insure and keep insured said condominium property in the manner set forth in the Declaration, against loss from fire and/or other casualty, and the unit owners against public liability, and to purchase such other insurance as the Board of Directors may deem advisable . . . . * * * Section 7. Meetings: * * * Special meetings shall be held whenever called by the direction of the President or a majority of the Board. The Secretary shall give notice of each special meeting either personally, by mail or telegram, at least three (3) days before the date of such meeting, but the directors may waive notice of the calling of the meeting; A majority of the Board shall be necessary and sufficient at all meetings to constitute a quorum for the transaction of business, and the act of the majority present at any meeting at which there is a quorum shall be the act of the Board. . . . * * * Article VII Finances * * * Section 3. Determination of Assessments A. The Board of Directors of the corporation shall fix and determine from time to time the sum or sums necessary and adequate for the common expense of the condominium property. Common expenses shall include expenses for the operation, maintenance, repair or replacement of the common elements . . . all insurance premiums and expenses relating thereto, including fire insurance, and any other expenses designated as common expense from time to time by the Board of Directors of the corporation. . . Funds for payment of common expenses shall be assessed against the unit owners in the proportions or percentages of sharing common expenses provided in the Declaration . . . Special assessments, should such be required by the Board of Directors, shall be levied and paid in the same manner as heretofore provided for regular assessments. . . . At all times material hereto, John Hillman was president of the Carillon Association. He has served as president for the past ten years. Additionally, he owns two units and has owned one of his two units for approximately 20 years. At all times material hereto, Lily Carico was treasurer of the Carillon Association. At all times material hereto, except from March 2010 forward, Peter Neofotistos was vice president of the Carillon Association. In March 2010, he resigned as vice president. At the end of each year for the past 20 years, the treasurer prepared a financial statement, i.e., an Annual Report, setting forth the annual budget based upon credits and debits, which was provided to each unit owner. The next year's budget was determined based upon the previous year's, resulting in essentially last year's budget becoming the next year's budget, and was financed by each of the owner's respective quarterly maintenance payments. For the past ten years, no annual budget meetings were noticed and held. Any extraordinary expenses for the past 20 years resulted in a special assessment to each unit owner, based upon each unit owner's ownership interest in the Carillon Condominium. For the past 20 years, the Carillon Association never charged or collected reserves for repair or replacement of items. Furthermore, for that same period of time, none of the unit owners requested a meeting to establish a reserve account. No evidence was presented as to whether, during the 20-year period or prior thereto, a majority of the unit owners voted to have no reserves. At all times material hereto, the Carillon Association purchased and maintained general premises liability coverage and all-risk coverage, including, but not limited to, fire, theft vandalism, vehicle, collapse, lightning, terrorism, and equipment breakdown coverage on the Carillon Condominium. The insurance premium for the all-risk policy in 2009 was $2,390.00 and in 2010 was $2,331.37. Sometime in 2006, Mr. Neofotistos suggested to Mr. Hillman the obtaining of insurance, covering wind and flood damage, by the Carillon Association in light of the recent hurricane activity. Mr. Hillman agreed in principle and that such insurance coverage might be something to explore. In 2006, unit owner Peter Neofotistos elected to use his one unit as collateral to secure a bank loan. He advised Mr. Hillman that his lender required a wind and flood insurance policy for the Carillon Condominium and that he (Mr. Neofotistos) acquired a master wind and flood insurance policy covering the Carillon Condominium at a cost of $3,740.00. Subsequently, Mr. Neofotistos made a demand for reimbursement of the $3,740.00. Mr. Hillman refused to reimburse Mr. Neofotistos mainly because the directors of the Carillon Association had not authorized and approved for Mr. Neofotistos to obtain the coverage for the Carillon Association. In 2009, unit owner Mario Sesma elected to use his one unit as collateral to secure a bank loan. The Carillon Association agrees that Mr. Sesma advised Mr. Hillman (a) that his lender was requiring a windstorm insurance policy for the loan; (b) that he (Mr. Sesma) was unable to pay for the windstorm insurance coverage; and (c) that the coverage would be considerably less if the Carillon Association had a master windstorm policy. Mr. Sesma advised Mr. Hillman further that the lender obtained a lender-placed flood insurance policy at a cost of $3,090.00 to Mr. Sesma. In April 2009, the roof at the Carillon Condominium required replacing due to leaks and age (ten years old). The unit owners were given notice of a special assessment in the amount of $15,285.70 for replacement of the roof. In 2009, Ms. Carico contacted the Carillon Association's long-time and current insurance agent for a quote on windstorm and hail insurance for the Carillon Association. She contacted the insurance agent upon learning of Mr. Sesma's request for the Carillon Association to obtain windstorm insurance. In September 2009, the insurance agent advised Carillon Association that one of the eligibility requirements for the insurance was an appraisal of the Carillon Condominium. Mr. Hillman requested the unit owners, who had forced-coverage by the lending institutions, to provide a copy of their appraisal in an effort to save money on the appraisal. The unit owners did not respond to his request. Additionally, in September 2009, the insurance agent provided a quote for the insurance coverage--the total estimated cost of the insurance was $4,012.00. However, he advised the Carillon Association that the estimate would fluctuate up or down depending upon the appraisal. The Carillon Association did not obtain an appraisal on the Carillon Condominium's common property. The Carillon Association's legal counsel, Jill Hillman, who was the daughter of Mr. Hillman and also a unit owner, advised the Carillon Association that windstorm insurance was not mandated by law. Ms. Carico conducted an informal poll of unit owners as to whether they wished the Carillon Association to purchase windstorm insurance for the Carillon Condominium. She did not want to purchase the insurance and was aware that Mr. Hillman and Ms. Hillman did not. Also, Ms. Carico asked two other unit owners, who indicated that they, too, did not want to purchase the insurance. As a result, five of the seven unit owners (also equating to six of the eight units), a majority, did not want to purchase windstorm insurance for the Carillon Condominium. After consultation with Ms. Hillman, acting as the Carillon Association's legal counsel, and the insurance agent, Mr. Hillman and Ms. Carico decided not to purchase the windstorm insurance quoted by the insurance agent. At all times material hereto, the Carillon Association did not have sufficient funds to purchase windstorm insurance. Moreover, the majority of the unit owners were unwilling to pay an assessment to purchase the windstorm insurance. The issue as to whether to purchase the windstorm policy quoted by the insurance agent or a windstorm policy from any other source was never brought to a formal board meeting as an agenda item at a duly called board of directors meeting or to a unit owner meeting. In or around June 2010, the water heater at Carillon Condominium required replacing on an emergency basis. The replacement cost was $5,200.00, which was funded with a special assessment upon all of the unit owners. Due to the immediacy of the situation, no board meeting and no unit owner's meeting was held; the replacement decision was made by the Carillon Association's president and treasurer. On or about July 29, 2010, Mr. Hillman sent a notice and the 2009 Annual Report to unit owners. The notice indicated, among other things, that three unit owners were in arrears, with two of the unit owners being Messrs. Neofotistos and Sesma. Mr. Neofotistos' arrearage was in the amount of $3,219.74, and Mr. Sesma's arrearage was in the amount of $2,586.40. Three board members of the Carillon Association own, cumulatively, four of the eight units. Only their units are free and clear of any mortgage.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Business and Professional Regulation, Division of Florida Condominiums, Timeshares and Mobile Homes enter a final order: Finding that Carillon Condominiums, Inc., did not violate section 718.111(11)(d), Florida Statutes (2009); and Rescinding the Notice to Show Cause. DONE AND ENTERED this 1st day of August, 2011, in Tallahassee, Leon County, Florida. S ERROL H. POWELL 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 1st day of August, 2011.
The Issue The issue for consideration herein is whether the Respondent's licenses and eligibility for licensure in the insurance field as a life insurance agent, (216); life and health insurance agent, (218); and solicitor for property, surety and miscellaneous lines, (420), should be disciplined because of the misconduct outlined in the Administrative Complaint filed herein.
Findings Of Fact At all times pertinent to the allegations herein, the Petitioner, Department of Insurance, was the state agency responsible for the regulation of the insurance industry in Florida. This included the licensing of insurance agents and solicitors. At the same time, the Respondent, Tim Calvin Olk, was licensed or eligible for licensure in this state as a life and health agent, a life insurance agent, and a solicitor for property, surety, and miscellaneous lines. He is currently eligible for licensure and appointment in this state in the same capacities. On or about November 10, 1988, Respondent contacted Gulf Coast Water & Waste, Inc., in Engelwood, Florida, and sold that company workers' compensation insurance coverage to be effective that date. He received a check for $1,000.00 payable to Brokerage Central as a premium for the coverage from Kyle James and Barbara Griffith, which, on November 14, 1988, he endorsed "Brokerage Central" and deposited into the Brokerage Central account at First American Bank. At that time, Respondent maintained an account with First American in the name of Brokerage Central which he used for his own funds. After making the deposit to the Brokerage Central account, Respondent failed to submit either the premium funds paid to him or a policy application on behalf of Gulf Coast Water & Waste, Inc. to his agency, Key Agency, Inc.. Instead, he used the $1,000.00 for his personal purposes. Since Gulf Coast Water & Waste, Inc. had been informed by the Respondent that effective November 10, 1988, the day of the application, it had worker's compensation coverage, the company thereafter utilized its employees in work activities under the mistaken belief they were covered. In reality they were not and they remained uncovered until Mr. James, at some date subsequent to November 10, 1988, actually procured the coverage from Key Agency, Inc.. On or about December 15, 1988, Respondent contacted Michael Piscopo, owner of Dante's Ristorante in Venice, Florida, with a view toward selling him business insurance to be effective that date, for one year through December 15, 1989. He collected a premium check for $3,000.00 payable to Key Agency to pay for this coverage, and on or about December 19, 1988, endorsed that check with the name, "Key Agency", and cashed it, receiving the $3,000.00 in cash. At the time, Mr. Olk represented Key Agency, Inc. as a solicitor for property, surety, and miscellaneous lines, having been hired on August 6, 1985. His relationship with Key Agency continued until December 19, 1988 but at no time included authority to convert agency funds to his own use. Notwithstanding the fact he had secured both a policy application and the $3,000.00 premium check from Mr. Piscopo for Dante's, Respondent failed to turn over either the check or the application to the agency, thereby leaving Mr. Piscopo without the coverage he had purchased. Instead of transferring the funds to his agency as he was required to do, Mr. Olk converted the money to his own use, attempting to conceal his actions by the issuing and reissuing of cashier's checks to various parties. On or about January 28, 1989, Joanna Pappas allegedly was injured while a patron in Dante's Ristorante. When the claim was processed through Key Agency, Inc., Mr. Piscopo first learned that he had no insurance coverage notwithstanding his submittal of an application and payment of the premium to the Respondent. As a result of Respondent's actions, Mr. Piscopo was without insurance coverage for the Pappas incident. It wasn't until on or about February 14, 1989 that Respondent attempted to obtain insurance coverage for Dante's Ristorante through Italiano Insurance Services, Inc., with whom he began employment as a solicitor for property, surety and miscellaneous lines on January 4, 1989. To pay for the coverage he sought for Dante's, Mr. Olk issued his personal check to Italiano. On this personal check, Respondent indicated that Dante's had paid him the $3,000.00 for the premium in cash, when in reality the premium payment was made by Mr. Piscopo by check. The check issued by Mr. Olk on his own account to Italiano to pay for the Piscopo coverage was subsequently dishonored by the bank because of insufficient funds in the account to cover it. On or about February 24, 1989, while employed as a solicitor for Italiano Insurance Services, Inc., Respondent sold group health insurance to Karen and Steven King of Symbiotic Systems Corporation of Engelwood, Florida, to be effective on or about March 1, 1989, for which he received a check for $1,420.40. Approximately two days later, on February 26, 1989, Respondent submitted both the premium check and the insurance application to Creative Planning Insurance Agency, an entity with which he was not authorized to deal directly. Some three days later, the agency returned the application to the Respondent without issuing a binder, with instructions to obtain additional information from the applicant. He did not do so right away, however, and it was not until April 1, 1989, that Respondent secured the proposed coverage. From March 1, 1989 to April 1, 1989, Symbiotic Systems Corporation employees did not have the coverage for which their employers had paid. During that period, the company did not know it was not covered. Evidence introduced at the hearing indicates that the Respondent improperly advised Symbiotic that its employees would be covered as of March 1, 1989, and did not mention to the company thereafter that from March 1 to April 1, 1989, the coverage was not in force. In addition to this failure, Respondent also improperly advised the company that its monthly premium would be $1,420.40, when in reality, the premium for the coverage applied for was $1,737.85.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that a Final Order be entered in this case revoking all licenses and eligibility for licensure and appointment in the insurance industry in this state held by the Respondent herein, Tim Calvin Olk, a/k/a Timothy Calvin Olk. RECOMMENDED this 18th day of March, 1991, 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 18th day of March, 1991. COPIES FURNISHED: Gordon Thomas Nicol, Esquire Department of Insurance 412 Larson Building Tallahassee, Florida 32399-0300 Michael P. Sampson, Esquire Holland & Knight, P.A. 92 Lake Wire Drive P.O. Box 32092 Lakeland, Florida 33802 Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Bill O'Neill General Counsel Department of Insurance The Capitol, Plaza Level Tallahassee, Florida 32399-0300
The Issue The issue is whether Respondent was an employee engaged in the construction industry and required to obtain workers' compensation insurance while working on the roof of the Myakka Animal Clinic and, if so, what penalty should be imposed.
Findings Of Fact On August 24, 1998, Petitioner's investigator observed Respondent working on the roof of the Myakka Animal Clinic in Venice, Florida. At the time, Respondent was regularly employed by Paradise Roofing, Inc., where he had an exemption from workers' compensation insurance coverage. He has never previously been guilty of a violation of the workers' compensation laws. The contract price was $800. However, the evidence is conflicting as to the identity of the party that entered into the contract with the Myakka Animal Clinic. The veterinarian testified that her understanding of the agreement was that Respondent was to do the work, but, if any problems arose, he was not alone, and she could go to Paradise Roofing, Inc., to ensure that the labor and materials were satisfactory. Although there are other indications in the record that Respondent may have been working on his own on this job, there is sufficient conflict in the evidence that Petitioner has failed to prove that Respondent was doing the job as a self- employed person, rather than an exempt employee of Paradise Roofing, Inc. Respondent's understanding of the contractual relationship carries less weight than the veterinarian's understanding of this relationship.
Recommendation It is RECOMMENDED that the Division of Workers' Compensation enter a final order dismissing the Notice and Penalty Assessment Order and any related stop work order. DONE AND ENTERED this 2nd day of April, 1999, in Tallahassee, Leon County, Florida. ROBERT E. MEALE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 2nd day of April, 1999. COPIES FURNISHED: Edward A. Dion, General Counsel Department of Labor and Employment Security 307 Hartman Building 2012 Capital Circle, Southeast Tallahassee, Florida 32399-2152 Mary Hooks, Secretary Department of Labor and Employment Security 303 Hartman Building 2012 Capital Circle, Southeast Tallahassee, Florida 32399-2152 Louise T. Sadler, Senior Attorney Department of Labor and Employment Security 307 Hartman Building 2012 Capital Circle, Southeast Tallahassee, Florida 32399-2152 Eric Kristiansen 3750 Aba Lane North Port, Florida 34287
The Issue Whether Respondent violated various provisions of the Insurance Code, specifically Sections 626.561(1), 626.611, 626.621 and 626.9521, Florida Statutes, which warrants that Respondent's licenses as an insurance agent should be disciplined.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant findings of fact are made: 1. Respondent was, at all times pertinent, licensed as a general lines agent and health agent in Florida 2 Respondent was the registered agent, sole director and officer of Sunshine State Insurance of Manatee, Inc. As a result of her corporate capacity, Sheryl Ann Satterfield is responsible for actions of employees working under her direct supervision and control. FINDINGS REGARDING COUNT I On or about April 5, 1991, Respondent's employee solicited an application for automobile insurance from Miguel A. Coronado of Bradenton, Florida. The automobile insurance was to be provided by the Nu-Main of Florida Agency. At this same time, the premium for the automobile insurance was quoted as $414.00 for a six month coverage. After being informed of the premium amount, Mr. Coronado paid Respondent's employee $146.00 in cash as a down payment on the premium. Receipt #6557 was issued which acknowledged receipt of said premium. On or about April 26, 1991, Mr. Coronado received a cancellation from Instant Auto Credit stating that his automobile was an unacceptable vehicle. After receiving this notice, Mr. Coronado went to the Sunshine State Insurance office to discuss the cancellation with Respondent. Respondent refused to refund the $146.00 premium to Mr. Coronado. Respondent never forwarded the $146.00 premium funds received from Mr. Coronado to Nu-Main of Florida. Further, Respondent failed, and refused to refund the premium to Mr. Coronado upon demand. Respondent misappropriated funds held in trust for her own use and benefit. FINDINGS REGARDING COUNT II On or about November 26, 1990, Jodi Spencer of Sarasota, Florida went to Respondent's agency for the purpose of obtaining automobile insurance. Ms. Spencer made a premium down payment of $197.00 on a quote of $697.00 annual premium. Respondent's employee issued receipt #7874 which acknowledged receipt of the $197.00 premium down payment. The auto insurance was to be provided by Nu-Main of Florida, Inc., and American Skyhawk Company. On February 11, 1991, American Skyhawk Insurance Company sent Ms. Spencer a cancellation notice. Respondent was to return $24.50 of unearned commission to Ms. Spencer which she failed to do. FINDINGS REGARDING COUNT III On or about December 31, 1990, Matthew Baker of Bradenton, Florida, went to Sunshine State Insurance Agency to obtain automobile insurance. At this time, Matthew Baker paid a down payment of $197.00 on an annual premium of $1,313.00. The insurance was to be provided by First Miami Insurance Company. Respondent's agency issued receipt #6851 upon receipt of the aforementioned premium down payment. On January 31, 1991, First Miami Insurance Company sent Mr. Baker a cancellation notice. At the time of cancellation Respondent was to return an unearned commission of $154.60. Respondent has failed to return $154.60 in unearned commission to Mr. Baker. FINDINGS REGARDING COUNT IV On or about January 11, 1991, Edwin Soto of Bradenton, Florida, was cancelled by First Miami Insurance Company with whom he had an existing automobile insurance policy. Edwin Soto had purchased this First Miami Insurance Company policy from Respondent. (Testimony of Edwin Soto). As a result of this cancellation Mr. Soto is owed $70.61 from Respondent which she has failed to return to him. FINDINGS REGARDING COUNT V In January 1991, William M. Woodyard of Bradenton, Florida, met with Respondent to renew his general liability and worker's compensation insurance. At this same time Mr. Woodyard gave Respondent his premium down payment. During the latter part of 1991, Mr. Woodyard went to Sunshine State Insurance of Manatee, Inc. to obtain a copy of his worker's compensation policy. Upon Mr. Woodyard's arrival, he met with Joe Money, President of Sunshine State Insurance Group, Inc. No record of insurance or coverage for Mr. Woodyard or his company existed. Previously, Capital Premium Finance Company had issued two return premium checks to Mr. Woodyard. Respondent deposited Mr. Woodyard's return premium checks into the Sunshine State Insurance Agency's checking account in the total amount of $440.80. Mr. Woodyard was entitled to receive a premium refund check and unearned commission check from Respondent. Mr. Woodyard did not receive any premium refund or unearned commission funds from Respondent.
Recommendation Upon the foregoing findings of fact and conclusions of law, it is recommended that Respondent's licenses as an insurance agent in this state be REVOKED. DONE and RECOMMENDED this 20th day of October, 1992, at Tallahassee, Florida. DANIEL M. KILBRIDE 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 20th day of October, 1992. APPENDIX The following constitute specific rulings, pursuant to Section 120.59 (2), Florida Statutes, upon the parties respective proposed findings of fact (PFOF) Petitioner's PFOF: 1. - 27. Accepted in substance. Respondent's PFOF: Respondent did not file proposed findings of fact. COPIES FURNISHED: Willis F. Melvin, Jr., Esquire Daniel T. Gross, Esquire Department of Insurance and Treasurer 412 Larson Building Tallahassee, Florida 32399-0300 Ms. Sheryl Ann Satterfield P.O. Box 333 Polk City, Florida 33868 Tom Gallagher, Commissioner Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Bill O'Neil, Esquire General Counsel Department of Insurance and Treasurer The Capitol, PL-11 Tallahassee, Florida 32399-0300
The Issue The issues for consideration are those promoted by an administrative complaint brought by the Petitioner against the Respondent in which the Petitioner alleges that the Respondent has violated various provisions of the insurance code, Chapter 626, Florida Statutes, in conducting business in Florida under licenses held with the Petitioner agency. The particulars of the administrative complaint are more completely set forth in the conclusions of law section to this recommended order.
Findings Of Fact Petitioner's exhibit 1 admitted into evidence is a document from Bill Gunter, Insurance Commissioner and Treasurer for Florida, announcing that the Petitioner, State of Florida, Department of Insurance and Treasurer, has records pertaining to the Respondent, Terry Vernon Smith, about his residence and business addresses. Those addresses are respectively, 4000 Southwest 5th Avenue, Ocala, Florida, 32670, and Silver Point Complex, Northeast 3rd Street and Silver Springs Boulevard, Ocala, Florida, 32670, effective April 9, 1979. Effective April 8, 1980, those addresses are, respectively, 4000 Southwest 5th Avenue, Ocala, Florida 32670, and 3423 Northeast Silver Springs Boulevard, Suite 5, Ocala, Florida 32670. At times relevant to the administrative complaint, Respondent was an independent insurance agent representing Nationwide Insurance in Florida. At times relevant to the administrative complaint, Respondent financed insurance premiums through Premium Service Company of Florida, Jacksonville, Florida. In this process, Respondent received from the insuring companies or through their managing or general agents, certain unearned refunds associated with three of the four contracts that the Premium Service Company of Florida had financed. That company attempted on numerous occasions to have those refunds given to it to make the company, Premium Service Company of Florida, whole concerning its exposure as finance agent for the insurance premiums. Eventually it was necessary for Premium Service Company of Florida to secure the assistance of the Petitioner agency to try to rectify the problem with the Respondent pertaining to the refunds. There was also a problem in which Respondent was responsible for paying over an unearned commission to the finance company in order to resolve a remaining balance in a customer account of Premium Service Company of Florida which had been financed by Premium Service Company of Florida. The details of the resolution of these problems with Respondent are set forth in the succeeding discussion. In the transactions involving Premium Service Company of Florida, Respondent would use that organization for premium financing by utilizing application materials furnished by the finance company. He would have the customers sign one of Premium Service Company of Florida's finance agreements in order to secure part of the payment of the premium. The finance company would prepay the premium to the insuring company on behalf of the customer to place the insurance in effect and the customers were to reimburse Premium Finance Company a monthly amount to satisfy the finance debt. One of the individuals who sought Premium Service Company of Florida's assistance in financing his insurance premium was William C. Erney. The details of that finance agreement are set forth in the composite Petitioner's Exhibit 3 admitted into evidence. On October 24, 1983, Erney completed a premium finance agreement with the Respondent's insurance agency which was known as Terry V. Smith Insurance Agency. Erney paid down $127 and financed an additional $236 through the Premium Service Company of Florida. The premium finance company was due the $236 borrowed plus documentary stamp charges and finance charges for the use of their money. The total amount to be reimbursed was $270.60. Six equal installments were to be paid at $45.10 per month starting on November 24, 1983, for Erney to satisfy his indebtedness to Premium Service Company of Florida. Erney did not make the installment payments, and as a consequence the premium finance company issued a notice of cancellation to the insuring company. The policy was cancelled effective November 24, 1983. This left the gross amount of unearned premium as $277. The net unearned refund in the policy was $242.38, which the insuring company sent to the Respondent on February 24, 1984. Respondent needed to add his unearned commission of $34.60 to the $242.38 in order to make the premium service company whole in the amount owed to it, which was $277. This total amount was not satisfied until after the premium service company had complained to the Petitioner agency on October 19, 1984, on the subject of Respondent's tardiness in remitting the $277 to the finance company. The payment which satisfied the Erney account outstanding with Premium Service Company of Florida came about on November 16, 1984, when Respondent paid that item off, together with others which will be subsequently discussed. A copy of the check paying off the account may be found as part of Petitioner's composite Exhibit 7 admitted into evidence. From March 1984 until receipt of its money in the Erney account in November 1984, the premium finance company made proper demands of the Respondent's insurance agency on a monthly basis, without positive results. On May 13, 1983, Herbert Holt bought insurance through the Respondent's insurance agency. The details of that purchase may be found in Petitioner's composite Exhibit 4 admitted into evidence. The purchase price of the insurance was $246 with a cash downpayment of $86. One hundred sixty dollars of the premium was financed through Premium Service Company of Florida, together with documentary stamps and a finance charge. Holt was to pay six equal installments of $31.65 beginning June 15, 1983, in order to pay off his financing arrangement with Premium Service Company of Florida. Holt did not honor the terms of his contract for repayment to the Premium Service Company of Florida, causing the cancellation of the policy effective October 23, 1983. That left owning to the premium finance company $76.46 for unearned refund. One hundred thirty-one dollars, the amount of gross unearned premium, had been credited to Respondent's agency effective October 1983. The premium finance company did not get its $76.46 refund from the Respondent's company until November 1984. On June 9, 1983, Edna A. Irmie purchased insurance from the Respondent's insurance agency. The cost of the policy was $299 with a cash downpayment of $104 and an unpaid balance financed in the amount of $195 plus documentary stamps and finance charges by Premium Service Company of Florida. The agreement between the premium service company and the purchaser of insurance was for a payment of six installments in the amount of $37.86 beginning July 9, 1983. The particulars of this purchase may be found in Petitioner's composite Exhibit 5 admitted into evidence. Ms. Irmie did not honor her agreement for payment of the installments in accordance with the repayment schedule, and on October 5, 1983, a notice of cancellation was issued by Premium Service Company of Florida, requesting cancellation due to nonpayment of the premium financing. The insuring company effected the cancellation on October 19, 1983, and returned a gross unearned premium in the amount of $191 to the Respondent's insurance agency in October 1983. The balance owed to the premium finance company from Respondent for its participation in the finance of the Irmie insurance was $161.44. That remittance was not presented to the premium finance company until November 1984. On June 30, 1983, D. N. S. Sharma, d/b/a Country Cupboard, purchased insurance from the Respondent's agency in which the price of the insurance was $1,003.50. Petitioner's composite Exhibit 6 admitted into evidence contains the details of this purchase. Three hundred fifty-three dollars and fifty cents was paid down and $650 plus documentary stamps and finance charges were financed through the Premium Service Company of Florida concerning this purchase of insurance. The insurance consumer was to pay six equal installments in the amount of $118.35 beginning August 1, 1983. None of the scheduled installment payments were paid, and on August 30, 1983, notice of cancellation was issued to the insurance company requesting cancellation for nonpayment of the premium financing. On October 5, 1983, $558 was received by Premium Service Company of Florida related to net unearned premiums/refund. The balance owed by Sharma related to the insurance premium financing was $720.10. This left a deficit in the amount of $77.13 which was due the finance company from the Respondent's unearned commission. That money from the Respondent was not received until November 1984 as a part of the settlement of all the aforementioned premium finance cases. The balance of the money owed to the premium service company, $720.10, excluding the net unearned refund and the Respondent's unearned commission, was written off as a bad debt loss when the Premium Service Company was unable to get the purchaser to pay the difference between $720.10 and the $635.51 collected in the two categories described. The settlement check was written in the amount of $592.03, which is set forth in Petitioner's Exhibit 7 admitted into evidence. In the Petitioner's composite Exhibit 7 which includes a copy of the check satisfying the Premium Service Company of Florida on the various accounts set forth recently, there is a copy of the letter which accompanied the check, and in this letter Smith acknowledges the lateness of payment in these accounts. His acknowledgment is confirmation of inordinate and unacceptable delay in the payment of monies to Premium Service Company of Florida which should have been presented much earlier. Respondent, in his association with Nationwide Insurance, was involved with that affiliation for seven years. During that time, his supervisor from Nationwide Insurance was Kenneth Collett. As established by the witness Collett, on September 20, 1985, Linda L. Humbertson purchased automobile insurance through the Respondent's agency from Nationwide Insurance. She paid $103.10 for the policy. That policy was later cancelled for nonpayment of the premium, when in fact Ms. Humbertson had paid the $103.10 for the insurance premium to Respondent's insurance agency. Petitioner's exhibit 8 admitted into evidence contains a receipt dated September 20, 1985, in the amount of $103.10 pertaining to the automobile insurance purchased by Humbertson and signed with the Respondent's name as receiving those moneys. What had happened in this instance is that Humbertson had renewed her insurance with Nationwide by paying the premium payment to Respondent's agency and that money had not been remitted to Nationwide. According to Collett, and his testimony is accepted, it was incumbent upon Respondent in the ordinary course of business to send the premium payment to Nationwide as Respondent had done in the past; however, in this situation with Humbertson, Respondent did not remit as required. Subsequently, Humbertson's policy which had been cancelled was reinstated and Respondent's account on commissions with Nationwide was debited for future commissions earned to make up the $103.10. On December 11, 1984, Econsul Corporation of Ocala, Florida, purchased a workers compensation policy from the Respondent's agency through Nationwide. The $785 check paid to the Respondent's agency may be found as Petitioner's exhibit 10. Respondent never submitted the application for the workers compensation insurance after completing the application form, nor the check related to the insurance purchase. This circumstance was later discovered by Collett. The consequence of the failure to submit the application form was that Econsul was without workers compensation coverage from December 11, 1984, through August 2, 1985. The Econsul premium payment of $785 was placed in the checking account of Respondent's insurance agency. On October 28, 1985, and again on November 7, 1985, Collett, in behalf of Nationwide, inquired of the Respondent concerning the whereabouts of the check from Econsul for workers compensation benefits. Respondent did not reply to these letters. The letters are set out in Petitioner's composite Exhibit 9 admitted into evidence. Subsequently, Nationwide Insurance Company charged a minimum premium to Econsul to comply with the laws related to workmen's compensation and refunded the balance of its premium payment, Econsul having made other arrangements for workmen's compensation insurance. The money which was associated with the coverage for Econsul in the requisite period for compliance with workmen's compensation was charged against the commission account of the Respondent, thereby satisfying the demands of Nationwide. From the evidence presented, it is inferred that Respondent is licensed by Petitioner to sell insurance in Florida.
The Issue The issue in this case is whether Respondents have violated provisions of Section 627.837, Florida Statutes, through payment of alleged monetary inducements to insurance agents for the purpose of securing contracts which finance insurance premiums.
Findings Of Fact Petitioner is the Department of Insurance and Treasurer (Department). Respondents are Puritan Budget Plan, Inc., and Gibraltar Budget Plan, Inc., (Respondents). Findings contained in paragraphs 3- 23, were stipulated to by the parties. Stipulated Facts Common shares in Respondents' corporations were sold to insurance agent/shareholders for between $500.00 and $2,500.00 per share, depending on date purchased. Presently, and for the purposes of this litigation, marketing and/or administrative fees paid by Respondents to agent/shareholders range from $1.00 to $13.00 per contract produced, depending on the number of payments made, and the amount of the down payment. Each per contract marketing and/or administrative fee paid by Respondents to agent/shareholders is completely unrelated to the number of contracts produced by that agent/shareholder, and is based upon the characteristics of each contract, pursuant to the terms of the shareholder purchase agreement. Perry & Co., pursuant to a written agreement, manages the day to day activities of Respondents, including solicitation of new shareholder/agents. Alex Campos is currently President of Perry & Co. Perry & Co., Dick Perry or Alex Campos have no equity ownership, either direct or indirect, in Respondents corporations. No shareholder of Perry & Co. is also a shareholder in either Respondent, and no shareholder of the Respondents is a shareholder in Perry & Co. No officer or director of Perry & Co. is an officer or director of either Respondent, and no officer or director of either Respondent is an officer or director of Perry & Co. The individual management agreements between Perry & Co. and Respondents are terminable with proper notice by either party. Respondent Puritan Budget Plan, Inc., was originally licensed by the Department as a premium finance company in 1984, pursuant to the provisions of Chapter 627, Part XV, Florida Statutes. Puritans' principle office is located at 2635 Century Parkway, Suite 1000, Atlanta, Georgia 30345. Respondent Gibraltar Budget Plan, Inc., was originally licensed by the Department as a premium finance company in 1984, pursuant to the provisions of Chapter 627, Part XV, Florida Statutes. Gibraltar's principle office is located at 2635 Century Parkway, Suite 1000, Atlanta, Georgia 30345. Customers of Respondents are typically financing automobile insurance premiums. There is little if any variation among licensed premium finance companies in the State of Florida as to the interest rate charged to customers. In 1988, the Department inquired of Respondents' activities in relation to agent/shareholder compensation arrangements. After several meetings with representatives from Respondents, the Department closed the matter without taking any action. Also in 1988, the Department proposed the adoption of Rule 4-18.009, which in part would have explicitly made payment of processing fees or stock dividends a violation of Section 627.837, Florida Statutes, but later withdrew the proposed rule. Again in 1994, the Department proposed a rule which would have explicitly made payment of processing fees or stock dividends a violation of Section 627.837, Florida Statutes. After a hearing and adverse ruling by the hearing officer, the Department withdrew proposed Rule 4-196.030(8). Financial consideration paid to insurance agents in exchange for the production of premium finance contracts may result in the unnecessary financing of contracts, and the Department believes Section 627.837, Florida Statutes, was intended to make such conduct illegal. Financial consideration paid to insurance agents in exchange for the production of premium finance contracts may result in insurance agents adding or sliding unnecessary products to make the total cost of insurance more expensive and induce the financing of additional contracts, and the Department believes Section 627.837, Florida Statutes, was intended to make such conduct illegal. An "inducement" is presently defined as "an incentive which motivates an insurance purchaser to finance the premium payment or which motivates any person to lead or influence an insured into financing the insurance coverage being purchased; or any compensation or consideration presented to a person based upon specific business performance whether under written agreement or otherwise." Rule 4-196.030(4), Florida Administrative Code (July 27, 1995). This rule is currently effective but presently on appeal. There is no evidence that Respondents unnecessarily financed any premium finance contracts or engaged in any "sliding" of unnecessary products to induce the unnecessary financing of contracts. Section 627.837, Florida Statutes, does not prohibit the payment of corporate dividends based on stock ownership to shareholders who are also insurance agents. According to the Final Bill Analysis for H.B. 2471, in 1995 the Legislature amended Section 627.837, Florida Statutes, relating to rebates and inducements. This section was amended to clarify that this statute does not prohibit an insurance agent or agents from owning a premium finance company. The statute, as amended, is silent on the issue of how owner-agents may be compensated. Other Facts Approximately 80 percent of Respondents' insureds will turn to the shareholder/agent to handle premium mailing and collection. When a shareholder/agent provides these valuable services and labor to Respondents through the servicing of the premium finance contract with an insured, payment for those services and/or recoupment of the expenses involved with their provision is made, at least in part, in the form of the marketing and administrative fees paid by Respondents to the shareholder/agent. The marketing and administrative fee payment by Respondents to shareholder/agents is made from the net profit of the corporation and represents payment of ownership interest (dividends) to shareholder/agents in addition to payment for shareholder/agent services or expenses. Respondents generally finance "non-standard" private passenger automobile insurance. Such insurance generally covers younger drivers and drivers with infraction points against their license. The average non-standard premium is $500 per year. Thirty percent of non-standard insureds will cancel their insurance prior to the renewal date. Cancellation of policies and financing arrangements by non-standard insurers require the agent to return unearned commissions, about $30 generally. In contrast, payment of an insurance premium in cash guarantees an agent his/her entire commission, an average of $90 per non-standard policy. Consequently, the financial interest of most agents is best served by cash sale of auto insurance as opposed to financing the insurance. The average amount generated by 95 percent of all premium finance contracts executed in Florida would yield an agent/shareholder approximately six dollars per contract.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that a Final Order be entered dismissing the Administrative Complaints. DONE and ENTERED in Tallahassee, Florida, this 28th day of November, 1995. DON W. DAVIS, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of November, 1995. APPENDIX In accordance with provisions of Section 120.59, Florida Statutes, the following rulings are made on the proposed findings of fact submitted on behalf of the parties. Petitioner's Proposed Findings 1.-11. Accepted to extent included within stipulated facts, otherwise rejected for lack of citation to the record. 12. First sentence is rejected as not substantially dispositive of the issues presented. Remainder rejected for lack of record citation if not included within stipulated facts. 13.-15. Rejected to extent not included within stipulation, no citation to record. Incorporated by reference. Rejected, no record citation, legal conclusion. 18.-19. Rejected, not materially dispositive. 20. Rejected, no record citation. 21.-23. Rejected, not materially dispositive. Rejected, record citation and relevancy. Rejected, weight of the evidence. Incorporated by reference. Respondent's Proposed Findings 1. Rejected, unnecessary to result. 2.-3. Accepted, not verbatim. 4. Rejected, unnecessary. 5.-7. Accepted, not verbatim. 8.-9. Rejected, unnecessary. 10. Accepted per stipulation. 11.-12. Rejected, unnecessary. 13. Accepted per stipulation. 14.-16. Accepted, not verbatim. Rejected, hearsay. Rejected, relevance. Rejected, unnecessary. 20.-22. Accepted per stipulation. 23. Rejected, unnecessary. 24.-57. Incorporated by reference. 58.-60. Rejected, unnecessary. 61.-62. Rejected, subordinate and not materially dispositive. 63.-67. Rejected as unnecessary to extent not included in stipulated facts. Accepted per stipulation. Rejected, unnecessary. Accepted per stipulation. 72.-76. Rejected, unnecessary. 77. Accepted per stipulation. 78.-79. Incorporated by reference. 80.-87. Accepted per stipulation. 88. Incorporated by reference. 89.-90. Accepted per stipulation. 91.-95. Rejected, subordinate. 96. Accepted. 97.-101. Rejected, unnecessary. 102. Incorporated by reference. COPIES FURNISHED: Alan Liefer, Esquire Division of Legal Services 612 Larson Building Tallahassee, FL 32399-0333 Steven M. Malono, Esquire Cobb, Cole & Bell 131 N. Gadsden St. Tallahassee, FL 32301 Bill Nelson State Treasurer and Insurance Commissioner Department of Insurance The Capitol, Plaza Level Tallahassee, FL 32399-0300 Dan Sumner Acting General Counsel Department of Insurance The Capitol, PL-11 Tallahassee, FL 32399-0300
The Issue Whether Respondent is guilty of failure to account for and deliver funds to the person entitled thereto and/or guilty of fraud, misrepresentation, breach of trust, or dishonest dealing in a business transaction.
Findings Of Fact At all times relevant hereto, Irving Halsey Brain, Jr., was licensed as a real estate broker, and, with his wife, owned the stock of Jay Hearin, Inc. On October 10, 1983, Respondent negotiated a lease of property between Emily R. Hammer, lessor, and Suncoast Heat Treatment, Inc., lessee, (Exhibit 1) for a period of three years, beginning November 1, 1983, at an initial rental of $2,225 per month plus sales tax with annual adjustments for changes in the consumer price index, and the option to renew the lease for an additional three years at the expiration of the initial lease period upon the same terms and conditions. This lease was renewed November 1, 1986, to expire October 31, 1989. On May 22, 1986, Respondent negotiated the lease agreement between Emily R. Hammer, lessor, and Whitaker Roofing, Inc., lessee, for a building for a period of one year from June 1, 1986 to May 31, 1987, at a monthly rental of $1,250 per month plus sales tax, with options to renew the lease in 1987 and 1988 on similar terms and conditions with adjustment to the rent based upon the consumer price index. Both of these leases provided in clause 21 that the lease was procured through the efforts of Jay Hearin, Inc., who was to collect all rentals coming due from which, as compensation for procuring the lease, the lessor authorized Jay Hearin, Inc., to deduct 8 percent on the Suncoast Lease and 7 percent on the Whitaker lease and remit balance to lessor. Jay Hearin, Inc., was also authorized to pay any invoices applicable to the leased premises which had been approved by the lessor and to deduct the amount so paid. In February and March, 1987, Whitaker roofing did not remit rent payments to Hearin Realty, and the monthly computer printout Owner's Statements to Mrs. Hammer show only rental payments from Suncoast. However, the monthly statement for April 1987 shows Whitaker made the February, March and April payments, and these payments were remitted to Mrs. Hammer. The May and June statements do not show payments from Whitaker and, due to an office error, the June payment from Suncoast was not remitted to Mrs. Hammer. The July statement shows receipt of rent from Whitaker for May and June and for Suncoast for July. No rental payments were received from either tenant in August, and the September statement reflects payments from Suncoast for August and September. During this period of sporadic collections, Mrs. Hammer became upset at not getting her full rental payments, and attempted several times to contact Respondent Brain without success. Brain testified he also tried to contact Mrs. Hammer without success. Mrs. Hammer telephoned the tenants about their rental payments, and they told her they had paid Respondent. In August 1987, Mrs. Hammer engaged another real estate agency to manage the property for her and unilaterally terminated her contract with Respondent contained in Exhibit 1. The new agent advised the tenants to submit rentals to him. On the September 1987 Owner's Statement, Respondent listed the Suncoast rental payments for August and September, deducted his commission, added the June payment which had not been remitted, deducted the rental commission for the balance of the lease for both Suncoast and Whitaker and submitted to Mrs. Hammer a check for the balance of $463.63. This was not accepted by Mrs. Hammer, and she engaged the services of an attorney who filed suit against respondent and Jay Hearin, Inc. The suit alleged failure to remit rents for the months of June, August and September 1987, from Suncoast in the total amount of $6,955.14 and converting these payments to his own use; and for converting rental payments from Whitaker Roofing for the months of July and August 1987, in the total amount of $2,486.06 to his own use. This complaint alleged these conversions of funds constituted civil theft and demanded triple damages (Exhibit 3). Instead of filing an answer to the complaint, Respondent submitted a letter (Exhibit 5) to Mrs. Hammer's attorney, Stephen Evans, on February 18, 1988, contending Mrs. Hammer had failed to comply with the terms of the lease agreement. The attorney for Mrs. Hammer obtained a default judgment against Respondent for triple the sums alleged to have been converted in the total amount of $28,353.60 plus costs of $105.00 and attorney's fee of $680.00 (Exhibit 2). Respondent then obtained the services of an attorney but was unable to get the judgment set aside (Exhibit 7). In 1989 Respondent submitted, through his attorney, $7,200.00 to Mrs. Hammer which apparently represents the figures shown on the September 1987 Owner's Statement without a deduction for future commissions plus interest and attorney's fees. Prior to the filing of this administrative complaint Jay Hearin, Inc., filed for bankruptcy and has been declared bankrupt. In his proposed recommended order, Respondent indicated he has also filed personal bankruptcy, but no evidence in this regard was presented at the hearing.
Recommendation It is recommended that the charges contained in the administrative complaint filed April 26, 1990 against Irving Halsey Brain, Jr. be dismissed. DONE and ENTERED this 17th day of December, 1990, in Tallahassee, Florida. K. N. AYERS 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 17th day of December, 1990. Appendix Accepted Rejected. Respondent was licensed as a broker Accepted Accepted, however, the provision quoted from the lease is Rejected as not being an accurate quote. Rejected. See Exhibit 4. Accepted only insofar as included in HO's #6,7, and 8 Accepted Accepted Treatment accorded Respondent's proposed findings: 1, 2, 3, and 4 Rejected as unsupported by evidence presented at this hearing. Accepted Accepted but for last sentence which is a legal conclusion, not as a fact. Accepted Accepted Accepted only insofar as included in HO's #6,7, and 8 (?) Accepted Accepted Accepted to the extent Respondent submitted $7,200 to Mrs. Hammer. Rejected. Evidence was presented that Jay Hearin, Inc. filed for bankruptcy, but the record does not indicate Respondent filed personal bankruptcy. Rejected as legal argument. COPIES FURNISHED: Steven W. Johnson, Esquire Division of Real Estate 400 W. Robinson Street Post Office Box 1900 Orlando, FL 32802 Irving Halsey Brain, Jr. 334 State Street Commerce, GA 30529 Darlene F. Keller Division Director Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, FL 32801 Kenneth Easley General Counsel Department of Professional Regulation Northwood Centre 1940 North Monroe Street Suite 60 Tallahassee, FL 32399-0792
