The Issue The issues are (1) whether respondent's licenses as a life and health (debit) agent, life, health and variable annuity contracts agent, life agent, life and health agent, general lines agent and health agent should be disciplined for the reasons stated in the amended administrative complaint, and (2) whether respondent's applications for the issuance and renewal of a resident license should be granted.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: At all times relevant hereto, respondent, Stephen Schnur, was licensed and eligible for licensure as a life and health (debit) agent, life, health and variable annuity contracts agent, life agent, life and health agent, general lines agent - property, casualty, surety and miscellaneous lines, and health agent by petitioner, Department of Insurance and Treasurer (Department). When the events herein occurred, respondent was licensed as a property and casualty insurance agent for Clarendon National Insurance Company (CNIC) and had placed his license as a general lines agent with Devor Insurance Agency (DIA), an incorporated general lines insurance agency located at 6611 West Hillsborough Avenue, Tampa, Florida. He has been licensed by petitioner for approximately nineteen years. In August 1987 respondent was associated with Bill Ely Insurance (Ely) in Tampa, Florida. Because that firm was unable to write automobile insurance on young drivers, Schnur referred some of Ely's business to DIA, a firm owned by one Marcia Cline, who held no insurance licenses. In September 1987 Schnur received an offer from Cline of a weekly salary of $150 if he would place his property and casualty general lines agency license with DIA. After obtaining independent verification from petitioner that DIA had no pending "problems", and accepting Cline's representation, albeit false, that the firm had an errors and omissions policy, respondent accepted Cline's offer and placed his license with DIA effective that month. He continued to utilize his other licenses to sell insurance for Ely, his principal employer. It should also be noted that another unnamed general lines agent had placed her license at DIA during this same period of time. At first Schnur attempted to review all automobile insurance applications received by DIA. However, because of his duties at Ely, he was unable to devote more than a few hours per week to DIA. In view of this, he agreed to sign in blank applications and binders for Cline to use in his absence. In doing so, he relied upon Cline's honesty and integrity and assumed she would forward all applications and premiums to the insurance company and secure coverage for DIA's customers. Under this arrangement, Cline was considered to be an employee of DIA and operating under Schnur's direct supervision and control. In October 1987 five customers purchased various types of automobile insurance from Cline. 1/ Each customer gave Cline either cash or checks as payment for their policies. Although none of the customers met with or spoke with respondent, and dealt exclusively with Cline, each received a binder from Cline signed by respondent evidencing insurance with CNIC. In addition, Cline gave each customer a receipt of payment also carrying respondent's signature. As it turned out, Cline did not process the applications or forward them to CNIC. She also failed to remit any monies to the insurance company. Consequently, none of the customers received a policy from CNIC or any other insurance company. However, respondent had no reason to suspect anything since he periodically examined the office files during this period of time and found all documents in order. On January 3, 1988, respondent learned from other office personnel that there was a problem with Cline's handling of insurance applications. He immediately telephoned petitioner's Tampa district office the same day and advised that DIA applications were found unprocessed and in the waste basket. When Schnur asked if he should pull his license from DIA, he was told by petitioner's representative not to do anything. In the meantime, the other general lines agent at DIA pulled her license and left the state. On January 28, 1988 DIA sent a form letter to various customers, including the five who had purchased policies in October 1987. The letter read as follows: Dear We are writing you this letter concerning the insurance policy which you sought through our agency. Please consider this letter as official notification from our agency that you need to purchase insurance coverage from another agency or agencies as soon as possible. You have no insurance coverage on your vehicle or vehicles. Again, you must secure insurance on your vehicle or vehicles immediately, as in today!! Sincerely, Devor Insurance Agency It should be noted that none of the five customers received any refund of monies. In early February 1988 respondent pulled his license with DIA. Since then, he has worked full-time with Ely. Respondent has fully cooperated with the Department during the course of this investigation. At hearing, Schnur was can did and forthright and admitted he used extremely poor judgment in signing in blank the binders and receipts and relying on Cline's honesty. However, there was no intent on his part to violate the insurance code or otherwise harm the customers. He strongly desires to continue in the insurance profession, a field in which he has worked without a blemish for the last nineteen years. His present employer, Ely, has expressed complete trust and confidence in Schnur, allows him to handle all of the firm's money, and intends to reward him with a part ownership of that business. Other than the charges set forth in the pending amended administrative complaint, there is no basis upon which to deny the applications for renewal and issuance of a resident license.
Conclusions Paragraph 2 of Petitioner's exceptions takes exception to the Hearing Officer's Statement of the Issues, Preliminary Statement, Conclusions of Law, and Recommendation because none of these sections of the Recommended Order address the April 9, 1990 denial of the renewal of Respondent's resident license to represent C M Life Insurance Company as a life and health insurance agent. Petitioner filed a motion for consolidation regarding the April 9 denial on April 17, 1990. Although the record contains no Order ruling on-the last motion for consolidation, it appears that the parties agreed that the April 9 denial be considered together with the administrative complaint and the denial of Respondent's application to represent United States Life Insurance Company of NY as a life and health insurance agent (February 14, 1990) and the denial of Respondent's application to represent Acceleration Life Insurance Company as a life and health insurance agent (April 6, 1990). Because the three denials of Respondent's applications for licensure or renewal of licensure were based upon the allegations in the administrative complaint in this case, all three denials (February 14, April 6, and April 9, 1990) will be consolidated with the administrative complaint for disposition by this Final Order. Accordingly, Petitioner's exception numbered 2 is accepted. RULING ON PETITIONER'S EXCEPTION TO CONCLUSIONS OF LAW Paragraph 3 of Petitioner's Exceptions takes exception to the Hearing Officer's Conclusion of Law numbered 4 because that Conclusion of Law refers to Section 626.611(6), Florida Statutes, which was not alleged in the administrative complaint, and the Conclusion of Law does not refer to Section 626.611(7), Florida Statutes. Section 626.611(6), Florida Statutes addresses misrepresentations by insurance claims adjusters or agents in effecting claims settlements. Clearly, Section 626.611(6), Florida Statutes has no application to the instant case, and violation of that section was not charged in the administrative complaint. On the other hand, Section 626.611(7), Florida Statutes lists the demonstration of lack of fitness or trustworthiness to engage in the business of insurance as grounds for the-suspension or revocation of an insurance agent's license. This statute was included in the charges in each count of the administrative complaint. The hearing officer apparently considered Section 626.611(7), Florida Statutes, in his Conclusions of Law numbered 3 and 4. Accordingly, the citation to Section 626.611(6), Florida Statutes is deemed to be a typographical error and it is assumed that Section 626.611(7), Florida Statutes was the intended citation. In light of the foregoing, Petitioner's exception in Paragraph 3 is accepted. RULING ON PETITIONER'S EXCEPTION TO RECOMMENDATION Paragraph 4 of Petitioner's Exceptions takes exception to the Hearing Officer's Recommendation that Respondent's license be suspended for fifteen (15) days and that Respondent's applications for licensure be granted after the expiration of the fifteen-day suspension. After a complete evaluation of the record the hearing officer's recommended penalty of a 15-day suspension and acceptance of Respondent's applications after the 15-day suspension is hereby rejected for the following reasons: The Hearing Officer found, in Findings of Fact numbered 2, that Respondent accepted an offer to "place" his general lines insurance agent license with Marcia Cline, an unlicensed person. This finding is supported by the Respondent's testimony at hearing. (Tr. 71, 72) Respondent was compensated with a weekly salary of $150. (Tr. 72); The Hearing Officer found, in Findings of Fact numbered 3, that Respondent had signed, in blank, applications and binders for Cline to use in Respondent's absence. This finding is supported by Respondent's testimony at hearing. (Tr. 72, 79, 81); The Hearing Officer concluded, in Conclusions of Law numbered 4, that Cline wrongfully withheld premiums from the insurer, made willful misrepresentations to her customers, demonstrated a lack of trustworthiness, engaged in fraudulent and dishonest practices, and misappropriated monies belonging to others, as proscribed by sections 626.561(1), 626.611(5), 626.611(7), 626.611(9) and 626.611(10), Florida Statutes. The Hearing Officer further concluded that Respondent is responsible for Cline's wrongdoing pursuant to Section 626.734, Florida Statutes. (Concl. of Law #4); The Hearing Officer was of the opinion that Respondent was "the victim of circumstances which happened to place his license with the wrong person at the wrong time, and because of poor judgment, is now saddled with Cline's misconduct." (Concl. of Law #5). This circumstance, together with the facts that Respondent immediately notified the Department when he learned that Cline had misused his license (Finding of Fact #6) and that Respondent was candid and forthright under oath at the hearing of this matter and admitted that he used poor judgment (Finding of Fact *8), led the Hearing Officer to recommend the 15- day suspension. It should be noted that Respondent voluntarily "placed" his license with an unlicensed individual. (Tr. 71, 72). Not only was this "placing" of the license the result of poor judgment, but it is prohibited by Section 626.441, Florida Statutes. That section provides: 626.441 License or permit: transferability.--A license or permit issued under this part is valid only as to the person named and is not transferable to another person. S626.441, Fla. Stat. Accordingly, it is illegal to place an insurance agent's license on the wall of an agency in order to assist unlicensed persons in selling or servicing insurance policies in the absence of the licensed agent. However, because a violation of Section 626.441, Florida Statutes was not alleged in the Administrative Complaint, this final order does not rule on that issue. Additionally, agents are prohibited from supplying blank forms, applications and other supplies to unlicensed persons for use in soliciting, negotiating, or effecting contracts of insurance. S626.342, Fla. Stat. Respondent admitted that he signed blank applications and binders for Cline, an unlicensed individual, to use in his absence. (Fact Stipulation of March 5, 1990; Finding of Fact *3). Violation of Section 626.342, Florida Statutes was not alleged in the Administrative Complaint, and is not addressed by this Order. While Respondent was not charged with violation of Sections 626.342 and 626.441, Florida Statutes in the Administrative Complaint, his "poor judgment" in becoming involved in this illegal arrangement is an aggravating rather than a mitigating factor in this case. Accordingly, this aggravating factor should be considered together with the mitigating factors referred to by the Hearing Officer. The Hearing Officer concluded that Respondent is liable for the acts of Cline while his license and signature were used by Cline, and that therefore, Respondent is guilty of violating five subsections of Section 626.611, Florida Statutes. Section 626.611, Florida Statutes compels the Department of Insurance to deny, suspend, revoke, or refuse to renew or continue the license of any agent who commits any of the acts listed in Section 626.611, Florida Statutes. However, the mitigating factors found by the Hearing Officer in Conclusion of Law numbered 5, namely Respondent's immediate notification of the Department when he learned of possible wrongdoing and Respondent's cooperation in the investigation, make the 15-day suspension an appropriate, if lenient, penalty in this case. However, the aggravating factor of the improper situation entered into by Respondent in "placing" his license and supplying forms to Cline renders acceptance of Respondent's applications at the end of the 15-day suspension period inappropriate in this case. Petitioner's exception to the Hearing Officer's Recommendation is therefore accepted. IT IS THEREFORE ORDERED: That the Findings of Fact of the Hearing Officer are hereby adopted in toto as the Department's Findings of Fact. That the Conclusions of Law of the Hearing Officer are hereby adopted in toto with the exceptions noted above; That the recommendation of the Hearing Officer is hereby rejected for the reasons set forth in paragraph 4 above, Ruling on Petitioner's Exception to Recommendation; That Respondent is guilty of violating subsections 626.561(1), 626.611(1), 626.611(5), 626.611(7), 626.611(9), and 626.611(10), Florida Statutes; That as a result of Respondent's violations of the above referenced statutes, the licenses and eligibility for licensure of Respondent, Steven Schnur, are hereby SUSPENDED for a period of fifteen (15) days, effective upon the date of this Order. The denial letters dated February 14, 1990, April 6, 1990, and April 9, 1990 are hereby AFFIRMED. Upon expiration of the suspension period, Respondent is free to reapply for any insurance licenses, and the Department of Insurance shall not deny Respondent's applications based upon any of the facts and circumstances at issue in this action. Any party to these proceedings adversely affected by this Order is entitled to seek review of this Order pursuant to Section 120,68, Florida Statutes and Rule 9.110, Florida Rules of Appellate Procedure. Review proceedings must be instituted by filing a petition or notice of appeal with the General Counsel, acting as the agency clerk, at 412 Larson Building, Tallahassee, Florida 32399- 0300, and a copy of the same with the appropriate district court of appeal within thirty (30) days of the rendition this Order. ORDERED this 21 day of June , 1990. TOM GALLAGHER Treasurer and Insurance Commissioner Honorable Donald R. Alexander Hearing Officer Division of Administrative Hearings 1230 Apalachee Parkway Tallahassee, FL 32399-1550 Alan J. Kerben, Esquire 8814 Rocky Creek Drive Tampa, FL 33615 C. Christopher Anderson, III, Esquire Department of Insurance Division of Legal Services 412 Larson Building Tallahassee, FL 32399-0300
Recommendation Based on the foregoing findings of fact and conclusions of law, it is: RECOMMENDED that respondent be found guilty of violating subsections 626.561(1) and 626.611(5),(6),(9) and (10) that his licenses be suspended for fifteen days. The other charge should be dismissed with prejudice. It is further recommended that his applications for renewal and issuance of resident licenses be approved after the suspension is lifted. DONE AND ORDERED this 19 day of April, 1990, in Tallahassee, Leon County, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administative 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 19 day of April, 1990.
The Issue The issue is whether Petitioner is entitled to licensure as a resident public all lines insurance adjuster.
Findings Of Fact On August 5, 2005, Petitioner filed with Respondent an application for licensure as a Residential Public All Lines Insurance Adjuster (3-20). In the application, Petitioner stated that, on July 8, 1999, he had entered a plea of nolo contendere to a felony charge of possession of cocaine with the intent to sell. In supplementation of his application, Petitioner stated in a letter to Respondent dated April 5, 2006, that the crime was a "mistake" that "dishonored myself and my family," and "[t]his is something that I would never want to experience again." Petitioner displayed the same sincere remorse during the hearing.
Recommendation It is RECOMMENDED that the Department of Financial Services enter a final order denying Petitioner's application for licensure. DONE AND ENTERED this 15th day of August, 2006, in Tallahassee, Leon County, Florida. S 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 15th day of August, 2006. COPIES FURNISHED: Honorable Tom Gallagher Chief Financial Officer Department of Financial Officer The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Carlos G. Muniz, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Allan Ayala 16383 Southwest 74 Terrace Miami, Florida 33193 William G. Kitchen, Esquire Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399-0333
Findings Of Fact Home Insurance and Home Indemnity are corporations incorporated under the laws of the State of New Hampshire, and City Insurance is a corporation incorporated under the laws of the State of New Jersey. They are foreign insurers within the meaning of Section 624.06, Florida Statutes. In its Order to Show Cause of July 2, 1993, the Department alleges that Chapter 93-401, Laws of Florida, prohibits the Home from cancelling or nonrenewing policies of insurance pursuant to a plan which was formulated and initiated in 1991, after notice to and without objection by the Department. In 1991, Home Insurance was authorized and licensed to transact the following kinds and lines of insurance in Florida, pursuant to Sections 624.41 and 624.414, Florida Statutes: fire, industrial fire, automobile casualty, homeowners and commercial multi-peril, commercial automobile liability and physical damage, commercial fire, personal and commercial inland and ocean marine, personal and commercial general liability, PPA physical damage, other liability, mobile peril and physical damage, medical malpractice, glass, aircraft, fidelity and surety, commercial multi-peril special package (business owners) and commercial package policies, boiler and machinery, accident and death, livestock, burglary and theft, earthquake and allied lines insurance. In 1991, Home Indemnity was licensed and authorized to transact the following kinds and lines of insurance in Florida pursuant to section 624.14 and 624.414, Florida Statutes: fire, industrial fire, automobile casualty, homeowners and commercial multi-peril, commercial automobile liability and physical damage, commercial fire, personal and commercial inland and ocean marine, personal and commercial general liability, PPA physical damage, other liability, mobile home peril and physical damage, medical malpractice, glass, aircraft, fidelity and surety, credit, commercial multi-peril special package (business owners) and commercial package policies, boiler and machinery, crop hail, accident and death, livestock, burglary and theft, earthquake, and allied lines insurance. In 1991, City Insurance was licensed and authorized to transact the following kinds and lines of insurance in Florida pursuant to Section 624.14 and 624.414, Florida Statutes: fire, industrial fire, automobile casualty, homeowners and commercial multi-peril, commercial automobile liability and physical damage, commercial fire, personal and commercial inland and ocean marine, personal and commercial general liability, PPA physical damage, other liability, mobile home peril and physical damage, medical malpractice, glass, aircraft, fidelity and surety, credit, commercial multi-peril special package (business owners) and commercial package policies, boiler and machinery, crop hail, accident and death, livestock, burglary and theft, earthquake, and allied lines insurance. On October 31, 1991, the Home notified the Department in writing of their complete withdrawal from all personal lines of insurance in all states, including Florida. The Department received the October 31, 1991, letter on November 5, 1991. By means of the October 31, 1991, letter, the Home notified the Department that they would nonrenew personal lines insurance policies issued in Florida and written through a broker or producer, commencing on and after May 1, 1992, and would nonrenew personal insurance policies issued in Florida on and after May 1, 1993, if written through appointed agents. The October 31, 1991, letter satisfied all requirements of Section 624.430, Florida Statutes, for notice to the Department of the Homes' intent to withdraw from personal lines coverage in the State of Florida. No Department approval of the October 31, 1991, letter was required in order for the Home to carry out the plan of withdrawal and begin issuing notices of nonrenewal in accordance with that plan. The Department never objected to the Homes' notice of withdrawal. If the Department had believed that the Homes' plan of withdrawal was not appropriate or was not legal, then the Department would have initiated some legal action against the Home. The Department never instituted such an action with regard to the October 31, 1991, letter. Prior to the issuance of the Order to Show Cause on July 2, 1993, the Department never formally notified the Home that they could not begin or could not continue implementing the plan of withdrawal outlined in the October 31, 1991, letter. From and after October 31, 1991, the Home has implemented the withdrawal from personal lines throughout the United States, including Florida, and has been engaged continually in the routine issuance of notices of non- renewal. They have kept the Department fully and completely apprised of their intent to carry out the withdrawal from personal lines in accordance with the October 31, 1991, letter. The Home has never sought an exemption from the moratorium, but instead has consistently asserted that the moratorium was inapplicable to nonrenewals done in furtherance of the plan of withdrawal. The Home has never nonrenewed a personal lines policy "on the basis of risk of hurricane claims" within the meaning of Chapter 93-401, Laws of Florida. In fact, the Home has always had and followed a policy of not nonrenewing policies on the basis of claims resulting from acts of nature, which would include hurricanes. The decision to withdraw from personal lines throughout the United States was based on the Homes' realization that profitability in the personal lines market would require significant capital expenditures (such as for computer hardware), but that the needed resources would be better allocated to those other lines of business that provided a greater opportunity for profit. The Home implemented the withdrawal from personal lines outlined in its October 31, 1991, letter to the Department. Homes' nonrenewal of personal lines policies in Florida is and will be on the basis of withdrawal from all personal lines insurance in Florida and elsewhere. For homeowner's insurance, underwriting is the process of determining whether to issue a policy based on specific characteristics (such as construction, location, value) of the property proposed to be insured. Because Homes' 1991 decision to withdraw from the personal lines market was based on business considerations not related to the individual risk posed by the properties insured, underwriting played no role in that decision or the subsequent nonrenewals undertaken and proposed to be undertaken pursuant to that decision. Because underwriting involves the assessment of individual risk, it is never a factor in nonrenewing an entire line of insurance. If underwriting guidelines were required for the Homes' withdrawal from personal lines, the Homes' October 31, 1991, letter provided all of the information that would be required in such a guideline. That letter was tacitly "approved" by the Department, because it fulfilled all requirements of law for withdrawal from the market which were in existence at the time the letter was filed. In its Order to Show Cause, the Department sought an order requiring that the Home "cease and desist from any further action to cancel or non-renew personal lines residential property insurance policies in this state during the moratorium" and that it "pay an administrative penalty of $20,000 for each notice of cancellation or nonrenewal effectuated after the effective date of the moratorium." The parties entered into and "Agreed Order" which was entered by the Insurance Commissioner as an Order in this case on July 30, 1993, which was during the pendency of this matter before the Division of Administrative Hearings. By that Agreed Order, the Home agreed to "reinstate and extend coverage, at a prorated premium, until January 1, 1994," for all policies "which had expiration dates between May 19, 1993 and July 6, 1993 or for which nonrenewal notices were mailed between May 19, 1993 and July 6, 1993 " [sic] The Home also agreed to extend coverage to January 1, 1994, at a prorated premium, for all policies that would have been nonrenewed, but for the Order to Show Cause, between July 6, 1993, and November 14, 1993. In consideration for the Homes' agreement, the Department agreed the Home was not restricted by the Agreed Order from beginning to renew policies on November 15, 1993, the date on which the moratorium expires. It further agreed that the Agreed Order constituted "the Department's sole administrative remedy against the Home and . . . [resolved] all issues arising from the Order to Show Cause, including any sanctions or penalties that might otherwise have been imposed." The parties attempted to exclude from the agreement "the issue of determining the applicability of the moratorium contained in Chapter 93-401 to the Home's actions," so as to maintain DOAH's jurisdiction over that limited issue. However, the Agreed Order, which was a final order resolving the issues in the Department's case initiated by the Order to Show Cause, required the parties to carry out their agreed actions "regardless of the outcome of any administrative proceeding."
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Insurance enter a Final Order determining that the Homes' withdrawal from the market does not constitute a violation of the moratorium and dismissing the Order to Show Cause. DONE and ENTERED this 30th day of September, 1993, in Tallahassee, Florida. DIANE K. KIESLING 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 30th day of September, 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-3929 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on the proposed findings of fact submitted by the parties in this case. Specific Rulings on Proposed Findings of Fact Submitted by Petitioner, Department of Insurance Each of the following proposed findings of fact is adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 1(1) and 2(3-5). Proposed findings of fact 3-15 are subordinate to the facts actually found in this Recommended Order. Proposed findings of fact 16 and 17 are irrelevant. Specific Rulings on Proposed Findings of Fact Submitted by Respondents, the Home 1. Each of the following proposed findings of fact is adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 1-15(1-15). COPIES FURNISHED: Elizabeth J. Gregovits Nancy J. Aliff Attorneys at Law Department of Insurance Division of Legal Services 612 Larson Building Tallahassee, Florida 32399-0300 Paul R. Ezatoff David A. Yon Attorneys at Law 106 East College Avenue, Suite 1200 Post Office Box 1877 Tallahassee, Florida 32302-1877 Bill O'Neil General Counsel Department of Insurance The Capitol, PL-11 Tallahassee, Florida 32399-0300 Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300
The Issue The issue is whether proposed rule 4-141.020 is an invalid exercise of delegated legislative authority.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Background These cases arose after respondent, Department of Insurance (DOI), published in the Florida Administrative Weekly its notice of intent to adopt new rules 4-141.020 and 4-141-021, Florida Administrative Code. The first rule prescribes procedures for the withdrawal and surrender of a certificate of authority, or the discontinuance of writing insurance in the state. The second rule specifies procedures for implementing the moratorium phaseout process in Section 627.7013, Florida Statutes. By agreement by the parties, rule 4-141.021 is no longer in dispute. Contending that rule 4-141.020 is invalid for numerous reasons, petitioners, United States Fidelity and Guaranty Company (USF&G) and Fidelity and Guaranty Insurance Company (FGIC), filed their petition to determine invalidity of proposed rules on February 25, 1994. Generally, the petition alleges that the rule as a whole conflicts with other statutory and constitutional provisions, as well as the authorizing statute. It further alleges that subsections (3), (5), (8), and (9)(b) of the rule conflict with the authorizing statutes, and that paragraph (9)(b) is also arbitrary, capricious and vague. Petitioner, Holyoke Mutual Insurance Company in Salem (Holyoke), filed its petition to determine invalidity of proposed rules on February 25, 1994. The petition generally alleges that the rule as a whole conflicts with the law being implemented and is arbitrary and capricious. More specifically, the petition alleges that subsections (2)(b), (5), (6)(e)4., (7)(a), (7)(b), (8), (9), (9)(a), and (9)(b) contravene statutory provisions, and that the rule as a whole violates the due process, equal protection, commerce, and impairment of contract clauses of the state and federal constitutions. The Parties Respondent is the state agency charged with the responsibility of administering and enforcing the laws of the state governing insurance companies. Petitioners USF&G and FGIC are foreign insurers authorized to transact insurance in the State of Florida, including personal lines and residential insurance. USF&G and FGIC filed a notice to withdraw from homeowners multi-peril lines of insurance on July 7, 1993, in accordance with Subsection 624.430(1), Florida Statutes. Under that law, petitioners were required to give ninety days notice to the DOI before discontinuing those lines of insurance. The ninety-day notice period would have expired on October 5, 1993. Due to various emergency rules adopted by DOI and newly enacted legislation, the notice to withdraw never became effective. Because the proposed rule would affect their right to discontinue writing certain lines of insurance, petitioners are substantially affected by rule 4-141.020. Petitioner Holyoke is a mutual insurance company that writes business in all the New England states, New York and Florida. As of December 31, 1994, Holyoke had 4,027 homeowner policies and 1,541 dwelling fire policies outstanding in the State of Florida. Some of these property and insurance contracts were entered into prior to the enactment of Section 627.7013, Florida Statutes, which provides for a phaseout of a moratorium imposed by the legislature on the cancellation or nonrenewal of certain policies. On March 11, 1993, Holyoke filed a notice of withdrawal from all lines and kinds of insurance in the State and of the surrender of its certificate of authority pursuant to Section 624.430, Florida Statutes. Its plan was to withdraw over six months, giving all policyholders six months notice before nonrenewing policies over a twelve month period. Due to various emergency rules and statutes, Holyoke has been unable to cease doing business in the state. Since rule 4-141.020 would regulate Holyoke with regard to withdrawing from the homeowners multi-peril insurance market, it is substantially affected by the proposed rule. Events Leading to the Adoption of the Rule Following Hurricane Andrew's landfall in South Florida on August 24, 1992, the insurance industry suffered catastrophic casualty losses which totaled around $15 billion. Many insurance companies announced they were either withdrawing from the state altogether, were withdrawing from the homeowners' line of business, or were cancelling or nonrenewing substantial blocks of policyholders. Beginning on August 31, 1992, the DOI began to issue a string of emergency rules designed to limit cancellations and nonrenewals of insurance policies. None of these rules, however, purported to regulate the withdrawal of insurers from the state or from particular lines of insurance. During this same time period, the DOI adopted two emergency rules establishing procedures for insurers wishing to withdraw from any property lines in Florida. These emergency rules pertaining to insurer withdrawals expired on May 12, 1993, and no authority to restrict withdrawals retroactively has been authorized by the legislature. On May 18, 1993, the DOI imposed emergency rule ER 93-18 which represented its response to market stabilization in homeowners insurance lines. The rule imposed a moratorium on the nonrenewal and cancellation of homeowners insurance policies. The rule did not purport to regulate insurer withdrawals under Section 624.430, Florida Statutes, which governs the surrender of certificates of authority or discontinuance of writing certain lines of insurance in the state. Effective June 8, 1993, the legislature enacted Chapter 93-401, Laws of Florida, which essentially codified a DOI emergency rule and imposed a moratorium on cancellation or nonrenewal of personal lines residential property insurance policies from May 19, 1993, until November 14, 1993. The law was specifically confined to imposing a time-limited moratorium on only the "cancellation and nonrenewal of residential property coverages." Just prior to the expiration of the moratorium, the legislature enacted Section 627.7013, Florida Statutes, which provided for a "phaseout" of the moratorium imposed in Chapter 93-401. The statute provides for the extension of the moratorium on nonrenewal or cancellation of personal lines property insurance imposed by Chapter 93-401, limits unrestricted nonrenewals to five percent per year, and is to remain in effect until November 14, 1996. The statute makes no reference to withdrawals by insurers. Indeed, its purposes, as stated in subsection (1) of the statute, "are to provide for a phaseout of the moratorium (on cancellation or nonrenewal of personal lines residential property insurance policies) and to require advance planning and approval for programs of exposure reduction." It is especially noteworthy that during the same legislative special session in which section 627.7013 was enacted, the legislature considered and rejected legislation that would have created a new section 624.431 granting DOI the authority to condition and prevent withdrawals by insurers. Thus, the legislature rejected a statute which would have provided the DOI with the same authority included in the proposed rule. There is no clear expression in section 627.7013 that the legislature intended the law to operate in a retroactive manner. Because the statute imposes new obligations on insurers, it must be presumed that the legislature intended it to operate prospectively. In contrast, and in response to Hurricane Andrew, when the legislature adopted Chapter 92-345, Laws of Florida, in its December 1992 special session, subsection (2) of section 1 of that law contained specific language that "this section shall take effect upon becoming a law and shall apply retroactively to August 24, 1992." On February 4, 1994, the DOI published notice of its intent to adopt new rules 4-141.020 and 4-141.021. However, the latter rule is no longer in issue. Rule 4-141.020, which is sometimes referred to as the "withdrawal rule," generally sets forth the procedures for withdrawal, surrender of certificate of authority, or discontinuance of writing insurance in the state under section 624.430. More specifically, it provides definitions of various terms [paragraph 2)], provides a DOI interpretation of section 624.430 (paragraphs (3) and (5)], prescribes procedures for withdrawals and reduction of insurance (paragraphs (6)-(8)], and sets out DOI policy regarding the relationship of reduction in business to the moratorium phaseout in section 627.7013 [paragraph (9)]. Sections 624.308(1) and 624.6012, Florida Statutes, are cited as the specific authority for adopting the rule while Sections 624.430, 624.6011, 624.6012 and 627.7013, Florida Statutes, are identified as the law implemented. Prior to Hurricane Andrew, if an insurer wished to (a) discontinue the writing of any one or more multiple kinds of insurance, (b) withdraw from the state, or (c) surrender its certificate of authority, it would simply provide to the DOI notice of its intent to do so as required by section 624.430. As long as the notice complied with the statutory requirements, the withdrawal was self- executing, and DOI did not require specific approval or impose further conditions on the insurer. Thus, before this controversy arose, DOI took the position that the only duty or power granted to it under the section was a ministerial one of altering the certificate of authority to reflect the insurer's withdrawal from certain lines of insurance or, in the case of complete withdrawal from the state, to cancel the insurer's certificate of authority. It has never adopted any permanent rule construing the statute in any other fashion. Although section 624.430 has not been amended by the legislature since it was enacted in 1963, under the proposed rule, section 627.7013 is interpreted as restricting the right of an insurer to withdraw from the state entirely or from a line of insurance. Indeed, the rule provides that section 627.7013 takes precedence over section 624.430, and unless an insurer had filed its notice of withdrawal prior to August 24, 1992, insurers are severely limited in their ability to discontinue lines of business or withdraw from the state through at least November 14, 1996. The Petitions, Stipulation and Proposed Final Orders Because the initial petitions, prehearing stipulation, and proposed final orders sometimes speak to different issues, and some of the allegations are either unclear or not precisely pled, it is necessary to comment on these matters before making findings as to the validity of the rule. Since the initial petitions frame the issues in these cases, and DOI counsel has objected to expanding the issues through stipulation or otherwise, the undersigned has limited the issues to those raised in the initial petitions and deemed all others to be untimely raised. Further, where a party has framed an allegation in its complaint, but failed to argue that issue in its proposed order, that allegation has been deemed to be abandoned. Finally, where allegations are nonspecific and speak to the rule as a whole, and the undersigned is unable to determine the language in the rule being challenged, those allegations have been disregarded. In their initial petition, USF&G and FGIC first contend that the rule as a whole is invalid because it conflicts with, extends or modifies sections 624.430, 627.7013 and "other existing (but unnamed) statutory authority," and it violates the Florida and U. S. Constitutions by interpreting section 627.7013 as taking precedence over section 624.430. In actuality, only subsection (9), and not the entire rule, speaks to this issue and thus the broad allegation has been narrowed in this respect. They have also alleged that the rule in its entirety is invalid because it conflicts with, extends or modifies the "authorizing statute" in that it purports to require filings and information not authorized by statute. Because these alleged illegal filing requirements are found in paragraph (6)(e), the undersigned has considered only that provision as subject to attack. USF&G and FGIC also allege that subsections (3), (5), (8) and (9)(b) are invalid because they conflict with, extend or modify the "authorizing statute." Finally, they allege that paragraph (9)(b) is invalid on the additional grounds that the language is arbitrary, capricious, and vague. Since the reference to paragraph (9)(b) appears to have been in error, and petitioners actually intended to challenge paragraph (9)(a), the undersigned will address the latter provision. In summary, then, and notwithstanding the broad allegations in the petition, only parts, and not the whole, of the rule have been placed in question by these petitioners. Because the proposed final order of USF&G and FGIC fails to address subsections (5) and (6)(e), the undersigned has deemed those allegations to be abandoned. Finally, the proposed order raises for the first time a contention that subsection (4) is invalid. This contention has been disregarded as being untimely raised. In its initial petition, Holyoke first contends that the rule in its entirety is invalid "because it would enlarge, contravene, and modify the specific provisions of law that it purportedly implements and because it would be arbitrary and capricious." It then goes on to plead that subsections (2)(b), (5), (6)(e)4., (7)(a), (7)(b), (8), (9), (9)(a), and (9)(b) are invalid on the ground they conflict with, extend, or modify other statutory provisions. Since no specific factual allegations have been made regarding the arbitrary and capricious nature of the rule, and there are no statutory allegations regarding the remaining parts of the rule, the undersigned will treat the petition as challenging only these paragraphs for the single ground stated. Finally, Holyoke alleges that the rule in its entirety violates the due process, equal protection, commerce, and impairment of contract clauses in the State and U. S. Constitutions. In its proposed order, Holyoke has further contended that the above paragraphs are also invalid on the grounds they are arbitrary and capricous, vague, fail to establish adequate standards and vest unbridled discretion in the agency. Because the latter three grounds were never raised in the initial petition and, as noted above, there are no specific allegations regarding the arbitrary and capricous nature of the cited paragraphs, these grounds have been disregarded as being untimely raised. Is the Rule Invalid? a. Rule 4-141.020(9) Petitioners' chief concern is the DOI's interpretation, as expressed in subsection (9) of the rule, that section 627.7013 takes precedence over section 624.430 "as to all attempted or desired reductions" affecting personal lines residential policies. Because "reductions" are broadly defined in paragraph (2)(b) of the rule as including the discontinuance of one or mulitiple lines of business, the withdrawal from the state, and the surrender of a certificate authority, subsection (9) effectively prevents an insurer from exercising its rights under section 624.430 until November 14, 1996, when the phaseout statute expires. Since the vitality of much of the rule turns on the validity of subsection (9), the multiple allegations concerning this provision will be addressed first. The exact language in subsection (9) is as follows: (9) Relationship of Reduction to Moratorium Phaseout. The department interprets Section 627.7013(2)(a)4., Florida Statutes, relating to certain applications for reduction filed prior to August 24, 1992, as indicating a legislative intent that as to all attempted or desired reductions affecting "Florida per- sonal lines residential policies" (hereinafter "residential policies"), other than those in which such reduction notice was filed prior to August 24, 1992, Section 627.7013 applies and takes precedence over Section 624.430, and prohibits or limits such reductions affecting residential policies, where there is any relation- ship between the reduction sought, and the risk of loss from hurricane exposure. Subparagraph (2)(a)4. of section 627.7013 provides the principal statutory support for the rule and reads as follows: 4. Notwithstanding any provisions of this section to the contrary, this section does not apply to any insurer that, prior to August 24, 1992, filed notice of its intent to dis- continue its writings in this state under s. 624.430, and for which a finding has been made by the department, the Division of Administrative Hearings of the Department of Management Services, or a court that such notice satisfied all re- quirements of s. 624.430. As explained at hearing by the author of the rule, "by implication" or "negative inference" the DOI construed the above statutory language as manifesting an intent on the part of the legislature to make all types of withdrawals, and not just the cancellation or nonrenewal of personal lines residential property policies, subject to the moratorium phaseout statute. In other words, DOI posits that the legislative exemption from the moratorium phaseout statute of an insurer who filed, prior to August 24, 1992, a notice of its intent to discontinue writings, supports the broad negative inference that section 627.7013 prohibits an insurer not only from "discontinuing its writing" of one or more lines of business after August 24, 1992, but also from withdrawing from the state and surrendering its certificate of authority. In making this interpretation of section 627.7013 in its rule, the DOI ignored the distinctions between "discontinuance of lines of insurance" versus "withdrawal from the state" versus "surrendering a certificate of authority." Section 627.7013 refers only to "discontinue," as opposed to a total withdrawal coupled with a surrender of a certificate. Whatever negative inference might be drawn from subparagraph (2)(a)4. regarding the discontinuance of a line of insurance before August 24, 1992, as opposed to after that date, it cannot be extended to prohibit an insurer's total withdrawal from Florida and the surrender of its certificate of authority. Such an interpretation is not only contrary to the plain language in sections 624.430 and 627.7013, but also subsection 624.416(1), which recognizes an insurer's right to surrender its certificate of authority. To this extent, then, the rule is an invalid exercise of delegated legislative authority. Assuming that the statute is a proper source of authority for imposing restrictions on discontinuing lines of insurance by virtue of the words "discontinue its writings" in subparagraph (2)(a)4., petitioners argue further that DOI has used the rule to interpret the statute so as to have it apply in a retroactive manner to insurance contracts in existence prior to the enactment of the statute. It is undisputed that all petitioners had insurance contracts in existence as of the date of the enactment of the law, and that the rule operates in a retroactive manner by applying to all notices of withdrawal filed prior to the enactment of section 627.7013 but after August 24, 1992. In resolving this issue, the undersigned cannot find, and respondent has not credibly reported, any clear expression in the statute that the legislature intended to apply the statute retroactively. At the same time, the statute affects petitioners' substantive rights by imposing new obligations or duties in connection with their right to withdraw under section 624.430, and thus it is deemed to be substantive in nature. Because the rule has the effect of imposing retroactive obligations and duties on petitioners in contravention of section 627.7013, subsection (9) is found to be an invalid exercise of delegated legislative authority. b. Rule 4-141.020(2)(b) Proposed rule 4-141.020(2)(b) defines the terms "reduce presence in Florida," "reduce," and "reduction" as follows: (b) "Reduce presence in Florida," "Reduce," and "Reduction," as used in this rule are inclusive terms meant to collectively refer to any and all of the following actions as may be desired or taken by an insurer: to surrender its Florida certificate of authority; to withdraw from Florida; or to discontinue the writing of any one or multiple lines or kinds of insurance in Florida. Holyoke contends that the foregoing language is invalid because the term "reduction" is defined as including a total withdrawal from all lines of insurance in Florida and the surrender of a certificate of authority, and thus it contravenes sections 624.430, 624.415, 624.416 and 627.7013. 34. Sections 624.430, 624.6011, 624.6012 and 627.7013 are cited by DOI as the source of authority for the definition. There is nothing in section 624.6011, which classifies insurance into seven "kinds of insurance," nor section 624.6012, which defines the term "lines of insurance," authorizing the broad and sweeping definition of the word "reduction." Similarly, section 627.7013(2)(b) authorizes the DOI to "adopt rules to implement this subsection," but subsection (2) deals only with "the cancellation or nonrenewal of personal lines residential property insurance policies that were in force on November 14, 1993, and were subject to the moratorium." Section 624.430 does speak in general terms to "(a)ny insurer desiring to surrender its certificate of authority, withdraw from this state, or discontinue the writing of any one or multiple kinds of insurance in this state," but in the context of this rule, which seeks to prevent all types of withdrawals under the authority of section 627.7013, the rule clearly contravenes the law being implemented. Therefore, paragraph (2)(b) constitutes an invalid exercise of delegated legislative authority. c. Rule 4-141.020(3) Proposed rule 4-141.020(3) reads as follows: (3) Actions Having the Substantial Effect of a Withdrawal or Discontinuance of Writing Insurance in this State. Reductions subject to Section 624.430, Florida Statutes, include any action or actions the reasonably forseeable substantial effect of which is, or will be when the action is completed, to have discon- tinued the writing of a kind or line of insurance or to have withdrawn from Florida. "Substantial effect" means that, for example, the continuance of a token amount of writing in Florida will not prevent a conclusion that a reduction subject to Section 624.430 has or will occur. Furthermore, it is not determinative of the existence of a reduction requiring notice under Section 624.430, that the action is taken in a single step, or by a series of steps over time, if the reasonably forseeable effect of the action or actions is or will to be to (sic) have substantially effected a reduction. The application of Section 624.430 does not depend upon the insurer's subjective statement of desire or intent as to the effect of its actions. In their petition, USF&G and FGIC contended this part of the rule impermissibly "conflicts with, modifies or extends the authorizing statutes in that the rule adopts a 'reasonably forseeable substantial effect' test for determining whether a proposed action is subject to Section 624.430, Florida Statutes." While petitioners have addressed other somewhat similar provisions in paragraph (9)(a), no argument has been made in their proposed order as to subsection (3), and the undersigned has accordingly assumed the issue to be abandoned. d. Rule 4-141.020(5) Proposed rule 4-141.020(5) prescribes the following time limitations in which an insurer can take no action after filing a notice of reduction with DOI: (5) Notice to Precede Action to Reduce Presence in Florida. An insurer shall take no action in furtherance of a reduction, prior to the expir- ation of 90 days after the receipt by the depart- ment of the notice required by Section 624.430. Prohibited actions include sending any notice of cancellation or termination, or notice of intent to cancel or terminate, to any policyholder, agent, managing general agent, reinsurer, or other person or entity. In their petition, USF&G and FGIC have alleged that the proposed rule conflicts with, modifies or extends "the authorizing statute in that it prohibits an insurer from taking action in furtherance of the proposed reduction prior to the expiration of the 90-day period under section 624.430, Florida Statutes." Holyoke makes the same allegation and contends the rule contravenes sections 624.430, 624.415 and 624.416. The record is not clear on the exact manner in which section 624.430 operates. It may be reasonably inferred, however, that once a notice of withdrawal is filed, the insurer may then begin notifying customers and other interested persons that it will withdraw at the end of the ninety-day statutory time period. By restricting insurers from taking this action in contravention of the terms of section 624.430, and there being no other valid source of authority, subsection (5) is found to be an invalid exercise of delegated legislative authority. e. Rule 4-141.020(6)(e)4. Paragraph (6)(e) describes the content of the notice to be given to DOI when providing a notice of reduction. Subparagraph 4. therein requires the following information to be provided in the notice of reduction: 4. Insurers shall also provide the department with the following information in the notice: A listing of all lines of insurance the insurer than has in force in Florida which will be affected by the reduction, and for each line, a statement of the approximate number of policies and dollars of premium then in force in Florida and which will be affected by the desired reduction. A description of what notice and treatment will be given by the insurer to its affected Florida policyholders concerning the reduction; and what steps will be taken by the insurer regarding processing of any outstanding covered claims of such policyholders while and after the insurer accomplishes its reduction. A description of projected impact of the reduction upon the insurer's Florida agent and agency force, if any. In addition to any other information related to the impact on agents, the insurer shall state the number of affected agents and give a brief description of what they are being told. Holyoke claims that this portion of the rule is invalid because it requires an insurer "to provide excessive information" in contravention of sections 624.430, 624.415 and 624.416. Since the proposed rule is based upon the premise that the DOI has the authority under section 627.7013 to restrict the ability of insurers to withdraw in any fashion, and such statutory authority has been found to be lacking in the laws being implemented, the rule is deemed to be an invalid exercise of delegated legislative authority on the ground it modifies or extends sections 624.430 and 627.7013. f. Rule 4-141.020(7)(a) and (b) These paragraphs describe the DOI's responsibilities once an insurer files a notice of reduction. They read as follows: (7) Department Action Upon Receipt of Notice. Subsequent to receiving the initial filing the department will request the insurer to provide further information, or will conduct such other investigation as is necessary to determine whether the initial information provided is accurate and whether the proposed action will have the effects projected by the insurer. Reduction Tolled During Certain Investi- gations. The department shall inform the insurer by (sic) that the proposed reduction would be in violation of, or cause a violation of, any provision of the Insurance Code or rule of the department, and thereafter the insurer shall not effect the reduction and shall terminate any action then under way towards accomplishment of the reduction, until such time as the department's allegation is determined under Section 120.57, Florida Statutes, and such appeals as may be taken by either party are concluded. Like so many other parts of the rule, Holyoke contends here that the foregoing language is invalid because it contravenes sections 624.430, 624.415, and 624.416. Since the proposed rule purports to place new restrictions on insurers seeking to withdraw, and it has no source of statutory authority, the above language is found to be an invalid exercise of delegated legislative authority on the ground it extends or modifies sections 624.430 and 624.7013. g. Rule 4-141.020(8) This provision provides that no surrender of a certificate is effective until approved by DOI. The specific language in the subsection reads as follows: (8) Certificate of Authority Surrender Effected by Department Order. No surrender or attempted surrender of a certificate of authority is effective until accepted by order of the department. USF&G and FGIC contend the rule conflicts with, modifies or extends section 624.430 since that statute requires an insurer to provide notice that it intends to surrend a certificate of authority, but does not require it to obtain DOI approval to do so. In its petition, Holyoke has alleged that the foregoing language contravenes not only section 624.430, but also sections 624.415 and 624.416. As noted in finding of fact 17, until the enactment of section 627.7013, DOI has always taken the position that a notice of withdrawal did not require specific agency approval. Rather, DOI has said that the only power or duty granted it under section 624.430 was a ministerial one of altering the certificate of authority to reflect the insurer's withdrawal from certain lines of insurance or, in the case of complete withdrawal from the state, to cancel the insurer's certificate of authority. Since section 624.430 has not been amended, and section 627.7013 does not enlarge DOI's rights with regard to a notice of withdrawal filed by an insurer, the paragraph is found to in conflict with both sections 624.430 and 627.7013. Therefore, it is deemed to be an invalid exercise of delegated legislative authority. h. Rule 4-141.020(9)(a) This paragraph generally provides that any reductions in residential policies proposed by an insurer must be unrelated, directly or indirectly, to a reduction of risk of loss from hurricane exposure. The rather lengthy rule reads as follows: Reduction Must be Unrelated to Risk of Loss From Hurricane Exposure. Pursuant to Section 627.7013, where the reduction affects residential policies, the proposed reduction must be unrelated to the risk of loss from hurricane exposure. The department notes that Section 627.7013 does not in any way qualify or limit the requirement that the reduction be unrelated to the risk of loss from hurricane exposure. The department interprets the word "unrelated," as used in Section 627.7013, in the context of the exigent circumstances motivating the enactment of the statute, and the remedial nature of the statute, as requiring a liberal, wide-reaching definition, so that the reduction must be completely unrelated, directly and indirectly, to reduction of risk of loss from hurricane exposure. As stated in subsection (3), above, the department is not bound by the reason facially asserted for the reduction. If the reduction is related in part to reduction of risk of loss from hurricane exposure, the reduction is prohibited unless authorized as type one, two, or three relief, under Rule 4-141.021, notwith- standing that some other reason is in good faith also part of the reason for seeking the reduction. The objective effect of the propose (sic) reduction in reducing hurricane exposure is given more weight than the insurer's subjective motivations, in determining whether the reduction is unrelated to risk of hurricane exposure. Subjective motivation is relevant primarily only where the objective effect is equivocal. Factors which will be given great weight in evaluating whether a desired reduction is related to risk of hurricane loss are: Would the reduction in Florida be accompanied by reduction action by the insurer in other states? If so, would a disproportionate amount of the impact be in areas of the country especially subject to risk of loss from hurricane? How much of the reduction in Florida would be in residential policy exposures as compared to exposures in other lines of insurance in Florida? If the insurer is discontinuing writing only some lines of insurance are the lines being discontinued especially subject to risk of loss from hurricane, as compared to the lines not being discontinued? Does the insurer have a significant con- centration of residential policies and exposure to risk of loss from hurricane exposure under residential policies in Florida? Would the desired reduction significantly reduce the insurer's exposure to risk of loss from hurricane exposure under residential policies in Florida? Holyoke argues that the paragraph contravenes sections 624.430, 624.416 and 627.7013 by stating that any "reduction" must be "unrelated to risk of loss from hurricane exposure" and that "unrelated" means "completely unrelated, directly and indirectly, to reduction of risk of loss from hurricane exposure." At the same time, USF&G and FGIC contend the rule is invalid since it "improperly" defines the term "unrelated" to permit the DOI to apply a subjective "effects" test "using illegal, arbitrary, capricious, and vague factors which fail to establish adequate standards for agency action and which exceed the agency's delegated authority." Although several statutes are cited as being the law implemented, section 627.7013 is the principal source of authority for the rule. Subparagraph (2)(a)1. of the statute provides in relevant part that (t)his subparagraph does not prohibit any cancellations or nonrenewals of such policies for any other lawful reason unrelated to the risk of loss from hurricane exposure. The statutory language unequivocally reserves to insurers the right to cancel or nonrenew policies "for any other lawful reason unrelated to the risk of loss from hurricane exposure." To the extent the rule authorizes DOI to prohibit nonrenewals or cancellations if they are related in part to reduction of hurricane exposure, even if other reasons are in good faith and are part of the reason for seeking the cancellations or nonrenewals, the language contravenes the statute. The rule further provides that if the effect of a reduction in exposure is to avoid hurricane exposure, the nonrenewal or cancellation can be denied even if the insurer has given a lawful reason unrelated to the risk of loss from hurricane exposure. Since it can be reasonably inferred that the ultimate effect of every withdrawal is to reduce to zero the insurer's risk of loss from hurricane exposure, the "effects" test strips the statute of its clear mandate that insurers maintain the right to cancel or nonrenew policies "for any other lawful reason unrelated to the risk of loss from hurricane exposure." For this additional reason, the rule contravenes the statute. Next, while there is some evidential support as to DOI's theory in adopting the rule as a whole, there is no factual basis in the record to support the rationale for the language in paragraph (9)(a). As such, it is deemed to be arbitrary and capricious. Finally, in applying the six factors that would be given "great weight" in evaluating whether a desired reduction is related to risk of hurricane loss, the DOI acknowledges that there are no criteria or guidelines to follow in weighing these objective effects. Indeed, the DOI author admitted he had insufficient experience to fashion more specific guidelines. Even so, the language is not so vague as to confuse a person of reasonable knowledge, nor can it be said that the rule fails to establish adequate standards for agency action which exceed the agency's delegated authority. i. Rule 4-141.020(9)(b) The final provision under challenge is found in paragraph (9)(b) which reads as follows: (b) If the department determines that any proposed reduction violates Section 627.7013, the insurer shall not proceed with the reduction as it affects residential policies, and shall file an application under Rule 4-141.021 which implements Section 627.7013. The reduction in residential policies shall be limited to the extent of relief granted the insurer by the department under Section 627.7013 and Rule 4-141.021. Holyoke contends that this language is invalid because it contravenes sections 624.430, 624.415 and 624.416. Although the allegation is imprecise, it is assumed that petitioner contends the rule impermissibly broadens the definition of the word "reduction" to include an insurer's withdrawal from the state or the surrender of a certificate of authority. Because the undersigned has previously found that the DOI clearly lacks statutory authority under section 627.7013 to limit withdrawals from the state or the surrender of a certificate of authority, and the broad definition of "reduction" in paragraph (2)(b) has been deemed to be invalid, it is found that the language in the rule conflicts with sections 624.430 and 627.7013 and is an invalid exercise of delegated legislative authority. D. Constitutional Claims Even if the rule is a valid exercise of delegated legislative authority, Holyoke nonetheless contends the rule is invalid because it violates the Florida and United States Constitutions in several respects. USF&G and FGIC join in this claim. Due process and takings clause Article I, section 9 of the Florida Constitution provides that "(n)o person shall be deprived of life, liberty or property without due process of law . . ." USF&G, FGIC and Holyoke contend the proposed rule violates this provision and its federal counterpart, the 14th Amendment of the United States Constitution. Holyoke's presence in the state may be characterized as small. Therefore, the absence of economies of scale assures continuing operating losses for the company. Indeed, in 1993 and 1994, Holyoke suffered operational losses in the state of $822,071 and $736,000, respectively, without the landfall of a hurricane. The rule bars Holyoke from withdrawing totally from Florida and surrendering its certificate of authority as it wishes to do. In Holyoke's case, every dollar of risk required to be underwritten in Florida requires that it forego writing business in another state, or increase its surplus-to-writings ratio, thereby increasing the financial risk assumed. The prospect of continuing losses in Florida impacts Holyoke in two ways. First, it suffers a drain on its surplus to the extent of the forced losses. Second, given the relationship between surplus and writing capacity, the loss of surplus caused by the operating losses results in its inability to write business in another state upon the lost surplus. USF&G is now in the process of downsizing its firm. In 1991, it was on the verge of insolvency having suffered losses of $600 million in that year alone. Based on marketing studies performed after 1991, the company has reshaped its corporate strategy and has subsequently withdrawn entirely from two states (Texas and Louisiana), and has withdrawn all personal lines from nine states. In addition, USF&G has made selected withdrawals for particular lines in many other states, and has pared its total employees from 12,500 to 6,000. The proposed rule prevents it from meeting its corporate objective of filing with DOI a notice of withdrawal for personal homeowners multiperil insurance. Equal protection clause Section 2 of Article I of the Florida Constitution provides in part that "(a)ll natural persons are equal before the law." Under the proposed rule, Holyoke must continue to do business in the personal lines market of the state indefinitely, or at least until November 1996. Holyoke contends this is to the detriment of residents of other states in which it writes business, and that the rule favors Florida residents over residents of other states for an illegitimate purpose. Commerce clause The federal commerce clause limits the power of the states to interfere with interstate commerce. Holyoke contends that the interstate allocation of capital and surplus constitutes interstate commerce, and because the proposed rule seeks to regulate its decision as to how to allocate capital and surplus, it violates the commerce clause. Impairment of contracts Article I, section 10 of the Florida Constitution provides that "(n)o . . . law impairing the obligation of contracts shall be passed." All three petitioners contend that section 627.7013, as interpreted by the proposed rule, violates the impairment of contract clauses of both the Florida and United States Constitutions. All petitioners had insurance contracts in existence at the time section 627.7013 was enacted and the rule proposed. Prior to that time, petitioners' rights with respect to those contracts were set forth in section 624.430. The DOI's interpretation of section 627.7013, as expressed in its rule, prohibits the insurers from exercising these pre-existing contractual rights, including the right to withdraw. To this extent, an impairment has occurred. By prohibiting an insurer from withdrawing from the state, DOI's impairment of those rights can be deemed to be substantial. Petitioners operate in a heavily regulated industry. At the same time, according to the findings and purposes of section 627.7013, that legislation was prompted by Hurricane Andrew's "enormous monetary impact to insurers," proposals by insurers to make "substantial cancellation or nonrenewal of their homeowner's insurance policyholders," and the legislature's "compelling state interest in maintaining an orderly market for personal lines residential property insurance."
Findings Of Fact Petitioner is the state agency in Florida responsible for the regulation and licensing of general lines insurance agents. Its responsibility includes the duty to sanction those licensed under the insurance code for violations of the code. At all times relevant, Respondent was a licensed general lines insurance agent and possessed license #265736194 issued by the Petitioner on December 21, 1990. Respondent's license is presently active. On June 5, 1992, an order of liquidation, injunction and notice of automatic stay was entered in Case No. 92-1766, Circuit Court, Leon County, Florida, In Re: The Receivership of First Miami Insurance Company, a Florida corporation. On December 14, 1992, Salma Zacur, the operations manager for the receiver for First Miami Insurance Company, mailed a letter to Respondent. On June 7, 1993, a summary order directing immediate delivery of funds was entered in Case No. 92-1766, Circuit Court, Leon County, Florida, In Re: The Receivership of First Miami Insurance Company, a Florida corporation. On June 8, 1994, an order on receiver's motion for entry of final judgment was entered in Case No. 92-1766, Circuit Court, Leon County, Florida, In Re: The Receivership of First Miami Insurance Company, a Florida corporation. Petitioner failed to produce evidence of the contents of the December 14, 1992 letter which was non-hearsay and, therefore, failed to establish the relevance of the court orders of June 7, 1993 and June 8, 1994 in this matter. The Petitioner failed to present clear and convincing evidence that Respondent violated Section 631.155, or Chapter 626, Florida Statutes.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department enter a final order dismissing the Administrative Complaint filed against Respondent. DONE and ENTERED this 23rd day of August, 1995, in 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 23rd day of August, 1995. APPENDIX The following constitutes my specific rulings, in accordance with Section 120.57(1)(b)9., Florida Statutes. Proposed findings of fact submitted by Petitioner. Accepted in substance: paragraphs 1, 2, 3, 4, 5, 7 (in part), 12 (in part). Rejected as not proven by clear and convincing evidence: paragraphs 6, 7 (in part), 8, 9, 10, 11, 12 (in part) 13. Proposed findings of fact submitted by Respondent. Accepted in substance: paragraphs 1, 2, 3, 4, 5, 6, and 7. COPIES FURNISHED: Bill Nelson State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Dan Sumner Acting General Counsel Department of Insurance The Capitol, PL-11 Tallahassee, Florida 32399-0300 Michael K. McCormick, Esquire Division of Legal Services 612 Larson Building Tallahassee, Florida 32399-0300 Jed Berman, Esquire Infantino and Berman O. Drawer 30 Winter Park, Florida 32790
The Issue Whether the Respondent properly denied the Petitioner's application for licensure as a Resident All Lines Insurance Adjuster for a material misstatement on her application?
Findings Of Fact The Petitioner, Krista Rose Navarro, filed an application with the Respondent for licensure as a Resident Independent All Lines Insurance Adjuster (05-20) by letter dated December 30, 2004. This application was filed on line. As part of that application the Petitioner answered, "no," to the question: Have you ever been convicted, found guilty, or pled guilty or nolo contendere (no contest) to a felony or crime punishable by imprisonment of one (1) year or more under the law of any municipality, county, state, territory or country, whether or not adjudication was withheld or a judgment of conviction was entered? The Respondent conducted a criminal records file check that revealed that the Petitioner had entered a plea to a count of mail fraud in the Federal District Court for the Central District of California in 1986. The records of this proceeding under the seal of the records custodian of the National Archives and Records Administration were introduced as Department's Composite Exhibit 2. Based upon this information, the Respondent determined that (1) the period an applicant would have to wait to be licensed for the offense involved was 15 years, and that this had run; and (2) the Petitioner's failure to disclose the offense resulted in extending the licensure eligibility date until December 30, 2005. Based upon this latter determination, the Respondent denied the Petitioner's application for licensure. The Petitioner testified that the portion of the question that stated, "pled guilty or nolo contendere (no contest) to a felony or crime punishable by imprisonment of one (1) year or more under the law" was confusing to her. She took the question to require reporting an offense for which one was imprisoned for a year or more, and that she had not intentionally failed to reveal the offense. In support of this contention, the Petitioner pointed out that she was currently a licensed real estate broker and held this license for ten years, and had revealed the subject offense and plea on the application for that license. She also introduced a letter from her child's school, the Petitioner's Exhibit 2, which indicated that the Petitioner had shared the information about her plea with the principal of the school as part of the vetting of parental chaperones. The Petitioner passed that vetting process. Although the underlying facts of the offense to which the Petitioner entered the plea are not relevant to the matters under consideration, they show the Petitioner engaged in a telephone marketing ploy in which businesses and offices were called and copier products were offered for sale at current prices before an anticipated price increase. Although not stated, an impression was given that the salesperson was a representative of the supplier usually used by the office being called, and the "price hike" was not factual, but a sales gimmick. The "handling charges" and similar fees in these transactions were very high, although the products were delivered to the purchasers. Such practices are specifically prohibited today, but were not specifically proscribed at the time. The Petitioner was cooperative with authorities when arrested, and is now remorseful about her conduct at the time considering this is an embarrassing epiphany in her life; however, she has fully disclosed the facts as indicated above when she perceived it was necessary. The Petitioner has her own real estate brokerage; has never been the subject of disciplinary action by those licensing authorities; and is a long-time resident of her community. She is married, has two children, and takes part volunteering at her children's school, as indicated above.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law set forth herein, it is RECOMMENDED: That the Department of Financial Services issue the Petitioner as a Resident Independent All Lines Insurance Adjuster. DONE AND ENTERED this 2nd day of June, 2005, in Tallahassee, Leon County, Florida. S __ STEPHEN F. DEAN 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 June, 2005. COPIES FURNISHED: Krista Rose Navarro 111 Placido Place Panama City Beach, Florida 32413 Dana M. Wiehle, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0333 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Carlos G. Muniz, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue Whether the Petitioner's application of January 11, 1991, for examination as a general lines agent should be granted.
Findings Of Fact Petitioner Paul L. Kornya was licensed in 1974 as a general lines insurance agent in the State of Florida. Prior to 1984, Respondent Department of Insurance had taken no formal disciplinary action against the Petitioner. In 1983, while licensed as an insurance agent and employed in the capacity of office manager for the Milton Carpenter Insurance Agency, Petitioner established a demand deposit account in the name of "Atlantic Association Insurance" and listed himself as the sole signatory and beneficiary on the account. Petitioner thereafter wrote four unauthorized checks on the Milton Carpenter Agency Account totaling $47,132.14 made payable to Atlantic Association Insurance and deposited them into his demand deposit account. In order to conceal his activity, the Petitioner altered the payee of the checks. In a prior administrative case (Case No. 84-L-4085F), Petitioner admitted misappropriating and converting the funds. In 1983, while licensed as an insurance agent and employed in the capacity of office manager for the Milton Carpenter Insurance Agency, Petitioner wrote two unauthorized checks on the Milton Carpenter Agency Account totaling $3,455 made payable to Blinder, Robinson and Co., Inc., Investment Bankers. In order to conceal his activity, the Petitioner listed an agency account code designated for miscellaneous companies on said checks. In a prior administrative case (Case No. 84-L- 4085F), Petitioner admitted misappropriating and converting the funds which were used for Petitioner's personal stock purchases. In 1984, a judgement in the amount of $52,013.35 was entered against Petitioner in the case styled Milton Carpenter Insurance, Inc., a Florida Corporation, and Cincinnati Insurance Company vs. Paul L. Kornya, Case No. 84-3235 CA(L)A, Fifteenth Judicial Circuit Court, Palm Beach County, Florida. On October 31, 1985, the Department entered a Final Order revoking Petitioner's license qualifications and eligibility for licensure for a period of two years, based upon the misappropriation and conversion of said funds. By application signed December 16, 1987 and filed December 28, 1987, Petitioner submitted an application for examination as a general lines insurance agent. By Insurance Commissioner Bill Gunter's letter to the Petitioner of February 29, 1988, the Department requested that the Petitioner submit certain certificates of employment to verify his prior experience. The letter stated that, "[t]o qualify for this examination through experience you must have completed within the past 4 years, at least 1 year of substantially full-time responsible duties as the bona fide employee of an agent or insurer. Your duties during this time must have been in all lines of property, casualty, surety, health and marine insurance. ... One certificate should be completed by you and the other by your employer." The Petitioner claims to have submitted said employment certificates shortly following the Department's request. However, the Department's files do not contain the documents or any other response to the letter, and there is no evidence beyond Petitioner's testimony to support the claim. By letter of March 17, 1988, Department representative Franklin Thompson again requested the experience information cited in the February 29 letter or in the alternative, that Petitioner submit proof that a course of education had been completed. The letter further stated that "we will need a statement from Milton Carpenter Insurance Inc. Agency of Belle Glade, Florida stating that any and all indebtedness you may have had relative to their firm has been satisfied". Both the February 29 and March 17 letters provided that failure to file the information within 30 days from the date of each letter is grounds for denial of the application. Three months passed following the March 17 letter to the Petitioner. According to the records of the Department, no response to either letter was received. On June 17, 1988, the Petitioner's December 1987 application was closed by the Department based upon the failure of Petitioner to submit the previously requested information. By letter of June 23, 1988, the Petitioner advised the Department that the indebtedness was not to the Milton Carpenter Insurance Agency, but was to Cincinnati Insurance Company, which had insured the Carpenter agency against such losses. The letter further stated that approximately $5,000 had been repaid to the Cincinnati Insurance Company. By letter of August 3, 1988, Department representative Thompson wrote, "[t]he information you have furnished has been thoroughly reviewed. It appears that your indebtedness with Milton Carpenter Insurance has been assigned to Cincinnati Insurance Company. Please request that Cincinnati Insurance Company furnish us with a statement indicating that all of your indebtedness to their company has been satisfied". The letter stated that failure to respond within 30 days from the date of the letter was grounds for denial of the application. The evidence does not explain the reason for Mr. Thompson's letter of August 3, 1988. Given the June 17 closure of the pending application based upon the Petitioner's failure to supply additional information, the information furnished apparently consisted of the Petitioner's untimely filed letter of June 23. As of August 3, no pending application existed. In any event, the Petitioner did not respond to the August 3 request. By second application signed October 31, 1989, and filed November 3, 1989, Petitioner submitted an application for examination as a general lines insurance agent. By undated letter, Department representative Thompson again requested Petitioner to submit either certificates of employment to verify his prior experience or proof of completion of certain educational requirements, and further requested a reply to the letter of August 3, 1988 seeking statement from Cincinnati Insurance Company indicating that "all of your indebtedness to their company has been satisfied". Again the letter provides that failure to furnish the requested information within 30 days would result in the file being closed. 1/ The Petitioner, subsequent to the undated letter and prior to February 2, 1990, submitted said certificates of employment. Early in 1990, the Petitioner's application file was assigned to Department representative, Patricia Lehman. On February 2, 1990, Ms. Lehman informed that Petitioner that his certificates of employment were not acceptable, and that he would be required to complete a 240 hour educational requirement. Further, Ms. Lehman's letter provided that, "[i]n addition, you will need to furnish us with a certified letter from Cincinnati Insurance Company that you have made full restitution or a certified copy of the written agreement between you and the party(s) involved that you are making restitution satisfactory to all parties concerned. The information you sent to us is not certified and reflects no signatures". Beginning February 26, 1990, Mr. Kornya took and completed the 240 hour insurance course as identified in the Department's previous communications. The $595 course met for six weeks, five days each week, from 8:00 a.m. to 5:00 p.m. On September 17, 1990, the pending application was closed by the Respondent based upon the failure of Petitioner to submit the previously requested information. There is no evidence that Petitioner submitted evidence of completing the educational requirement. On or about January 8, 1991, Petitioner entered into an restitution agreement with Cincinnati Insurance Company setting forth a payment schedule which requires that Petitioner make a payment of $300 each month to the Cincinnati Insurance Company in order to eventually satisfy the entire $52,013.35 judgement against him. By application signed January 11, 1991, and filed January 16, 1991, Petitioner submitted an application for examination as a general lines agent. By memorandum of February 18, 1991, to her superior, Bob Stewart, Ms. Lehman recommended that the Petitioner's application be denied. Specifically, her memo provides as follows: Mr. Kornya's license qualification and eligibility for licensure were revoked by the Department in 1985 for the mishandling of funds in a fiduciary capacity. It does not appear Mr. Kornya attempted to make restitution until the signed Agreement in 1991. He has demonstrated lack of fitness and trustworthiness to engage in the business of insurance. Therefore pursuant to Sections 626.611(1) (7) , [sic] 626.641(2) and 626.731(1), I recommend his application be denied. Although Ms. Lehman's memo states that "[i]t does not appear Mr. Kornya attempted to make restitution until the signed Agreement in 1991", prior to the January 8, 1991 execution of the restitution agreement, the Petitioner had paid $12,237.94 to Cincinnati Insurance Company realized from the sale of vehicles and real estate. The executed copy of the restitution agreement reflects that such funds were paid, although the agreement fails to indicate when the payment was made. The payment was applied towards interest which had accumulated on the judgement, not towards the $52,013.35 principle judgement amount. At the time of the hearing, the restitution payments were current (although Petitioner did not make the $300 payment due in April, but paid $600 in May.) As of the date of hearing, approximately $49,913 remained to be paid to Cincinnati Insurance Company to satisfy the judgement. Although at the time of the hearing, a letter allegedly from Cincinnati Insurance Company indicated that they had not received documentation of Petitioner's compliance with paragraph five of the restitution agreement (a requirement that Petitioner purchase a life insurance policy naming the insurer as irrevocable beneficiary), said policy was purchased on January 9, 1991. By letter of March 1, 1991, the Department denied the application, based on an application of the statutory sections cited in Ms. Lehman's memo. On June 21, 1991, the Department issued an amended letter of denial. 2/ In the amended letter of denial, the Department cites the prior misappropriation of funds, the unsatisfied judgement, and the 1985 revocation of licensure and eligibility for licensure, which "circumstances surrounding that revocation still exist". The letter cites Sections 626.611(1), (4), (7), (9), (10) and (13), section 626.641(2), and section 626.731(1) Florida Statutes, as the statutory basis for the denial. The evidence fails to establish that any representative of the Department of Insurance, at any time, informed or assured the Petitioner that, upon his completion of the course of education and upon the execution of the restitution agreement between Cincinnati Insurance Company and the Petitioner, his application for examination for licensure as a general lines insurance agent would be approved. The Petitioner has been acquainted with his current employer, Samuel Jokich, for approximately six years. Mr. Jokich employs the Petitioner as a "Colorado Prime" freezer beef salesman. According to Mr. Jokich, the Petitioner is "extremely trustworthy" and of good character. The Petitioner had not disclosed to Mr. Jokich, and Mr. Jokich was not otherwise aware, that the Petitioner had taken approximately $52,000 from the Milton Carpenter Insurance Agency. Mr. Jeffrey Hooker, an independent insurance agent in Belle Glade and childhood friend of the Petitioner's, is aware of the Petitioner's misappropriation and conversion of approximately $52,000 from the Milton Carpenter Insurance Agency. However, Mr. Hooker stated that he would trust the Petitioner and "try to help him any way I could". Mr. Hooker desires to become partners with the Petitioner in a proposed insurance agency in Ft. Myers. Mr. Kenneth Snyder, a field representative for CNA Insurance Company, has known the Petitioner for approximately eight years. He believes the Petitioner to be of "good character" with "solid morals". Although Mr. Snyder was aware that the Petitioner had taken some funds from the Milton Carpenter Insurance Agency, he was unaware of the amount of said funds. Mr. Snyder stated that he would be willing to enter into a business relationship were the Petitioner to become licensed as a general lines agent.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department of Insurance enter a Final Order denying the application of Paul L. Kornya to sit for examination for licensure as a general lines insurance agent. DONE and RECOMMENDED this 23rd day of January, 1992, in Tallahassee, Florida. WILLIAM F. QUATTLEBAUM 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 23rd day of January, 1992.
The Issue The central issue in this case is whether the Respondent is guilty of the violations alleged in the Administrative Complaint and, if so, what penalty should be imposed.
Findings Of Fact Based upon the testimony of the witnesses and the documentary evidence received at the hearing, I make the following findings of fact: At all times material to allegations of the Administrative Complaint, Respondent, William John Harnett, has been licensed or been qualified for licensure as an insurance agent in the State of Florida. Respondent currently holds licenses for service lines insurance, debit insurance, ordinary life and health insurance, and general lines insurance (which is property, casualty, or surety). The Department is charged with the administration of Chapter 626, Florida Statutes. On December 15, 1975, the Department was appointed to serve as Receiver of Southern American Fire Insurance Company (Southern) . The purpose of this receivership was to seek the rehabilitation of the insurance company. On February 10, 1976, Southern was determined to be insolvent pursuant to Section 631.011(3), Florida Statutes and the Department, as Receiver, obtained an Order of Liquidation. The Department was charged with the responsibility of marshalling the company's assets in order to settle the outstanding claims against it. To this end, the Department filed civil suits against insurance agents and agencies which had allegedly failed to remit premium monies owed to Southern. One such suit was against Harnett, Inc., Respondent, and other individuals associated with Harnett, Inc. From April 9, 1947 until November 14, 1986, Harnett, Inc. was a corporation organized under the laws of the State of Florida whose general business was insurance. Respondent served as the treasurer and a director for Harnett, Inc. Respondent was authorized to and did sign checks and correspondence on behalf of Harnett, Inc. The Department's civil suit against Harnett, Inc. (Case No. 76-23143) was filed in Dade County on July 26, 1976. This suit claimed Harnett, Inc. had failed to remit premium monies owed to Southern and that Respondent, as an officer and director of Harnett, Inc. having direct supervision or control over individuals acting on behalf of Harnett, Inc., was personally liable for the amounts owed. On March 6, 1981, a final judgment (Case No. 76-23143) was entered in favor of the Department as Receiver of Southern. This judgment found against Respondent and Harnett, Inc., jointly and severally, in the sum of $78,617.85. This judgment was affirmed on appeal. 1/ The Department has attempted to collect the funds awarded in this judgment. From October 26, 1962 until November 14, 1986, Franklin Insurance Agency of Miami, Inc. (Franklin) was a corporation organized under the laws of the State of Florida. At all times material to this cause, Respondent was president and a director of Franklin. On October 20, 1976, the Department as Receiver of Southern filed a civil suit against Respondent and Franklin. This suit (Case No. 76-32799) claimed monies were owed to Southern for premiums Franklin had failed td remit. Further, the suit alleged that Respondent, as Franklin's president and director, was personally liable for the refusal and continued refusal of Franklin to pay the premiums. A final judgment was entered for the Department as Receiver of Southern in the Franklin suit on December 9, 1980. This judgment (case No. 76- 32799) provided for recovery against Franklin and Respondent, jointly and severally, in the sum of $35,983.39. The Department has attempted to collect the funds awarded in this judgment. Gables Insurance Agency, Inc. (Gables), organized on November 28, 1967, continues as an active corporation in this state. At all times material to the allegations in the Administrative Complaint, Respondent was the sole officer and director for Gables. Norfolk & Dedham Mutual Fire Insurance Company, Inc. (Norfolk) entered into Agency Agreements with Gables and Harnett, Inc. on February 1, 1976. Subsequently, Norfolk sued Harnett, Inc. (Case No. 84-03815) and Gables (Case No. 84-03816) for premium monies it was claimed to be owed. These suits resulted in final judgments in favor of Norfolk. The suit against Harnett, Inc. (Case No. 84-02815) found the sum of $54,556.00 was owed to Norfolk. The suit against Gables (Case No. 84-03816) found the sum of $18,843.20 was owed to Norfolk. The four judgments identified herein (paragraphs 8, 11, 14 and 15) total $188,000.44 and remain unsatisfied. These judgments represent money damages owed for unpaid insurance premiums. An applicant for licensure with outstanding judgments incurred during the course of doing the business of insurance would not be approved by the Department without a showing of restitution or rehabilitation. The Department deems such an applicant to be untrustworthy, incompetent, and not fit to become qualified and licensed in Florida. Respondent offered no evidence of restitution or rehabilitation. Respondent maintained that no monies were owed by the respective debtor companies or Respondent individually.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That Department of Insurance and Treasurer enter a Final Order revoking the licenses held by Respondent, William John Harnett. DONE and RECOMMENDED this 5th day of July, 1988, in Tallahassee, Florida. JOYOUS D. PARRISH 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 5th day of July, 1988.
