The Issue Whether C. Fullerton and Landscaping Co., Inc., is indebted to Other Side Sod, LLC, for the purchase of sod and pallets; and, if so, in what amount.
Findings Of Fact Petitioner is a Florida Limited Liability Corporation located in Arcadia, Florida, and at all times relevant hereto was a producer of agricultural products, as defined by section 604.15(9), Florida Statutes. Petitioner is also a “dealer in agricultural products” within the meaning of section 604.15(2). Respondent, during all times relevant hereto, was a “dealer in agricultural products,” within the meaning of section 604.15(2). At all times relevant to this proceeding, Great American served as surety for Respondent. At all times relevant to this proceeding, Respondent was a customer of Other Side Sod. Respondent purchased sod from Petitioner and thereafter resold and installed the sod to Respondent’s customers. Petitioner sold sod to its customers on wooden pallets. An integral part of each transaction involved the pallets. There are 10 invoices in dispute which cover the period October 14, 2016, through February 10, 2017. For the underlying transactions that relate to the invoices in question, the following language is contained on each field/delivery ticket: Terms of Sale: Payment due upon receipt. All payment[s] applied to pallet balance first. Interest at the rate of 1 1/2% per month will be charged on unpaid invoice amounts after 14 days. Invoices will be charged $0.02 per square foot additional after 30 days. Purchaser agrees to pay all costs of collection, including attorney fees, in [the] event it is necessary to institute suit for collection. Venue will be in DeSoto County, Florida. All Sales F.O.B. Shipping Point. On or about October 14, 2016, Petitioner sent Respondent invoice 47293, which showed a balance due of $462 for pallets related to the sale of Bahia sod. The invoice remained unpaid for more than 30 days and Petitioner, in accordance with the terms of sale, amended the original invoice and added a charge of two cents for each of the 83,200 units of Bahia sod related to the transaction ($1,664). Petitioner also added to the invoice a charge of $124.80 for sales tax related to the late payment penalty ($1,664 x 7.50 percent). On or about October 23, 2016, Petitioner sent Respondent invoice 47378, which showed a balance due of $224 for pallets related to the sale of Bahia sod. The invoice remained unpaid for more than 30 days and Petitioner, in accordance with the terms of sale, amended the original invoice and added a charge of two cents for each of the 70,400 units of Bahia sod related to the transaction ($1,408). Petitioner also added to the invoice a charge of $105.60 for sales tax related to the late payment penalty ($1,408 x 7.50 percent). On or about October 24, 2016, Petitioner sent Respondent invoice 47420, which showed a balance due of $280 for pallets related to the sale of Bahia sod. The invoice remained unpaid for more than 30 days and Petitioner, in accordance with the terms of sale, amended the original invoice and added a charge of two cents for each of the 16,000 units of Bahia sod related to the transaction ($320). Petitioner also added to the invoice a charge of $24 for sales tax related to the late payment penalty ($320 x 7.50 percent). On or about November 13, 2016, Petitioner sent Respondent invoice 47549, which showed a balance due of $1,526 for pallets related to the sale of Bahia sod. The invoice remained unpaid for more than 30 days and Petitioner, in accordance with the terms of sale, amended the original invoice and added a charge of two cents for each of the 103,200 units of Bahia sod related to the transaction ($2,064). Petitioner also added to the invoice a charge of $154.80 for sales tax related to the late payment penalty ($2,064 x 7.50 percent). On or about December 6, 2016, Petitioner sent Respondent invoice 47755, which showed a balance due of $434 for pallets related to the sale of Bahia sod. The invoice remained unpaid for more than 30 days and Petitioner, in accordance with the terms of sale, amended the original invoice and added a charge of two cents for each of the 30,400 units of Bahia sod related to the transaction ($608). Petitioner also added to the invoice a charge of $45.60 for sales tax related to the late payment penalty ($608 x 7.50 percent). On or about January 8, 2017, Petitioner sent Respondent invoice 48093, which showed a balance due of $1,256 for 12,800 units of Bahia sod, $224 for a pallet deposit, and $72 for sales tax. The invoice remained unpaid for more than 30 days and Petitioner, in accordance with the terms of sale, amended the original invoice and added a charge of two cents for each of the 12,800 units of Bahia sod related to the transaction ($256). Petitioner also added to the invoice a charge of $19.20 for sales tax related to the late payment penalty ($256 x 7.50 percent). On or about December 13, 2016, Petitioner sent Respondent invoice 48166, which showed a balance due of $343 for pallets related to the sale of Bahia sod. The invoice remained unpaid for more than 30 days and Petitioner, in accordance with the terms of sale, amended the original invoice and added a charge of two cents for each of the 163,200 units of Bahia sod related to the transaction ($3,264). Petitioner also added to the invoice a charge of $244.80 for sales tax related to the late payment penalty ($3,264 x 7.50 percent). On or about January 29, 2017, Petitioner sent Respondent invoice 48285, which showed a balance due of $3,000 for 40,000 units of Bahia sod, $308 for a pallet deposit, and $225 for sales tax (total = $3,533). On February 3, 2017, Respondent submitted to Petitioner partial payment in the amount of $3,210.50, which left an unpaid balance of $322.50. The balance remained unpaid for more than 30 days and Petitioner, in accordance with the terms of sale, amended the original invoice and added a charge of two cents for each of the 40,000 units of Bahia sod related to the transaction ($800). Petitioner also added to the invoice a charge of $60 for sales tax related to the late payment penalty ($800 x 7.50 percent). On or about January 31, 2017, Petitioner sent Respondent invoice 48301, which showed a balance due of $390 for 5,200 units of Bahia sod, $91 for a pallet deposit, and $29.25 for sales tax (total = $510.25). On February 15, 2017, Respondent submitted to Petitioner partial payment in the amount of $468.33, which left an unpaid balance of $41.92.1/ The balance remained unpaid for more than 30 days and Petitioner, in accordance with the terms of sale, amended the original invoice and added a charge of two cents for each of the 5,200 units of Bahia sod related to the transaction ($104). Petitioner also added to the invoice a charge of $7.80 for sales tax related to the late payment penalty ($104 x 7.50 percent). On or about February 10, 2017, Petitioner sent Respondent invoice 48409, which showed a balance due of $390 for 5,200 units of Bahia sod, $21 for a pallet deposit, and $29.25 for sales tax (total = $440.25). On February 15, 2017, Respondent submitted to Petitioner partial payment in the amount of $398.33, which left an unpaid balance of $41.92. The balance remained unpaid for more than 30 days and Petitioner, in accordance with the terms of sale, amended the original invoice and added a charge of two cents for each of the 5,200 units of Bahia sod related to the transaction ($104). Petitioner also added to the invoice a charge of $7.80 for sales tax related to the late payment penalty ($104 x 7.50 percent).
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Agriculture and Consumer Services enter a final order approving the claim of Other Side Sod, LLC, against C. Fullerton and Landscaping Co., Inc., in the amount of $4,981.34. DONE AND ENTERED this 7th day of November, 2017, in Tallahassee, Leon County, Florida. S LINZIE F. BOGAN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 7th day of November, 2017.
Findings Of Fact Upon consideration of the oral testimony and documentary evidence adduced at the hearing, the following relevant facts are found: At all times pertinent to this proceeding, Petitioners were producers of agricultural products in the State of Florida as defined in Section 604.15(5), Florida Statutes (1983). At all times pertinent to this proceeding, Respondent GMS was a licensed dealer in agricultural products as defined by Section 604.15(1), Florida Statutes (1983), issued license no. 936 by the Department and bonded by Commercial Union Insurance Company (Commercial) in the sum of $50,000.00 - Bond No. CZ 7117346. At all times pertinent to this proceeding, Respondent Commercial was authorized to do business in the State of Florida. The complaint filed by Petitioner was timely filed in accordance with Section 604.21(1), Florida Statutes (1983). Prior to Petitioners selling or delivering any watermelons (melons) to Respondent GMS, Petitioners and Respondent GMS entered into a verbal contract whereby: (a) Petitioners would harvest and load their melons on trucks furnished by Respondent GMS at Petitioners' farm; (b) the loading, grading and inspection, if any, was to be supervised by, and the responsibility of Respondent GMS or its agent; (c) the melons were to be U.S. No. 1 grade; (d) the melons were purchased F.O.B. Petitioner's farm subject to acceptance by Respondent GMS, with title and risk of loss passing to Respondent GMS at point of shipment (See Transcript Page 95 lines 5-7); (e) the price was left open subject to Petitioners being paid the market price for the melons at place of shipment on the day of shipment as determined by Respondent GMS less one (1) or two (2) cent sales charge, depending on the price; and requiring Respondent GMS to notify Petitioners on a daily basis of that price and; (f) the settlement was to be made by Respondent GMS within a reasonable time after the sale of the melons by Respondent GMS. Respondent GMS was not acting as Petitioners agent in the sale of the melons for the account of the Petitioners on a net return basis nor was it acting as a negotiating broker between the Petitioners and the buyers. Respondent GMS did not make the type of accounting to Petitioners as required by Section 604.22, Florida Statutes had it been their agent. Although Respondent GMS purchased over twenty (20) loads of melons from the Petitioners, there are only ten (10) loads of melons in dispute and they are represented by track report numbers 536 dated April 29, 1985, 534 dated April 30, 1985, 2363 and 537, dated May 1, 1985, 2379, 2386 and 538 dated May 2, 1985, and 2385, 2412 and 2387 dated May 3, 1985. Jennings W. Starling (Starling) was the agent of Respondent GMS responsible for loading; grading- inspecting and accepting and approving the loads of melons for shipment that Respondent GMS was purchasing from Petitioners during the 1985 melon season. Petitioners and Starling were both aware that some of the melons had hollow hearth a conditions if known, would cause the melons to be rejected. Aware of this condition in the melons, Starling allowed Petitioners to load the melons on the truck furnished by Respondent GMS. Starling rejected from 20 percent to 40 percent of the melons harvested and brought in from Petitioners' fields before accepting and approving a load for shipment. Starling accepted and approved for shipment all ten (10) of the disputed loads of melons. On a daily basis, Robert E. McDaniel, Sr., one of the Petitioners, would contact the office of Respondent GMS in Lakeland Florida to obtain the price being paid that day by Respondent GMS to Petitioners but was not always successful, however, he would within a day or two obtain the price for a particular day. Robert E. McDaniel did obtain the price to be paid by Respondent GMS for the ten (10) disputed loads and informed his son Robert E. McDaniel, Jr. of those prices. The prices quoted to Robert E. McDaniel, Sr. by Respondent GMS on the ten (10) disputed loads were 12 cents, 10 cents, 8 cents, 8 cents, 8 cents, 8 cents, 8 cents, 7 cents, 7 cents, and 7 cents on tract reports number 536, 534, 2363, 537, 2379, 2386, 538, 2385, 2412 and 2387, respectively. No written record of their prices was produced at the hearing but the testimony of Robert E. McDaniel Sr. concerning these prices was the most credible evidence presented. After the melons were shipped, sometimes as much as one week after, a track report was given to Robert E. McDaniel Jr. by Starling for initialing. Sometimes a price would be indicated on the track report but this price was based on selling price at point of destination and not the market price at point of shipment. Also, the letters "H.H." would also appear on the track report which, according to the testimony of Starling, indicated hollow heart but the evidence was insufficient to prove that Starling had rejected these loads for shipment because of a hollow heart condition in the melons. The loads in question were paid for by Respondent GMS based on a price at point of destination under its drafts no. 831912 and 851311. The amount in dispute is as follows: DATE TRACK NET AMOUNT AMOUNT SHIPPED
Recommendation Based upon the Findings of Fact and Conclusions of Law recited herein, it is RECOMMENDED that Respondent GMS be ordered to pay to the Petitioners the sum of $11.212.31. It is further RECOMMENDED that if Respondent GMS fails to timely pay the Petitioners as ordered, then Respondent Commercial be ordered to pay the Department as required by Section 604.21, Florida Statutes (1983) and that the Department reimburse the Petitioners in accordance with Section 604.21, Florida Statutes (1983). Respectfully submitted and entered this 13th day of June, 1986, in Tallahassee, Leon County, Florida. Hearings Hearings WILLIAM R. CAVE Hearing Officer Division of Administrative The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 FILED with the Clerk of the Division of Administrative this 13th day of June, 1986.
The Issue At issue in this proceeding is whether proposed Florida Administrative Code Rule 69O-186.003(1)(c) constitutes an invalid exercise of delegated legislative authority.
Findings Of Fact Parties ATIF was established in 1948 by Florida lawyers in order to provide title insurance services to their clients. ATIF has over 6,000 member agents, all of whom are members of the Florida Bar issuing title insurance in private practice. ATIF issues policies exclusively through its member agents. Stewart Title is a title insurer operating in all 50 states. Stewart Title issues title insurance policies in Florida directly, through affiliated companies, and through independent agents. First American is a title insurer operating throughout the United States. It offers the JLP in states other than Florida, and sells the product directly, through independent agents, and through affiliated agents. As of 2007, approximately 27% of First American's business was written directly. The Financial Services Commission (the "Commission") serves as the agency head of OIR for purposes that include rulemaking. The Commission comprises the Governor, Attorney General, Chief Financial Officer, and Commissioner of Agriculture. § 20.121(3) and (3)(c), Fla. Stat. OIR is a structural unit of the Commission responsible for all activities concerning insurers and other risk bearing entities, including but not limited to licensing, rates and policy forms. The head of OIR is the Director, also known as the Commissioner of Insurance Regulation. § 20.121(3)(a)1, Fla. Stat. The JLP Title insurance is purchased to insure the purchaser (or his lender) against disputes regarding the ownership of a given piece of real property. Title insurance guarantees the transferability of the title to real property. The JLP is title insurance intended to cover "junior" mortgages, which include second mortgages and home equity loans. The JLP is intended to be less comprehensive and less expensive than a traditional owner's or lender's primary title insurance policy. The JLP ensures that the borrower is the last grantee of record for the property being used as collateral for the loan. It ensures that the tax payments are current, insures against any liens on the property, and ensures that the legal description on the policy is the same legal description found on the last deed of record.2 The JLP is not authorized for sale in the state of Florida because OIR has yet to approve a premium rate for this type of title insurance. As more fully explained below, ATIF and First American filed petitions in 2003 seeking OIR's approval of the forms and rates necessary for the issuance of the JLP, pursuant to Section 627.782, Florida Statutes. The Statute and Proposed Rule Title insurance contracts generally are governed by Chapter 627, Part XIII, Florida Statutes. Section 627.7711, Florida Statutes, provides the following definitions: As used in this part, the term: (1)(a) "Closing services" means services performed by a licensed title insurer, title insurance agent or agency, or attorney agent in the agent's or agency's capacity as such, including, but not limited to, preparing documents necessary to close the transaction, conducting the closing, or handling the disbursing of funds related to the closing in a real estate closing transaction in which a title insurance commitment or policy is to be issued. (b) "Primary title services" means determining insurability in accordance with sound underwriting practices based upon evaluation of a reasonable title search or a search of the records of a Uniform Commercial Code filing office and such other information as may be necessary, determination and clearance of underwriting objections and requirements to eliminate risk, preparation and issuance of a title insurance commitment setting forth the requirements to insure, and preparation and issuance of the policy. Such services do not include closing services or title searches, for which a separate charge or separate charges may be made. "Premium" means the charge, as specified by rule of the commission, that is made by a title insurer for a title insurance policy, including the charge for performance of primary title services by a title insurer or title insurance agent or agency, and incurring the risks incident to such policy, under the several classifications of title insurance contracts and forms, and upon which charge a premium tax is paid under s. 624.509. As used in this part or in any other law, with respect to title insurance, the word "premium" does not include a commission. "Title insurer" means any domestic company organized and authorized to do business under the provisions of chapter 624, for the purpose of issuing title insurance, or any insurer organized under the laws of another state, the District of Columbia, or a foreign country and holding a certificate of authority to transact business in this state, for the purpose of issuing title insurance. "Title search" means the compiling of title information from official or public records.[3] Section 627.782, Florida Statutes, titled "Adoption of Rates," provides as follows: Subject to the rating provisions of this code, the commission must adopt a rule specifying the premium to be charged in this state by title insurers for the respective types of title insurance contracts and, for policies issued through agents or agencies, the percentage of such premium required to be retained by the title insurer which shall not be less than 30 percent. However, in a transaction subject to the Real Estate Settlement Procedures Act of 1974, 12 U.S.C. ss. 2601 et seq., as amended, no portion of the premium attributable to providing a primary title service shall be paid to or retained by any person who does not actually perform or is not liable for the performance of such service. In adopting premium rates, the commission must give due consideration to the following: The title insurers' loss experience and prospective loss experience under closing protection letters and policy liabilities. A reasonable margin for underwriting profit and contingencies, including contingent liability under s. 627.7865, sufficient to allow title insurers, agents, and agencies to earn a rate of return on their capital that will attract and retain adequate capital investment in the title insurance business and maintain an efficient title insurance delivery system. Past expenses and prospective expenses for administration and handling of risks. Liability for defalcation. Other relevant factors. Rates may be grouped by classification or schedule and may differ as to class of risk assumed. Rates may not be excessive, inadequate, or unfairly discriminatory. The premium applies to each $100 of insurance issued to an insured. The premium rates apply throughout this state. The commission shall, in accordance with the standards provided in subsection (2), review the premium as needed, but not less frequently than once every 3 years, and shall, based upon the review required by this subsection, revise the premium if the results of the review so warrant. The commission may, by rule, require licensees under this part to annually submit statistical information, including loss and expense data, as the department determines to be necessary to analyze premium rates, retention rates, and the condition of the title insurance industry. Section 627.783, Florida Statutes, titled "Rate deviation," provides as follows: A title insurer may petition the office for an order authorizing a specific deviation from the adopted premium. The petition shall be in writing and sworn to and shall set forth allegations of fact upon which the petitioner will rely, including the petitioner's reasons for requesting the deviation. Any authorized title insurer, agent, or agency may join in the petition for like authority to deviate or may file a separate petition praying for like authority or opposing the deviation. The office shall rule on all such petitions simultaneously. If, in the judgment of the office, the requested deviation is not justified, the office may enter an order denying the petition. An order granting a petition constitutes an amendment to the adopted premium as to the petitioners named in the order, and is subject to s. 627.782. Section 627.7843, Florida Statutes, titled "Ownership and encumbrance reports," provides as follows: As used in this section, the term "ownership and encumbrance report" means a report that discloses certain defined documents imparting constructive notice and appearing in the official records relating to specified real property. An ownership and encumbrance report may not directly or indirectly set forth or imply any opinion, warranty, guarantee, insurance, or other similar assurance as to the status of title to real property. Any ownership and encumbrance report or similar report that is relied on or intended to be relied on by a consumer must be on forms approved by the office, and must provide for a maximum liability for incorrect information of not more than $1,000. On April 11, 2003, First American filed with OIR a petition for approval of title insurance policy forms, including schedules and endorsements thereto, previously approved by ALTA, for the issuance of the JLP in Florida, subject to a rate determination pursuant to Section 676.782, Florida Statutes. The petition asserted that First American had established historical data reflecting an "almost negligible default rate" for such policies, and that the growing market for "no-cost" or "low-cost" home equity loans and junior loans had led many institutional lenders to seek a product such as the JLP that could be provided quickly, accurately, and at a reasonable cost to the lender or borrower. First American did not suggest a specific premium rate for its proposed JLP.4 On or about April 14, 2003, ATIF filed with OIR a "petition for rulemaking setting title insurance rates." ATIF's petition sought approval of forms previously adopted by ALTA. Unlike the First American petition, the ATIF petition requested a specific premium rate, in the following terms: Based on the high-demand and low anticipated claims rates for this type of coverage, Petitioner estimates that a rate equal to 30% of the rate premiums presently promulgated for a mortgage title insurance policy pursuant to Rule 4-186.003, F.A.C.[5] with a minimum premium of $100.00 per policy, will provide a reasonable margin for underwriting profit and contingencies, including contingent liability as provided in [Section 627.7865, Florida Statutes],[6] such as to allow a rate of return on capital that will attract and retain adequate capital investments in the title insurance business and maintain an efficient title insurance delivery system. In support of such rate, Petitioner would show as follows: The Petitioner's low prospective loss experience under the proposed policy. The Petitioner's low expenses and low prospective expenses for administration and handling of risks. The proposed premium will be $1.725 per $1,000 of coverage up to and including $100,000, and $1.50 per $1,000 of coverage in excess of $100,000, up to and including $250,000 of maximum coverage, with a minimum premium of $100.00. This proposed rate will not be excessive, inadequate or unfairly discriminatory, and will apply throughout the State of Florida. This proposed rate will be subject to the Respondent's review not less frequently than once every three (3) years, and may be revised based on such review. By letter dated June 13, 2003, OIR informed ATIF that it agreed the rulemaking process should be initiated in this matter, and that OIR would hold workshops to gather information as to the propriety of the rate suggested by ATIF. OIR's letter notified ATIF that OIR neither approved nor disapproved of the forms submitted by ATIF at that time, pending receipt of sufficient data at the workshops to permit OIR to make an informed decision. By letter dated June 23, 2003, ATIF's senior underwriting counsel, Ted Conner, informed OIR that ATIF did not dispute OIR's decision to initiate the rulemaking process and postpone approval of ATIF's forms. Following receipt of the First American and ATIF petitions and the decision to initiate the rulemaking process, OIR commissioned The David Cox Company to prepare an actuarial report (the "Cox Report") on the rates and forms for the proposed JLP. OIR general counsel Steven Parton recalled that Mr. Cox was hired to provide "an independent look" at the two proposed rates. Mr. Cox requested information from ATIF and First American. ATIF responded with detailed answers to Mr. Cox' questions as well as to follow-up questions from OIR concerning the scope of services required to make the determination of insurability under the JLP and the events that might trigger a claim under such a policy.7 The Cox Report, dated September 2003, and provided to OIR on November 24, 2003, made the following relevant recommendations: the ALTA Residential Limited Coverage Junior Loan Policy form, the Short Form Limited Coverage Junior Loan Policy and endorsements JR1 and JR2, all dated 10/19/96, should be adopted; eligibility for the JLP should be restricted to institutional lenders, to land having 1-4 residential units, and to loan amounts less than or equal to $250,000; and that the JLP premium should be no lower than $2.00 per $1,000 of liability and no higher than $2.60 per $1,000 of liability. The premium for a standard title insurance policy is $5.75 per thousand of liability. Fla. Admin. Code R. 69O-186.003(1)(a). Mr. Cox justified his premium recommendation in summary as follows: My recommended Junior Loan Policy risk rate of $2.00 to $2.60 is a 55% to 65% discount off of the owner's policy risk rate. The discount is based on judgment considering the relatively low level of expense and loss for the Junior Loan Policy, other Florida risk rate discounts and rates used in other states. The proposed rates should not result in inadequate compensation to insurers operating through independent agents. The Cox Report was conceptually based on a comparison of the JLP to a standard title insurance policy. Mr. Cox ultimately made an actuarial judgment as to the proper discount based on the reduced coverage, the fact that eligibility would be restricted to low cost, low risk title transactions, and the reduced expenses associated with the JLP. Mr. Cox concluded his report as follows: The Junior Loan Policy is a new product in Florida and out-of-state experience is incomplete and in some respects is not comparable. By necessity judgment must be used to set the Junior Loan Policy risk rate. This section will examine the consequences of setting an initial risk rate that is either too high or too low. The title insurance industry tends to view lenders as customers and not land owners [as customers]. This is because lenders are constant business associates while owners come and go. State and Federal laws prohibit rebating to lenders and other middlemen. Rebating drives up the cost of title insurance for the land owner. Rates for the junior loan policy that are set too low would act as a rebate to the lenders who pay the Junior Loan Policy premium directly. Furthermore, title insurers do not intend to track the expenses of the junior loan policy versus the owner's policy and any subsidy of the junior loan policy rates by the owner's policy rates will never be detected and corrected. Florida case law has upheld the rebating of commissions by title insurance agents (the agent's 70% share of the risk premium).[8] The rebating of related title services is not permitted under [Florida Administrative Code Rule 4-186.003(13)(a)][9] in that related title services cannot be provided below actual cost. Assuming there is competition in the junior loan title insurance segment, there would be little error in having a somewhat high risk rate because rebating commissions would adjust the risk rate downward.[10] This assumption does not, however, apply to policies written directly buy [sic] an insurer, in which case there is no commission to rebate. There are currently no insurers operating primarily on a direct basis in Florida . . . The primary consumer for the Junior Loan Policy is the lender. The second mortgage lender is concerned with low closing costs and usually pays the title insurance premium directly. Lenders have much more bargaining power than borrowers as regards title insurance premiums. Price competition for the Junior Loan Policy is expected to be strong and lenders should be able to obtain rebates on commissions and discounts on related title services. A critical part of title insurance risk rate is that part retained by insurers operating through independent agents. This segment's only source of revenue is the 30% retained risk rate. Agents, attorneys, insurers operating through owned agencies, insurers writing directly and insurers providing related title services can supplement their revenues with related title service fees, which are essentially unregulated. Two prominent Florida title insurers, United General Title Insurance Company and Alliance Title of America, Inc. rely predominantly on the insurer's portion of the risk premium. These companies could sustain a net operating loss on Junior Loan Policy business if the risk rate is set too low. There is a range of reasonable risk rates for the Junior Loan Policy. A rate set on the high end of this range would avoid hurting insurers operating through independent agents while not necessarily hurting others. Setting a flat risk rate rather than a series of risk rates that decrease with the amount of liability further provides support for insurers operating through independent agents. Subsequent to the issuance of the Cox Report, First American commissioned Milliman USA to prepare an actuarial report (the "Milliman Report") regarding rates and forms for the JLP. The Milliman Report, written by actuary Paul Struzzieri, was dated February 2004. The Milliman Report concurred with the Cox Report as to the ALTA forms that should be adopted, and that eligibility for the JLP should be restricted to land having 1-4 residential units. As to rates, the Milliman Report recommended that the JLP premium should be no lower than $0.86 per $1000 of liability, and no higher than $1.33 per $1000 of liability, and recommended a cap of $500,000 on the junior mortgage loan. In his report, Mr. Struzzieri took a different conceptual approach from that taken by Mr. Cox, who compared the JLP to a standard title insurance policy to arrive at a judgment of how much the standard policy's rate should be discounted to arrive at a fair JLP rate. Mr. Struzzieri believed that a more valid JLP rate could be derived from viewing the rates charged for JLPs in other states, and by comparison to the rates charged in Florida for the Ownership and Encumbrance ("O&E") reports described in Section 627.7843, Florida Statutes, which is set forth in full at Finding of Fact 9, supra. Mr. Struzzieri explained his proposed rates as follows: The rationale for my proposed rates is two- fold. The Junior Loan Policy has less risk than the Original Title Insurance Policy. The reduced risk comes from reduced levels of coverage and the elimination of defalcation claims. . . . Because there is less coverage, there is significantly less work involved in preparing and issuing a Junior Loan Policy. The following sections describe the support for the Junior Loan Policy losses (associated with reduced risk) and expenses (associated with reduced work load). I believe that these reduced amounts are reflective of the costs underlying a Junior Loan Policy by comparison to (a) rates for Junior Loan Policies in other states and rates for the Ownership and Encumbrance (O&E) report, to which the Junior Loan Policy coverage is most compatible. Reduced Risk As shown in the Cox report, losses are approximately 4% to 7% of the rate in Florida. . . . The current rate for an Original Title Insurance Policy (Owner or Lender) is $5.75 per $1,000 of liability. At a 5% loss ratio, losses would equal approximately $0.30 per $1,000 of liability. In First American's August 15, 2003, response to Cox's request for information regarding the Junior Loan Policy, a loss rate of $0.03 per $1,000 of liability is assumed. I believe that this is a reasonable estimate of the loss potential for the Junior Loan Policy, based on my attached analysis. . . .[11] This represents a 90% decrease in the losses underlying the Original Title Insurance Policy rates. The proposed Junior Loan Policy rates are 74% to 85% lower than the $5.75 rate, lower percentages than that indicated by the loss experience (i.e., 90%).[12] I believe that this comparison is illustrative of the magnitude of the reduced coverage and, therefore, the reduced effort and expense involved in issuing a Junior Loan Policy. Reduced Work In Florida, "primary title services" are included in the rate and are defined to include: determination of insurability in accordance with sound underwriting practices based upon evaluation of a reasonable search and examination of the title, determination and clearance of underwriting objections and requirements to eliminate risk, preparation and issuance of a title insurance commitment setting forth the requirements to insure, and preparation and issuance of the policy. The amount of work involved in issuing a Junior Loan Policy is greatly reduced because of the reduced coverage. In addition, the risk is reduced because of certain services that are generally performed by the lender. As an example of reduced work, a Junior Loan Policy insures against losses related to the borrower not being the same as the grantee in the last recorded deed. In order to determine insurability for a Junior Loan Policy, one must review the search to verify that the borrower is the grantee in the last deed of record. In addition, one must determine that the land described in the policy is the same as the land described in the deed to the borrower. To clear underwriting objections and eliminate risk, one must review the search results from the public records to verify that there are no liens against that borrower and that real estate taxes are current. As an example of reduced risk, I point out that the home equity lender generally performs the closing and disbursement functions. Therefore, most of the costs associated with these functions are borne by the lender and not the Junior Loan Policy issuer. Since neither the agent nor underwriter is involved in disbursing the funds, the defalcation element of the premium is eliminated. Mr. Struzzieri believed that the O&E report is the product most comparable to the JLP and therefore the one most likely to yield a reasonable rate: While the above discussion illustrates the minimal level of work involved in issuing a Junior Loan Policy, it is difficult to quantify the cost of this work because solid expense data is not available. Therefore, it is appropriate to compare the Junior Loan Policy to an O&E report. Essentially, the level of work involved in issuing a Junior Loan Policy is the same as the work performed for an O&E report. The majority of home equity loan transactions in Florida are currently closed using an O&E report. The cost of an O&E report to the lender is typically between $60 and $100 (this includes the cost of a search, which for the Junior Loan Policy would be an additional charge). Anecdotally, the O&E report is purported to be profitable to the companies in this business. For the $75,000 home equity loan used by Cox in the exhibits to his report, the premium for the Junior Loan Policy at the lower proposed rate ($0.86 per $1,000 of liability) would be $64.50[,] just above the low end of the range of O&E costs. Although the Junior Loan Policy provides broader coverage than the O&E report in Florida, the loss portion of the rate is small (estimated at $0.03 earlier in this report). Therefore, we conclude that my proposed rate (lower bound) of $0.86 is appropriate in Florida. The higher bound proposed rate ($1.33) would produce a premium of $99.75 in this example[,] equal to the high end of the range of O&E costs. As mentioned earlier, the cost associated with a search would be added onto the $99.75 premium. Therefore, I believe that any rate higher than $1.33 would be excessive. Unlike the Cox Report, the Milliman Report did not expressly consider the impact of an insurer's business model in the rate determination. Mr. Cox noted that setting a rate at the high end of his reasonable range "would avoid hurting insurers operating through independent agents while not necessarily hurting others." Mr. Struzzieri made no assessment of the impact his proposed rate would have on title insurers that operate through independent agents. This impact is of great concern to ATIF because it operates exclusively through independent agents, and because Subsection 627.782(1), Florida Statutes, permits the agent to retain as much as 70% of the premium. On April 30, 2004, OIR published proposed JLP rules establishing a JLP premium rate of $1.33 per $1000 of liability. Florida Administrative Weekly, vol. 30, no. 18, pp. 1788-1790. OIR general counsel Steven Parton testified that this rate was based on the Milliman Report and on "what we thought was an understanding among insurers that $1.33 per $1,000 would be acceptable to everybody. That turned out not to be true." Mr. Parton recalled that ATIF did not find the $1.33 rate acceptable.13 On September 10, 2004, OIR published a "Notice of Withdrawal" of those proposed rules. Florida Administrative Weekly, vol. 30, no. 37, p. 3784. In a letter to Ted Conner of ATIF dated August 17, 2004, OIR deputy director Lisa K. Miller explained OIR's decision to withdraw the proposed JLP rule as follows, in pertinent part: Thank you for working with the Office during the investigation of the proposed junior loan title product and the development of proposed rule drafts. At this time the Office has determined not to adopt the requested junior loan title product. Applicable statutory provisions do not specifically grant legislative authority for a rule adopting the JLP product, as required by FL Board of Medicine v. FL Academy of Cosmetic Surgery, Inc., 808 So. 2d 243, 253 (Fla. 1st DCA 2002). Additionally, Section 627.784, Florida Statutes prohibits casualty title insurance such as the JLP product.[14] Adoption of this proposed rule would therefore be arbitrary, capricious, and not reasonably related to any statue that could possibly enable the Office to adopt the JLP through a rule, in contravention of Joseph v. Henderson, 834 So. 2d 373, 375 (Fla. 2d DCA 2003). . . . By Order dated May 20, 2005, OIR approved First American's use of the ALTA Residential Limited Coverage Junior Loan Policy form, with Florida modifications, and endorsement form JR1, both dated 10/19/96. On June 3, 2005, OIR published proposed Florida Administrative Code Rule 69O-186.003 with a proposed rate of $0.86 per $1000 of liability written. Florida Administrative Weekly, vol. 31, no. 22, pp. 2029-2030. This version of the proposed rule was held to be an invalid exercise of delegated legislative authority, but only on the procedural ground that OIR had published the rule without the approval of the Commission as the agency head. Attorneys' Title Insurance Fund, Inc. and Florida Land Title Association, Inc. v. Financial Services Commission and Office of Insurance Regulation, Case No. 05-2630RP (DOAH May 17, 2006). OIR filed its notice of appeal of the summary final order in Case No. 05-2630RP to the First District Court of Appeal, but voluntarily dismissed the appeal on March 23, 2007. On June 12, 2007, the Commission approved for publication proposed Florida Administrative Code Rule 69O-186.003, again proposing a rate of $0.86 per $1,000 of liability written. The full text of the Proposed Rule is as follows: 69O-186.003 Title Insurance Rates. The following are risk rate premiums to be charged by title insurers in this state for the respective types of title insurance contracts. To compute any insurance premium on a fractional thousand of insurance (except as to minimum premiums), multiply such fractional thousand by the rate per thousand applicable, considering any fraction of $100.00 as a full $100.00. (1)(a) and (b) No change. For junior loan title insurance: The premium for junior loan title insurance shall be: $0.86 per $1,000.00 of liability written; The minimum premium shall be $50.00; The minimum insurer retention shall be 30%. This rate is approved for use with the following junior loan title insurance policy forms, copies of which are available on the Office's website www.floir.com: ALTA Residential Limited Coverage Junior Loan Policy (10/19/96)(with Florida Modifications) and ALTA Endorsement JR 1 (10/19/96); ALTA Short Form Residential Limited Coverage Junior Loan Policy (10/19/96)(with Florida Modifications), and ALTA Endorsement JR 1 (10/19/96); and Any substantially similar product that insures the same type risk. This rate does not include the $25.00 premium that shall be charged when issuing the optional ALTA Endorsement JR 2 (Revolving Credit/Variable Rate)(10/19/96) on a junior loan title insurance policy, as provided for in Florida Administrative Code Rule 69O-186.005(6)(c).[15] Eligibility for the junior loan policy shall be restricted to the following: The insured title is for land having 1-4 residential units; The junior loan must be a second or subsequent mortgage loan and must meet the definitional requirements of a "federally related mortgage loan", as defined in the Real Estate Settlement Procedures Act of 1974, 12 U.S.C. s. 2602, which is incorporated by reference and a copy is available from the Office; The junior mortgage loan amount is less than or equal to $500,000; No junior loan policy may be issued for an amount less than the full junior loan principal debt. (2) through (12) No change. On June 22, 2007, OIR published the notice of the Proposed Rule. As specific authority for the Proposed Rule, the notice cited Sections 624.308, 626.9611, 627.777, 627.782, and 627.793, Florida Statutes. The notice stated that the Proposed Rule would implement the following: Subsections 624.307(1), 626.9541(1)(h)3.a., Sections 627.777, 627.782, 627.783, 627.7831, 627.7841, 627.7845, and Subsection 697.04(1), Florida Statutes. OIR held a rule development workshop on July 24, 2007. On November 14, 2007, the Commission approved the Proposed Rule for final adoption. Petitioners' claim The Petition notes that Subsection 627.782(1), Florida Statutes, provides that at least 30% of the proposed JLP premium must be retained by the title insurer. ATIF asserts (without contradiction at the hearing) that the Legislature established this 30% minimum retention to ensure that market pressures, such as competition to attract and keep agents, do not lead title insurers to retain less premium than necessary to maintain their economic viability. Florida title insurers generally retain only the minimum 30% of the premium due to competition for agents. At the hearing, Petitioners presented a breakdown of the division of premium that would occur with the sale of a $100,000 policy if the JLP premium were set at $0.86 per $1,000. Out of a total premium of $86.00, the title insurer would receive $25.80. From this premium, the insurer must cover its expenses for issuing the JLP, generate a profit sufficient to attract and retain adequate capital investment, and set aside reserves to pay for claims. Petitioners noted that Subsection 625.111(1)(b), Florida Statutes, requires title insurers to maintain a guaranty fund of $0.30 per $1,000 of net retained liability for policies written or title liability assumed in reinsurance. On a $100,000 policy, the title insurer would be required to place $30.00 into the guaranty fund. Petitioners also noted that Section 624.509, Florida Statutes, requires title insurers to pay a premium tax of 1.75% of their gross receipts on each policy. The insurer is liable for the tax on the full premium, even though the insurer actually retains only 30% of that amount. On a $100,000 policy with a premium of $86.00, the premium tax paid by the insurer would therefore be $1.51. Petitioners concluded that when the statutory liabilities ($30.00 guaranty fund and $1.51 premium tax) are deducted from the title insurer's 30% share of the $86.00 premium, the title insurer would actually lose $5.71 on a $100,000 policy. This deficit would have to be covered by funds from the insurer's general operating budget. Mr. Conner, now ATIF's vice president and associate general counsel, testified that the $5.71 per policy loss does not address other underwriting costs, such as policy processing, the cost of operating the claims department, the general overhead of running a large business, or the return on capital required under Subsection 627.782(2)(b), Florida Statutes. Petitioners also offered evidence that the overall cost of performing the services associated with a JLP policy would greatly exceed the premium generated by the $0.86 per $1,000 rate. Mr. Conner spoke at the July 2007, workshop and tried to explain that the proposed JLP rate would not cover the expense of providing primary title services. OIR general counsel Steve Parton responded that OIR had no hard data on the cost of those functions and thus had no way of incorporating ATIF's concerns into the proposed rate. In an attempt to quantify the cost of providing primary title services for a JLP policy, Mr. Conner directed his central Florida branch staff to randomly16 select five residential properties on which a hypothetical second mortgage would be sought and to conduct a search and examination of title consistent with issuing a JLP. This analysis yielded the conclusion that primary title services, including labor costs, for a JLP policy cost a little over $100 per policy. If overhead is included, the total costs are approximately $150 per policy. Mr. Conner testified that the cost of performing these primary title services would be constant regardless of the size of the policy, and that they would have to be paid from the agent's maximum 70% share of the premium.17 On a $100,000 policy, the agent's share of the premium based on a rate of $0.86 per $1,000 would be $60.20. Mr. Conner further testified that a rate sufficient to cover the cost of the primary title services and provide a reasonable profit would be very close to the $2.00 to $2.60 range recommended by the Cox Report. Mr. Conner concluded that the agent's share would be "wholly inadequate" to compensate him for the work he must do. Mr. Conner testified that a number of ATIF's member agents represent lenders such as credit unions and community banks, and these agents will be issuing policies on second mortgages issued by those institutions. ATIF is concerned that the inadequate rate proposed by OIR could lead agents to issue the JLP without performing all the necessary title services, which would naturally increase ATIF's claims experience.18 Mr. Conner concluded that any title company offering the JLP at $0.86 per $1000 of liability, even by selling the product directly, would be offering it as a loss leader to obtain customers for other products. Petitioners contend that OIR's proposed adoption of the $0.86 per $1000 premium rate for the JLP fails to give "due consideration" to the specific ratemaking criteria set forth in Subsection 627.782(2), Florida Statutes. Petitioners contend that the proposed premium is plainly inadequate and insufficient for the JLP to exist as a self-sustaining product, and will thus require the title insurer to supplement issuance of the JLP with premium dollars collected on its other title insurance policies. Petitioners note that such a drain on premiums for these other policies was not contemplated when those policies' rates were adopted. Petitioners contend that the evidence establishes that OIR and the Commission have failed to consider the impact of the proposed premium rate on title insurance agents, including the adequacy of the rate in paying for the cost of primary title services connected with the JLP, and the agents' ability to earn a rate of return on their capital that will attract and retain adequate capital investment in the title insurance business and maintain an efficient title insurance delivery system, as required by Subsection 627.782(2)(b), Florida Statutes. Finally, Petitioners contend that the proposed JLP rule is vague and ambiguous because it provides that the JLP premium is approved for use with the named ALTA policies or with "[a]ny substantially similar product that insures the same type risk," but does not define the term "substantially similar product." OIR's response OIR's position is that it fulfilled its statutory ratemaking obligations under Subsection 627.082(2)(b), Florida Statutes, and made a rational decision to rely on the Milliman Report and the opinion of Mr. Struzzieri. Mr. Parton conceded the apparent anomaly of rejecting the OIR-commissioned, independent actuarial report of Mr. Cox in favor of a report commissioned by and based entirely on information provided to the actuary by a single company, First American. Mr. Parton also offered considered reasons for the agency's rejection of its own actuarial report. Mr. Parton testified that OIR had a number of concerns with the Cox Report. In the first place, Mr. Cox' fundamental premise regarding Florida law was inaccurate: OIR is not required to "create a rate that would fit everybody's business model." The rate promulgated by OIR need not be sufficient to guarantee profits to companies operating through agents. OIR believed that the Cox Report placed undue emphasis on setting a rate amenable to companies that worked only through agents and disregarded companies that perform direct sales even though the JLP, because it is a simple transaction, is tailored toward a direct business approach. Mr. Parton believed that Mr. Cox should have focused on a company such as First American, which was actually selling the JLP in other states and presumably could provide actual market data for use in recommending a rate. OIR also took issue with Mr. Cox' preference for setting the rate on the high side of the recommended range. The Cox Report noted that agents are free to rebate part of the rate to their customers. Relying on a rebate scheme to bring down rates hides the real cost of title insurance from both the consumer and regulator, and introduces unfair discrimination because not everyone will be able to take advantage of the rebate. OIR concluded that the existence of a rebate scheme constitutes an admission that the rate is excessive. OIR also suggested that ATIF's concern about not being able to cover expenses from the insurer's 30% share of premium could be solved by the insurer taking a greater share of the premium. OIR believed that the conceptual approach of the Milliman Report was more sound, because the agency was persuaded that the JLP bears much more resemblance to an O&E report than to a primary title insurance policy. Mr. Parton testified that during discussions with industry representatives, he had raised the question whether the JLP was really a title insurance product at all. Mr. Parton felt that the JLP was really "an [O&E] report that is trying to be dignified to the level of actually being an insurance policy, whereas an [O&E] report as it is set out in statute is not for the purposes of insurance and has a limit I believe of $1,000 for which you can make any claim against that report. Yet here we were with essentially a product that did nothing more than create an [O&E] report." OIR believed that the Milliman Report made more sense than the Cox Report because the former treated the product as OIR saw it: an O&E report with an insurance product attached. Mr. Parton pointed out that both reports relied on a great deal of actuarial judgment because the JLP is a new product to Florida. Mr. Cox arrived at his recommended rate by discounting a standard title insurance policy, whereas Mr. Struzzieri chose to rely on the costs and loss experience of a company that is actually writing this type of policy in other states. OIR concluded that the Milliman Report more consistently reflected the risk associated with the policy and the policy's intent to deal with simple transactions. Mr. Parton testified that OIR considered the statutory "reasonable margin for underwriting profit and contingencies" ratemaking factor through its reliance on the Milliman Report's analysis of O&E reports. By assuming that the costs embedded in an O&E report are covered by the price First American charges for that product, and then assuming that the cost of producing a JLP would be similar to the costs of producing an O&E report, Mr. Struzzieri was able to arrive at the concluding assumption that $0.86 per $1,000 of coverage would provide a reasonable level of profit for the JLP. OIR accepted the Milliman Report's conclusions without further inquiry into the data upon which Mr. Stuzzieri relied. Mr. Parton testified that OIR did consider all the business models in the industry, but finally chose to go with the lowest rate proposed: [T]he OIR and the Governor and Cabinet in looking at the business models, [ATIF] is a strictly agent-driven entity; that is to say, all sales are through agents. First American as well as [Fidelity National Title Insurance Company], who also sells this product and is not contesting this rate, use a combination of sales through independent agents, affiliated agencies, which are owned, if you will, by the company in direct writing. [The JLP] is a product that frankly lends itself greatly to direct writing, particularly since what you're talking about is essentially simple transactions as opposed to major transfers of title of property. So at the end of the day, in looking at what is going on, we're looking at a company, actually two companies, who are actually selling this product nationwide, have a business model which allows them to write direct, which we believe and I think it's reported reduces costs, and a company who does it strictly through agents and who is not selling this product and has never sold this product . . . [OIR] and [the Commission] in our recommendation and explanation has [sic] come to the conclusion that we have an ability here to actually set a rate that significantly lowers cost in at least limited circumstances. We have a company who is actually engaged in the business of selling this, and we have a company who has proposed a rate and had said, "I can write this rate and make a profit at 86 cents." So ultimately the decision was to go with that particular matter. Thus, OIR's position on giving "due consideration" to the ratemaking factor of "reasonable margin for underwriting profit and contingencies" found at Subsection 627.782(2)(b), Florida Statutes, as explicated by Mr. Parton, is that the statute allows OIR to set the rate at the lowest level at which any one company's actuary concludes it can make a profit.19 If the rate is set any higher, then the company that could have made a profit at the lower rate will be charging an excessive rate, to the detriment of policyholders. Mr. Parton testified that OIR was "not setting the rate for the industry as a whole. . . . I'm setting the rate we believe . . . meets all the requirements of the law, which may not be for the industry as a whole, but in fact can be adjusted if needed." OIR set great store in the fact that the $0.86 per $1,000 rate was proposed by "someone who actually engages in that business, who has engaged an actuary to take a look at the rate based upon the factors of the company who is actually doing it, and they use a direct business model." ATIF is not marketing this product anywhere in the country, and may never market it with its totally agent- generated business model. Mr. Parton stated that "due consideration was given by the fact that the insurers that are actually doing business in this matter have a business model which puts less emphasis on agent generated business and more on direct writing . . .". Mr. Parton noted that one factor leading to the adoption of the proposed rate was the availability of the "rate deviation" process set forth in Section 627.783, Florida Statutes. See Finding of Fact 8, supra, for the statute's text. Mr. Parton testified that Mr. Cox erred in not taking note of the rate deviation statute in his recommendation: ... Florida law allows any insurer to petition for deviation from a promulgated rate, and that's one of the things that, frankly, I believe Mr. Cox did not consider in setting this rate. If, in fact, the rates were set too low for [an] insurer operating through independent agents, and that insurer felt that it hurt him to be able to charge that, that insurer has the ability to petition for deviation and to have a rate set higher than that based upon what they have petitioned. . . . All they have to do is petition the Office pursuant to the statute, prepare whatever documentation under oath they feel supports what they need, and the Department [sic] will make a determination whether or not that justifies a higher rate.[20] * * * . . . It is not necessary for us to take into account the whole industry in adopting a rate when, in fact, the law particularly contemplates that that rate is not necessarily going to be the same for everybody and allows for companies who have a different business practice and different approach to present that to the Office for approval to charge a different rate. And if that's what [ATIF] wants to do, that's fine. So, it's difficult for me to understand how they're adversely impacted by that. Mr. Parton asserted that the rate deviation statute was especially significant to OIR's analysis because Chapter 99-286, sec. 13, Laws of Florida, changed the provision from an industry-wide deviation to one applying to a single applicant, meaning that for the first time the Legislature had authorized more than one rate for each type of title insurance.21 Mr. Parton testified that OIR considered the statutory "loss experience and prospective loss experience" ratemaking factor by holding a rate hearing to which the entire industry was invited, as well as by considering the Cox and Milliman Reports, both of which took loss experience into consideration. Mr. Parton testified that OIR's consideration of the statutory "past expenses and prospective expenses" ratemaking factor was essentially confined to its reliance on the Milliman Report's actuarial judgment in basing the potential costs expenses for the JLP on the costs and expenses associated with an O&E report. Mr. Parton testified that OIR's consideration of the statutory "defalcation" ratemaking factor consisted of adopting the Milliman Report's finding that there is virtually no danger of defalcation with the JLP product because the refinancing would almost always be handled by a bank, eliminating the danger of money passing through the hands of an agent. In summary, OIR's defense of proposed Florida Administrative Code Rule 69O-186.003(1)(c) is premised on its acceptance of the Milliman Report. This acceptance in turn reflects acceptance of the core concept of that report: that the JLP more resembles an O&E report than it does a traditional primary title mortgage policy. Expert testimony on the Milliman Report Dr. Nelson R. Lipshutz testified on behalf of Petitioners as an expert in the economics of the title insurance industry. Dr. Lipshutz has decades of experience in the design and implementation of title insurance statistical plans and ratemaking, including having designed ALTA's Uniform Financial Reporting Plan and Uniform Statistical Plan, which are used as the basis for title insurance regulation in roughly half of the United States. He collects data on behalf of rating bureaus in three states, has served as a consultant for several state departments of insurance (including Florida's) and is the author of a textbook, The Regulatory Economics of Title Insurance. Dr. Lipshutz was retained by ATIF to analyze the Milliman Report. At the hearing, Dr. Lipshutz explained that, unlike other lines of insurance, title insurance is not a loss reimbursement activity; rather, it is a loss prevention activity. Title insurance does not insure against some future contingency, but looks to the past to insure the state of title at a particular point in time. Relative to other lines of insurance, losses consume a small portion of the premium. With title insurance, more of the premium goes toward searching the title in a very complete way. Dr. Lipshutz stated that in most casualty lines, the amount of premiums going out in losses is between 60% and 110%, whereas the losses for title insurance are between 3% and 10%. Because such a small percentage of the title insurance premium goes to the underwriter, the losses are still significant, but loss prevention costs drive the rate for title insurance. In examining the Milliman Report, Dr. Lipshutz first critiqued Mr. Struzzieri's loss calculation, which was based on five years (1999 through 2003) of First American's experience writing JLPs. Mr. Struzzieri had data from First American as to its total liability written in each of those years, and the actual losses incurred on those policies up to June 2003. He also had national loss data averages developed by Milliman to predict the percentage of overall expected losses that were represented by those actual losses as of June 2003. These numbers allowed Mr. Struzzieri to calculate projected ultimate losses for each year, including a projected ultimate loss per $1,000 of liability. Mr. Struzzieri's ultimate projection was an expected loss of $0.03 per $1,000 of liability for the JLP. This projection included two years, 2001 and 2003, for which Mr. Struzzieri had no loss data and thus projected zero losses on over $6 million in liability written. At the outset, Dr. Lipshutz noted that title insurance has a long tail line, meaning that losses take a long time to come in. Unlike auto insurance, where the losses are fairly well known during the policy year, the tail on title insurance can go out for 20 years. The losses in title insurance must be projected and Mr. Struzzieri was conceptually correct in attempting a loss projection. Dr. Lipshutz faulted Mr. Struzzieri's projection for including the "highly unlikely" scenario of policy years with zero losses. Dr. Lipshutz also noted that the estimated losses for 1999, the earliest year in the report and therefore the year with the most fully developed losses, were $0.14 per $1,000, almost five times Mr. Struzzieri's overall projected loss for the JLP. Dr. Lipshutz was also critical of Mr. Struzzieri's use of national data because title insurance is "highly geographically idiosyncratic." Factors that can lead to losses in Florida, such as navigational servitudes, are insignificant in a state such as Arizona. Dr. Lipshutz found no discussion in the Milliman Report of the Florida market, as opposed to general comments on the title insurance industry. Dr. Lipshutz also noted that mortgage fraud is "endemic" in Florida. The state ranks first in the nation in mortgage fraud, with a rate twice the national average in 2006. Because a JLP is essentially insuring the identity of the property owner, fraud and identity theft in Florida should not be ignored in any loss calculation. Finally, Dr. Lipshutz faulted Mr. Struzzieri's loss calculation for failing to account for the cyclical nature of title insurance. When the real estate market is doing well, the losses on title insurance are low. When the market goes down, there are large spikes in the loss ratios. Dr. Lipshutz stated that the five years included in Mr. Struzzieri's analysis were some of the best years ever in the real estate industry. Using a mere five-year experience base will not lead to a good result unless the analysis accounts for the fact that the years under review are very strong for the market, and factors in the inevitable down cycles of the market. Dr. Lipshutz believed that Mr. Struzzieri's analysis gave insufficient consideration of what will happen in a downturn. Dr. Lipshutz next critiqued the Milliman Report's expense calculation or, rather, its lack of an expense calculation. After describing the "minimal level of work" involved in the issuance of a JLP, Mr. Struzzieri noted that it would be difficult to quantify the cost of the work because "solid expense data is not available." Therefore, Mr. Struzzieri looked to expense data for O&E reports as his point of comparison for deriving a JLP expense estimate. The problem with this approach, according to Dr. Lipshutz, was that Mr. Struzzieri also lacked "solid expense data" for O&E reports. Mr. Struzzieri's analysis is "extremely simple" and based on a series of assumptions that lack empirical support. First, Mr. Struzzieri assumes that "the level of work involved in issuing a Junior Loan Policy is the same as the work performed for an O&E report." Nothing in the Milliman Report attempts to quantify the expenses involved in issuing a JLP beyond the assertion that the work is the same as that involved in issuing an O&E report. Having made that assumption, Mr. Struzzieri then asserts that the cost of an O&E report to a lender is usually between $60 and $100. The Milliman Report provides no data to support that assertion. At the hearing, Mr. Struzzieri conceded that he had no supporting data for the $60 to $100 cost range and testified that an unnamed employee of First American gave him those numbers during a telephone conversation. Dr. Lipshutz testified that his own casual Google search of O&E prices in Florida turned up figures ranging from $125 to $250. While acknowledging that his search did not produce a scientific sample, Dr. Lipshutz rightly contended that it nonetheless called into question the validity of the upper end of Mr. Struzzieri's cost range. Finally, Mr. Struzzieri makes an assumption, based on anecdote, that O&R reports are profitable to the companies in that business. The Milliman Report does not include the anecdotes on which this assumption is based. Dr. Lipshutz thus described the Milliman Report's analysis as a conclusion reached at the end of a string of unsupported assumptions: if one assumes that the level of work for a JLP equals that for an O&E report, and assumes that the cost of an O&E report is between $60 and $100, and assumes that the companies make a profit by charging between $60 and $100, then one may assume that a JLP rate that provides the same revenue (calculated by Mr. Struzzieri to be between $0.86 and $1.33 per $1,000 on a $75,000 loan) would be profitable. Because the Milliman Report contained no data to allow one to test the reasonableness of its assumptions, Dr. Lipshutz concluded that the report's findings were unsupported and unreliable. Dr. Lipshutz disputed that a JLP is directly comparable to an O&E report, or at least the notion that such a comparison may be assumed without proof. He pointed out that an O&E differs from a JLP "even on the simplest financial terms." Because an O&E report is not an insurance product, no premium tax is charged on it. Dr. Lipshutz was not certain whether the issuer of an O&E report is required to maintain a guaranty fund, but noted that any such contribution would be negligible because the liability on an O&E report is limited to $1,000. The analysis discussed at Findings of Fact 35 and 36, supra, was performed at Dr. Lipshutz' request. As noted above, ATIF calculated that performing primary title services, including labor costs, for a JLP policy would cost slightly more than $100 per policy, and about $150 if overhead costs are included. ATIF performed the same calculation for an O&E report and found that the production cost would be just under $50 per policy, and just over $100 if overhead is included.22 Included in Dr. Lipshutz' written report were two charts produced by ATIF to support its calculation of the difference in cost between a JLP and an O&E report. The first chart showed the differences in coverage between the two products: Coverage JLP O&E Limit of liability $500,000 $1,000 Ad valorem taxes Yes No Gap coverage Yes No Encumbrances created by or liens against current owner Yes Yes Encumbrances created by or liens against prior owners Yes No Closing protection letter (CPL) coverage for failure of agent to follow lenders' closing instructions Available at no additional charge Not available CPL coverage for fraud or dishonesty of agent in handling lenders' funds or documents Available at no additional charge Not available Revolving credit/variable rate endorsement Available for $25 Not available Retain evidence of determination of insurability and premium charged for seven years Yes No The second chart showed the tasks required to produce a JLP and an O&E report:23 TASK JLP O&E Collect documents from recorder's office relevant to the property AFTER date of last deed or mortgage Yes Yes Collect documents from recorder's office relevant to the property BEFORE date of last deed or mortgage Yes No Check validity of documents Yes No Collect documents from courts for names in ownership AFTER date of last deed or mortgage Yes Yes Collect documents from courts for names in ownership BEFORE date of last deed or mortgage Yes No Check probate and foreclosure cases Yes No Check identity in case of common name Yes No Check for tax liens recorded AFTER date of last deed or mortgage Yes Yes Check for tax liens recorded BEFORE date of last deed or mortgage Yes No Check city and county tax offices for taxes owed Yes No Prepare O&E report No Yes Prepare commitment Yes No Downdate search before closing Yes No Review closing documents for compliance with conditions in commitment Yes No Review closing documents for compliance with lender's closing instructions Yes No Prepare policy Yes No Downdate search after recording and issue JR-1 and/or JR-2 endorsement Yes No From this data provided by ATIF, Dr. Lipshutz concluded that the extra work makes the cost of producing a JLP 85% higher than the cost of producing an O&E report, and corresponds to a rate of $2.52 per $1,000 of insured liability. Even accepting Mr. Struzzieri's range of reasonable rates ($0.86 to $1.33 per $1,000 of liability written), applying this 85% cost factor would change the range to $1.59 to $2.46 per $1,000 of liability. Dr. Lipshutz noted that this range overlaps significantly with the range of $2.00 to $2.60 per $1,000 recommended in the Cox Report. Dr. Lipshutz termed "specious" the statement in the Milliman Report that "[t]he proposed Junior Loan Policy rates are 74% to 85% lower than the $5.75 rate, lower percentages than that indicated by the loss experience (i.e., 90%)." Dr. Lipshutz stated that this statement would be reasonable in the context of auto insurance, where the primary concern is loss reimbursement: if the loss is 90% lower, then the rate should be 90% lower. However, in this case it is "downright silly" to tie rates to losses because loss prevention, not loss reimbursement, drives expenses in title insurance. As noted above, OIR contended that if an underwriter took a larger split of the premium from its agents, or wrote the policies directly, then the $0.86 per $1,000 rate for the JLP would be adequate. Dr. Lipshutz called this contention "violently incorrect." He stated that it is a "specious distinction" to say that a rate could be adequate for a direct writer but inadequate for an underwriter working through agents. Certain core title services must be performed, certain reserves must be set aside, and certain losses will have to be paid regardless of the premium split between the agent and underwriter. If the premium is not large enough to cover all of those costs, the rate will be inadequate regardless of the insurer's business model. As a secondary matter, Dr. Lipshutz noted that it is difficult for underwriters to dictate changes in the premium split to their agents. The market is competitive, and agents will walk away from an insurer that attempts to take more than the statutory 30% split of the premium. Many agents write for multiple insurers, and would likely direct most of their business toward those who were most generous in their premium splits. Dr. Lipshutz did not believe that changing the split is a practical way to solve the rate adequacy problem even from the underwriter's standpoint. Dr. Lipshutz was also critical of OIR's suggestion that dissatisfied insurers could avail themselves of the rate deviation statute, because it is difficult if not impossible to charge a significantly higher price than that charged by other participants in a competitive market. Dr. Lipshutz testified that rates are supposed to be based on industry averages, and thus disputed OIR's theory that a rate is "excessive" for any company that could offer the product for less than the promulgated rate. In a system of regulated competition as described by Dr. Lipshutz, it is a certainty that some companies are going to make more money than others at the promulgated rate. Those companies that cannot make a profit at the promulgated rate will drift out of that line of business. Those companies with high profits will invest more in their business, improving their technology and workflow. The profits and increased efficiency of these companies will appear in the industry data presented to the regulator, which will then fulfill its statutory mandate and lower the rate. However, if the initial rate is set so low that only one firm can sell the product at a profit, all of the other insurers are immediately knocked out of the market. Competition in the title insurance market is based on service as well as price, but the service element of competition would be wiped out by the low rate. Dr. Lipshutz was skeptical of the idea that a title insurer could offset an inadequate JLP premium with other charges because this product will be sold mostly to banks and other large institutional carriers, which have the leverage to resist paying extra charges above the statutory premium rate. Mr. Struzzieri testified at the hearing, after Dr. Lipshutz, to explain his methodology and defend the Milliman Report. He explained that he was contacted by First American to provide a rate analysis for filing with OIR. He reviewed the Cox Report and documents filed by First American in response to the report. Because there was no Florida experience on which to base his calculation, Mr. Struzzieri looked for other benchmarks and decided that the most relevant other experience would be JLP experience in other states. He examined the JLP loss experience of First American in other states and estimated an expected loss of $0.03 per $1,000 of liability written. This contrasted with an expected loss in the range of $0.20 to $0.30 per $1,000 on an original owner's or lender's policy. Mr. Struzzieri noted that, all things being equal, lower losses should result in a lower rate for the product. He agreed with Dr. Lipshutz that in title insurance, underwriting expenses are a more significant factor than expected losses in setting rates. Based on his understanding of the JLP product and what it covers, Mr. Struzzieri concluded that there is less work involved in the JLP than in a primary title policy and therefore less expense. Mr. Struzzieri's understanding was that the JLP "is intended for simple transactions such as, you know, a home equity loan, and that the lender on home equity loans is going to be performing the closing services as opposed to the title agent or the title company, the title insurers." This direct performance of closing services by the lender would eliminate the risk of defalcation by the title insurer or its agents, thus further driving down the cost of the JLP. Mr. Struzzieri stated that First American had no specific expense data for the JLP that would permit him to measure the work involved in producing a policy. Therefore, he needed to find other relevant data that would allow him to estimate the average cost of the work. Mr. Struzzieri's discussions with First American led him to study the O&E report, which seemed "parallel" to the JLP, such that the amount of work involved in the JLP could be assumed equivalent to the amount of work needed to produce an O&E report.24 Mr. Struzzieri decided to use O&E report costs as a proxy for the expense portion of the JLP product. First American told him that O&E report costs were between $60 and $100. Mr. Struzzieri conceded that he had no data to support those O&E costs, and did not doubt that Dr. Lipshutz found companies offering Florida O&E reports at prices well in excess of $100. Mr. Struzzieri also conceded that First American had initially convinced him of the comparability of the JLP and the O&E report by stating that the lender "probably will not close" if any adverse matters are uncovered during the limited search envisioned by the JLP. However, further discussions with First American had clarified that another option would be to exclude the adverse matters from coverage under the JLP and allow the lender to decide whether to close. Mr. Struzzieri pointed out that he checked his recommended rate range of $0.86 to $1.33 per $1,000 against the JLP rates charged by First American in other states. He believed that a comparison to other states' JLPs was more valid than a comparison to an original issue or owner's or lender's policy because of the greatly reduced scope, coverage, and the amount of work involved in a JLP. The data provided by First American showed rates that ranged widely, from $0.73 per $1,000 in California to $3.40 per $1,000 in New Mexico. Out of 29 states listed, only two had rates lower than $0.86 per $1,000. Seventeen of the 29 fell within a range of $1.33 to $2.33. Nonetheless, Mr. Struzzieri pronounced himself satisfied that his recommended range fit reasonably within the range of rates charged in other states. Mr. Struzzieri testified that he accepted Dr. Lipshutz' estimate of the risk of fraud and had no reason to doubt Dr. Lipshutz' data on the subject. However, Mr. Struzzieri did not believe that fraud had any bearing on his calculation of a $0.03 per $1,000 loss on the JLP because fraud losses are a small percentage of total title insurance losses. He acknowledged that there may be a small fraud component that his calculation missed by using national data rather than Florida data, given Florida's higher rate of fraud, but concluded that this component would be at most incremental. Mr. Struzzieri agreed that his data on the cost and profitability of an O&E report was anecdotal and unverified, but disagreed with Dr. Lipshutz' assertion that his anecdotal information about O&E profitability was the source of his conclusion that the JLP will be profitable at the recommended range of rates. Rather, said Mr. Struzzieri, the source of his assertion of profitability was the fact that First American is writing JLP policies in 29 other states, including California at $0.73 per $1,000, and appears to be making a profit on that business. He conceded, however, that this, too, was an assumption on his part. On cross-examination, Mr. Struzzieri was asked about a document he filed at OIR in response to a 2005 title insurance data call issued by OIR. In a letter dated November 17, 2005, Mr. Struzzieri wrote "to point out what I believe are several critical deficiencies in the 2005 title insurance data call." Mr. Struzzieri wrote that the deficiencies fell into two categories: missing information and insufficient data. As to the latter deficiency, Mr. Struzzieri wrote that OIR was not asking for enough information: It is my strong belief based on my many years of working with title insurance data that 5 policy years is insufficient to make rates. Reasons supporting this belief include: Long loss development "tail" -- Title insurance policies have no expiration date; claims continue to be reported far beyond 5 years after the policy effective date. . . . Not many losses reported in first 5 years -- Milliman analysis of title industry composite loss development triangles indicates that only a small percentage of total losses from policy years 2000 through 2004 are expected to have been reported as of December 31, 2004. For example, for policy year 2004, we would expect only 13% of "ultimate" losses to be reported by December 31, 2004. It is, therefore, my belief that policy years 2000 through 2004 are all too immature to be used in ratemaking without the benefit of additional policy years of data and will result in highly variable results. Title insurance cycle Milliman analysis of title insurance profitability indicates that title insurance is cyclical in nature. Specifically, profits vary with the real estate cycle; in particular, mortgage interest rates [sic]. For example, when interest rates are falling, title insurance revenue is higher and loss ratios are generally lower. Expenses are also higher; but not as high as revenue because certain expenses are relatively fixed. Therefore, profits are generally higher. When interest rates rise, revenues fall, expenses fall (but not as fast as revenue) and loss ratios increase. As a result, profits are lower. For this reason, I believe that any title insurance rate making exercise should use as many as 20 years of data (or at least 10 years). The number of years should correspond to a full real estate cycle. The 5 policy years included in the data call correspond to the lowest interest rates in the last 40 years. Therefore, the profits are likely much higher than an average year. When the real estate cycle turns (and there [are] indications that it soon may), the title industry may face losses. By using only the last 5 years, the OIR will be applying rates based off of the most profitable years and applying them to perhaps some very unprofitable years. However, if instead rates were based on 10, 15 or better yet 20 years of data, the OIR will have captured a complete cycle and will have made rates that are appropriate in the long run and, on average, for each individual year of the cycle. Mr. Struzzieri acknowledged his prior opinion that five years of data provides an insufficient basis for ratemaking, especially when those years were so recent that ultimate losses are uncertain. He further acknowledged that his own recommendation for a range of JLP rates was in part based on projected loss data from five years of recent First American policies. Mr. Struzzieri explained this apparent contradiction by noting that, as to primary title insurance, companies have sold the products in Florida for 50 to 60 years and typically report 20 years of data. As to the JLP, First American only had the five years of data used by Mr. Struzzieri. He agreed that more data would be better, but he used what was available. Summary Findings When it decided to commence rulemaking to set a premium rate for the JLP, OIR commissioned The David Cox Company to prepare an actuarial report on the rates and forms for the proposed JLP. The Cox Report recommended a rate ranging from $2.00 to $2.60 per $1,000 of liability, based on Mr. Cox' comparison of the JLP to a standard title insurance policy. Mr. Cox advocated setting the rate on the high end of the recommended range to avoid hurting insurers that operate through independent agents. OIR reviewed the Cox Report and found it flawed. OIR believed the Cox Report's recommended rate range was too high, because Mr. Cox overemphasized protecting companies that operate through agents, when the JLP appears more amenable to direct sales. OIR disapproved of Mr. Cox' rebate strategy for holding down rates, his assumption that the insurer is always bound to accept the 30% minimum premium split with its agents, and his failure to focus on actual market data generated by companies that are selling the JLP in other states. All of OIR's criticisms of the Cox Report's methodology and conclusions were reasonable concerns voiced by the regulatory entity charged with the responsibility to set a premium rate for the JLP. OIR had misgivings about whether the JLP qualified as an insurance product at all, and therefore found the Cox Report's conceptual strategy of "backing out" a JLP rate from the standard title insurance rate less than persuasive. The preponderance of the evidence at the hearing established that OIR's decision to reject the recommendations of the Cox Report was reasonable. OIR has freely conceded that the Proposed Rule is entirely dependent on the Milliman Report, with its recommended range of rates between $0.86 and $1.33 based on First American's experience in other states and the close comparison of the JLP to a non-insurance product, the O&E report. OIR's position, as elucidated by Mr. Parton, is that Section 627.782, Florida Statutes, allows OIR to base its ratemaking decision exclusively on an actuarial analysis conducted on behalf of one company, based on data derived exclusively from that company. OIR is under no obligation to set a rate for the industry as a whole, because any insurer that does not believe it can make a profit at the promulgated rate may petition for an upward deviation pursuant to Section 627.783, Florida Statutes. The rate should be set at the lowest level recommended by any single company's actuary, to ensure that no company can charge an excessive rate. ATIF demonstrated that it cannot profitably sell the JLP at the $0.86 rate set forth in the Proposed Rule. The insurer's 30% share of premium on a $100,000 policy ($25.80) is insufficient to cover its statutory liabilities ($30.00 to the guaranty fund and $1.51 premium tax), let alone its other underwriting costs. The insurer would be required to cover the losses with premiums from other policies.25 Mr. Parton pointed out that the insurer could solve this problem by forcing its agents to accept a 60-40 premium split. However, Dr. Lipshutz convincingly testified that such an imposition is not easily accomplished in a competitive market. Agents would either walk away or steer their less desirable risks toward that insurer. Further, ATIF showed that the cost of performing primary title services for a JLP policy would be a little more than $100, whereas the agent's 70% share of premium on a $100,000 JLP policy at the $0.86 rate would be only $60.20.26 Cutting the agent's share to 60% would merely shift more of the loss for a $100,000 policy onto the agent. However, because the agent's costs are fixed, his 70% share would more than cover expenses on a policy written for $167,000 or more. At a 60% share, the agent would not cover expenses on any policy worth less than $195,000. Mr. Conner of ATIF and Barry Scholnik of Stewart Title agreed that no company could issue the JLP for $0.86 per $1,000 and make a profit, and that a company selling the JLP at that rate would be offering it as a loss leader. OIR countered that ATIF is not marketing the JLP anywhere in the country, and may never do so. OIR asserted that it was entitled to rely on the fact that the $0.86 per $1,000 rate was proposed by a company that is actually selling the JLP throughout the country and has engaged an actuary to make a recommendation based on actual market data. First American maintains that it can generate a profit at the proposed rate through its direct business model. The Florida JLP purchaser should not be forced to pay higher rates in order to subsidize the less efficient "member agent" business model of ATIF. Petitioners' expert, Dr. Lipshutz, discussed at length his dispute with Mr. Struzzieri's loss projection of $0.03 per $1,000 of liability for the JLP. Dr. Lipshutz made valid points regarding the long tail line and cyclical nature of title insurance versus the very recent five years' data employed by Mr. Struzzieri, which included the unlikely projection of two years with zero losses. Mr. Struzzieri conceded that his loss data from First American was not optimal. However, both experts agreed that loss experience is not the driving force in setting title insurance rates. Additionally, Mr. Struzzieri's point that defalcation losses will be virtually nonexistent with the JLP was not effectively countered by Dr. Lipshutz. Even conceding the validity of Dr. Lipshutz' critique, Mr. Struzzieri persuasively argued that any upward projection of the loss projection would have an insignificant effect on the recommended range of rates. The experts and industry witnesses agreed that expenses are the main driver of title insurance rates. Dr. Lipshutz disputed that Mr. Struzzieri performed an expense calculation at all, and certainly questioned every expense assumption upon which Mr. Struzzieri ultimately based his rate recommendation. Mr. Struzzieri first assumed that expense data for O&E reports would provide a reliable basis for a JLP expense estimate. He was forced to use this assumption because First American could provide him with no specific expense data for the JLP, a fact that undercut the rationale for OIR's reliance on the Milliman Report as based on real industry data from a company actually selling the JLP. In fact, Mr. Struzzieri used First American's JLP price data from other states only after the fact as a tool to check the reasonableness of his rate recommendation. The evidence is not entirely clear whether Mr. Struzzieri independently reached the conclusion that the two products are equivalent, or whether this assumption was provided by First American. The Milliman Report does not explain the basis for its assumed equivalence of the O&E report and the JLP beyond a simple assertion that the "level of work . . . is the same" for the two products. At the hearing, Mr. Struzzieri merely stated that he found parallels between the O&E report and the JLP that allowed him to assume their equivalence. Mr. Conner of ATIF testified that the tasks necessary to issue a JLP are "not even close" to those employed to produce an O&E report. In support of this position, Petitioners offered a detailed, step-by-step review of the JLP process versus the process involved in producing an O&E report. This review led Dr. Lipshutz to conclude that the cost of producing a JLP would be 85% higher than the cost of producing an O&E report. Dr. Lipshutz' analysis on this point was credible, the more so because OIR offered no serious criticism of or alternative to Petitioners' evidence regarding the extensive differences between the production process for the two products. The preponderance of the evidence produced at the hearing established that the Milliman Report's assumption of equivalence between the JLP and an O&E report was simply wrong. Even if it were granted that the cost of an O&E report is comparable to that of a JLP, Mr. Struzzieri's assertion that the cost of an O&E report to a lender is usually between $60 and $100 was unsupported. At the hearing, Mr. Struzzieri conceded that he had no supporting data for the assertion and was unable to name the First American employee who gave him those numbers. Dr. Lipshutz' sworn testimony that he found O&E price quotes in Florida ranging from $125 to $250 was admittedly anecdotal but even so was at least as credible as Mr. Struzzieri's undocumented hearsay cost data from an unnamed source. The preponderance of the evidence produced at the hearing established that the Milliman Report's statement of the cost of a typical O&E report was an assumption lacking empirical support. The unsupported assumptions regarding the comparability of the JLP to the O&E report and regarding the cost of an O&E report render the Milliman Report's rate recommendation a speculative exercise, not the basis for an industry-wide JLP rate. Mr. Parton testified that Mr. Struzzieri employed a great deal of actuarial judgment in making his recommendation because the JLP is a new product to Florida, and that OIR was entitled to rely on that actuarial judgment. However, Mr. Struzzieri himself qualified his report with the following: In performing this analysis we have relied on data and other information provided to us by First American Title Insurance Company. We have not audited, verified, or reviewed this data and other information for reasonableness and consistency. Such a review is beyond the scope of our assignment. If the underlying data or information is inaccurate or incomplete, the results of our analysis may likewise be inaccurate or incomplete. (Emphasis added) Petitioners did not question Mr. Struzzieri's actuarial judgment. They questioned the underlying data provided by First American to Mr. Struzzieri, and showed that data to be unsupported in the case of the JLP/O&E comparison, and unverifiable in the case of the O&E costs. Mr. Struzzieri's qualifying statement acknowledges that his conclusions are only as good as their underlying information. OIR may have been entitled to rely on the Milliman Report at the time the Proposed Rule was published, before the agency was aware of the report's flaws. However, this rule challenge hearing is a de novo proceeding, not a review of OIR's past actions. At the hearing, Petitioners established that the Milliman Report was based on faulty assumptions and inadequate data. OIR failed to respond adequately to the objections raised by Petitioners. OIR simply reiterated its position that it had the discretion to rely on Mr. Struzzieri's actuarial analysis, without really answering Petitioners' evidence that the assumptions undergirding the analysis were unsubstantiated. OIR essentially adopted the Milliman Report as its own. Mr. Parton testified that as to each of the "due consideration" ratemaking factors listed in Subsection 627.782(2), Florida Statutes, OIR derived its conclusions largely from the Milliman Report. Whatever the merits of OIR's legal reasoning regarding its statutory ratemaking responsibilities, OIR's reliance on the Milliman Report to meet those responsibilities was misplaced. OIR's only response to Petitioners' sustained attack on Mr. Struzzieri's assumptions was to reiterate its reliance on the Milliman Report. The preponderance of the evidence established that the Proposed Rule was based on unsupported data and was, therefore, arbitrary.
The Issue Whether or not Petitioner's application for examination as a general lines agent should be approved.
Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, documentary evidence received, and the entire record compiled herein, I hereby make the following relevant factual findings: On or about September 2, 1989, Petitioner, Kimberly L. Strayer, formerly known as Kimberly Lindsay, filed an application for examination as a general lines agent with Respondent, Department of Insurance. Since January 1988, Petitioner has been the sole owner and president of Central Florida Insurance Agency (Central). On or about December 28, 1989, Respondent informed Petitioner, by letter, that her application for examination as a general lines agent was denied for the following reasons: Petitioner operated Central Florida Insurance Agency without a licensed general lines agent in the full-time active charge of that agency from January 1, 1988 through August 31, 1988. During January 1988 Petitioner accepted applications and down payments from the following insureds: Robert Smallwood, Annelle Jones, Mickey Lawson, Donald Johnson, Thomas Jones, Manning O'Callahan and Christopher Stevens. Petitioner issued a binder and an automobile identification card for each insured indicating that coverage was bound with State Farm Mutual Insurance Company, as servicing carrier for the Florida Joint Underwriting Association (FJUA). At the time Petitioner had no authority to accept either applications or premiums on behalf of State Farm. Petitioner failed to forward such applications and premiums to the insurer until April 12, 1988. During January 1988, Petitioner accepted an application and premium payment of $274.00 from Tammy Clay. Petitioner issued a binder indicating that coverage was bound with State Farm and Union American Insurance Companies. Petitioner failed to forward either the application or the premium payment to any insurer. Petitioner issued a fictitious policy number to Ms. Clay and after nearly four months, submitted a money order to State Farm payable to Tammy Clay, on or about May 1989. At the hearing, Petitioner admitted that she did not have a licensed general lines agent in full-time active charge of her agency; that she accepted applications and premium payments from the above-named insureds for auto insurance to be bound with State Farm Mutual Insurance Company and that she accepted an application for premium payment for automobile insurance from Tammy Clay in the amount of $274.00 for coverage to be bound by State Farm Mutual Insurance Company. Petitioner was first employed in the insurance sales industry during the summer of 1987. At the time, she was only seventeen years old and had completed the eleventh grade. Petitioner's first employment in the insurance industry was with Friendly Auto Insurance (Friendly) which had several offices throughout Polk County, Florida. Friendly was owned by Petitioner's now husband, Larry Lindsay when she was hired. Petitioner formed Central during late 1987 and began operating Central on or about January 1, 1988. Petitioner received her supervision and training while employed with Friendly, primarily through on the job experiences. During late 1987, Petitioner's husband encountered problems with one of his business partners which resulted in strained relations. The resultant strained relations prompted Petitioner to organize Central. Central purchased several of Friendly's agencies of which her now husband had an interest, with Petitioner paying a nominal amount for the "book of business" that Friendly had generated. When Central commenced operations during January of 1988, Bob Seese was the licensed insurance agent who was authorized under the rules of the FJUA to accept applications and bind coverage through one of the FJUA servicing carriers, State Farm. Friendly and its successor, Central, generated a substantial volume of so-called high risk auto insurance business for drivers who could not obtain insurance through the regular market. Bob Seese had been associated with and served as the licensed agent for the Friendly agency in Lakes Wales which Central purchased in January 1988. At the time Petitioner commenced operating Central, she hired Bob Seese as the licensed general lines agent. She considered that Central was authorized to accept applications and continue to bind FJUA insurance coverage through State Farm. Petitioner forwarded all of the FJUA insurance applications which were bound by Bob Seese to State Farm within a period ranging from one week to approximately one month. State Farm refused to accept the applications submitted by Petitioner based on its contention that initially, Bob Seese was not authorized to bind coverage through Central, as he had not transferred his license to Central and Seese could only operate out of the Friendly agency of Lake Wales. 1/ Bob Seese was formally authorized by State Farm to conduct business through Central during February 1988. As a result of that authorization, all of the above-named insureds obtained insurance and none of the insureds suffered any monetary loss as a result of Seese's belated authorization. All of the premium payments that Petitioner received were, in time, forwarded to the respective carriers. Petitioner properly gave new insureds binder numbers which were serially dispensed in the order that premium payments were received. During January 1988, Petitioner accepted an application and premium payment for auto insurance from Tammy Clay for coverage to be bound by State Farm. Petitioner submitted Clay's application and premium payment to State Farm and it was returned on one occasion based on the fact that a facsimile stamp was used by the purported licensed agent (Seese). Petitioner resubmitted it and State Farm again returned it based on State Farm's contention that Seese was not authorized to conduct business through Central. Petitioner has now completed the required formal educational courses to demonstrate her eligibility to sit for the general lines agent's examination. Petitioner is now knowledgeable about insurance matters and is aware of the proper procedures for operating as a general lines agent. When Petitioner formed Central, she had less than one year's experience in the insurance business and was ineligible to sit for the general lines agent exam as she was not of majority age.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: Respondent enter a Final Order granting Petitioner's application for examination as a general lines insurance agent. DONE and ENTERED this 31st day of October, 1990, in Tallahassee, Leon County, Florida. JAMES E. BRADWELL 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 31st day of October, 1990.
The Issue Does Petitioner, Department of Financial Services (DFS), have authority to determine if Respondent, Alberto Luis Sotero (Mr. Sotero) and Respondent, FalconTrust Group, Inc. (FalconTrust), wrongfully took or witheld premium funds owed an insurance company while a civil action between the insurance company and Mr. Sotero and FalconTrust pends in Circuit Court presenting the same issues? Should the insurance agent license of Mr. Sotero be disciplined for alleged violations of Sections 626.561(1), 626.611(7), 626.611(10), 626.611(13), and 626.621(4), Florida Statutes (2007)?1. Should the insurance agency license of FalconTrust be disciplined for alleged violations of Section 626.561(1), 626.6215(5)(a), 626.6215(5)(d). 626.6215(5)(f), and 626.6215(5)(k), Florida Statutes?
Findings Of Fact Based on the testimony and other evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: Mr. Sotero is licensed by DFS as an insurance agent in Florida and has been at all times material to this matter. He holds license number A249545. FalconTrust is licensed by DFS as an insurance agency in this state and has been at all times material to this matter. It holds license number L014424. Mr. Sotero is an officer and director of FalconTrust and held these positions at all times material to this proceeding. Mr. Sotero also controlled and directed all actions of FalconTrust described in these Findings of Fact. Zurich American Insurance Company is a commercial property and casualty insurance company. FalconTrust Commercial Risk Specialists, Inc., and Zurich-American Insurance Group entered into an "Agency-Company Agreement" (Agency Agreement) that was effective January 1, 1999. The Agency Agreement bound the following Zurich entities, referred to collectively as Zurich: Zurich Insurance Company, U.S. Branch; Zurich American Insurance Company of Illinois; American Guarantee and Liability Insurance Company; American Zurich Insurance Company; and Steadfast Insurance Company. The Agreement specified that FalconTrust was an "independent Agent and not an employee of the Company [Zurich.]". . .. The Agency Agreement also stated: All premiums collected by you [Falcontrust] are our [Zurich's] property and are held by you as trust funds. You have no interest in such premiums and shall make no deduction therefrom before paying same to us [Zurich] except for the commission if any authorized by us in writing to be deducted by you and you shall not under any circumstances make personal use of such funds either in paying expense or otherwise. If the laws or regulations of the above state listed in your address require you to handle premiums in a fiduciary capacity or as trust funds you agree that all premiums of any kind received by or paid to you shall be segregated held apart by you in a premium trust fund account opened by you with a bank insured at all times by the Federal Deposit Insurance Corporation and chargeable to you in a fiduciary capacity as trustee for our benefit and on our behalf and you shall pay such premiums as provided in this agreement. (emphasis supplied. The Agency Agreement commits Zurich to pay FalconTrust commissions "on terms to be negotiated . . . ." It requires FalconTrust to pay "any sub agent or sub producer fees or commissions required." The Agency Agreement also provides: Suspension or termination of this Agreement does not relieve you of the duty to account for and pay us all premiums for which you are responsible in accordance with Section 2 and return commissions for which you are responsible in accordance with Section 3 [the Commission section.] The Agency Agreement was for Mr. Sotero and Falcontrust to submit insurance applications for the Zurich companies to underwrite property and casualty insurance, primarily for long- haul trucking. The Agency Agreement and all the parties contemplated that Mr. Sotero and FalconTrust would deduct agreed-upon commissions from premiums and remit the remaining funds to Zurich. On September 14, 2000, Zurich and Mr. Sotero amended the Agency Agreement to change the due date for premium payments and to replace FalconTrust Group, Inc. (FalconTrust) for FalconTrust Commercial Risk Specialists, Inc., and to replace Zurich-American Insurance Group and Zurich Insurance Company, U.S. Branch, with Zurich U.S. Mr. Sotero and Zurich's authorized agent, Account Executive Sue Marcello, negotiated the terms of the commission agreement as contemplated in the Agency Agreement. Mr. Sotero confirmed the terms in a July 20, 1999, letter to Ms. Marcello. The parties agreed on a two-part commission. One part was to be paid from the premiums upon collection of the premiums. The second part, contingent upon the program continuing for five years, was to be paid by Zurich to Mr. Sotero and FalconTrust. The total commission was 20 percent. FalconTrust and Mr. Sotero were authorized to deduct 13 percent of the commission from premiums before forwarding them to Zurich. The remaining seven percent Zurich was to pay to Mr. Sotero and FalconTrust at the end of the program or after the fifth year anniversary date. The letter spelled out clearly that Zurich would hold the money constituting the seven percent and was entitled to all investment income earned on the money. The passage describing the arrangement reads as follows: Our total commission is 20 percent however Zurich will hold and retain the first 7 percent commission where they are entitle [sic] to earn investment income. I understand that FalconTrust will not benefit from this compounded investment income. However you mentioned you would increase our initial commission that is set at 13 percent currently from time to time depending on FalconTrust reaching their goals, but it will never exceed a total commission of 20 percent. It is to our understanding that the difference will be paid at the end of the program or after the fifth year anniversary date being 12/31/2005, but not earlier than five years. I do understand that if Zurich and/or FalconTrust cancels the program on or before the fourth year being 12/31/2004 that we are not entitle [sic] to our remaining commission that you will be holding. If the program is cancelled after 12/31/2004 by FalconTrust and/or Zurich it is understood that all commission being held will be considered earned. (emphasis added.) Until the program ended, the parties conducted themselves under the Agency Agreement as described in the letter. At some point the parties agreed to decrease the percentage retained by Zurich to five percent and increase the percentage initially paid to and kept by FalconTrust to 15 percent. During the course of the relationship FalconTrust produced approximately $146,000,000 in premiums for Zurich. At all times relevant to this matter, all premium payments, except for the portion deducted by sub-agents and producers before forwarding the payments to Mr. Sotero and FalconTrust were deposited into a trust account. The various sub-agents of FalconTrust collected premiums and forwarded them to FalconTrust, after deducting their commissions, which were a subpart of the FalconTrust 13 percent commission. FalconTrust in turn forwarded the remaining premium funds after deducting the portion of its 13 percent left after the sub-agent deduction. This was consistent with the Agency Agreement and accepted as proper by Zurich at all times. All parties realized that the held-back seven percent, later five percent, was money that Zurich would owe and pay if the conditions for payment were met. The parties conducted themselves in keeping with that understanding. Mr. Sotero and FalconTrust described the practice this way in their Third Amended Complaint in a court proceeding about this dispute: "In accordance with the Commission Agreement, Zurich held the contingency/holdback commission and received investment income thereon." (Emphasis supplied.) In 2006 Zurich decided to end the program. In a letter dated December 8, 2006, Tim Anders, Vice President of Zurich, notified Mr. Sotero that Zurich was terminating the Agency-Company Agreement of January 1, 1999. The letter was specific. It said Zurich was providing "notification of termination of that certain Agency-Company Agreement between Zurich American Insurance Company, Zurich American Insurance Co. of Illinois, American Guarantee and Liability Insurance Co., American Zurich Insurance Company, Steadfast Insurance Company . . . and FalconTrust Grup, Inc. . . ., dated January 1, 1999, . . .." Mr. Sotero wrote asking Zurich to reconsider or at least extend the termination date past the March 15, 2007, date provided in the letter. Zurich agreed to extend the termination date to April 30, 2007. At the time of termination FalconTrust had fulfilled all of the requirements under the Agency-Agreement for receipt of the held-back portion of the commissions. Mr. Sotero asked Zurich to pay the held-back commission amounts. He calculated the amount to exceed $7,000,000. Zurich did not pay the held- back commission amounts. As the program was winding down and the termination date approached, FalconTrust continued to receive premiums. As the Agency Agreement and negotiated commission structure provided, FalconTrust deducted its initial commission from the premium payments. But, reacting to Zurich's failure to begin paying the held back commission amounts, Mr. Sotero engaged in "self help." He deducted at least $6,000,000 from the premium payments from customers, received and deposited in the trust account. He took the money as payment from Zurich of earned and held back commissions.3 Nothing in the Agency Agreement or negotiated commission agreement authorized this action. In March of 2007, Mr. Sotero and FalconTrust also brought suit against Zurich in the Circuit Court for the Eleventh Judicial Circuit, Miami, Florida. The issues in that proceeding include whether Mr. Sotero and FalconTrust wrongfully took premiums and how much Zurich owes them for commissions. As of the final hearing, that cause (Case Number 07-6199-CA-01) remained pending before the court and set for jury trial in August 2010. There is no evidence of a final disposition. But the court has entered a partial Summary Judgment determining that FalconTrust wrongfully took premium funds for the commissions that it maintained Zurich owed. The court's Order concludes that the issue is not whether Zurich owed money to FalconTrust, but whether FalconTrust was entitled to take the funds when it did. Like the undersigned, the court determines that it was not. Between December 8, 2006, the date of the cancelation letter, and April 30, 2007, the program termination date, Mr. Sotero and FalconTrust did not remit to Zurich any of the approximately $6,000,000 in premium payments received. Despite not receiving premiums, Zurich did not cancel or refuse to issue the policies for which the premiums taken by Mr. Sotero and FalconTrust were payment. The policies remained in effect.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services suspend the license of Adalberto L. Sotero for nine months and suspend the license of FalconTrust Group, Inc. for nine months. DONE AND ENTERED this 15th day of October, 2010, in Tallahassee, Leon County, Florida. S JOHN D. C. NEWTON, II 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 October, 2010.
The Issue The issue in this case is whether Petitioner, Greg Davenport Enterprises, Inc., d/b/a Container Grown, is entitled to payment from an Agricultural Bond issued to Respondent, A.W. Kelley’s Gardens, Inc., and, if so, the amount owed to Petitioner.
Findings Of Fact Petitioner is a licensed producer of an agricultural product: Nursery plants and flowers. Petitioner is duly incorporated by the State of Florida and is in good standing. Greg Davenport is listed as Director and President of the corporation in the Division of Corporations’ web-based records. Respondent is a duly incorporated Florida corporation. Its business address is 6901 Hendry Creek Drive, Ft. Myers, Florida. The directors of the corporation are listed as Dixie Kelley, Drew Kelley, and Kent Kelley. Respondent is a plant retail business. Respondent has been a customer of Petitioner for many years, going back as far as 2006 according to evidence submitted at final hearing. During that time, Respondent has purchased approximately $91,000.00 worth of goods from Petitioner. (In its PRO, Respondent says the relationship goes back 25 years or more, but there was no sworn testimony to that effect.) During the period March 22 through May 24, 2012, Respondent ordered numerous items from Petitioner for which he was billed in accordance with standard practices. The following invoices provide the invoice number, date of invoice, and amount of purchase: Invoice 1399 - March 22, 2012 - $1,570.00 Invoice 1818 – March 27, 2012 - $2,105.00 Invoice 1391 – April 10, 2012 - $1,130.00 Invoice 1303 – April 25, 2012 - $ 850.00 Invoice 1419 – May 16, 2012 - $1,145.00 Invoice 1431 – May 24, 2012 - $1,175.00 TOTAL - $7,975.00 Petitioner contacted Respondent on numerous occasions to request payment on the outstanding invoices. Those efforts were in vain. At first, Respondent would make empty promises to pay, but ultimately just refused to accept Petitioner’s calls. Meanwhile, Respondent’s owner relocated to North Carolina, causing Petitioner to fear that payment may never be forthcoming. Respondent made some promises to make payments “whenever he could” to satisfy the debt. He said, however, that even if he could not pay, Petitioner should not attach his agriculture bond. Respondent’s failure to make any promised payments was the basis for Petitioner seeking payment by way of the bond. Respondent does not deny his failure to pay the outstanding invoices. He does not dispute that the products he received were of acceptable quality. He does, in fact, admit his indebtedness to Petitioner. Respondent does not feel his bond should be attached for payment of this debt. He cites, as reasons, that: 1) his business suffered during the national financial crisis; 2) there was some embezzlement going on in his business that affected his ability to pay obligees; 3) there is a related civil lawsuit underway in circuit court relating to the embezzlement; and 4) Davenport and Kelley have been friends for a long time and thus he should be allowed more time to pay the invoices. Respondent’s PRO sets forth other bases for why he believes it would be improper to attach his agriculture bond. However, none of those bases was addressed by sworn witnesses at final hearing and are thus not evidence in this case. Further, Respondent contends that two witnesses he subpoenaed but failed to show up for final hearing prejudiced his case. He did not prove, however, that either of the supposed witnesses had been properly served. Respondent’s PRO also sets forth facts not elicited through testimony or documentary evidence during final hearing. Respondent relies in part on various documents exchanged between the parties during discovery, but none of those were offered into evidence and thus are not part of the record. Respondent acquired a bond through Suretec Insurance Company. The amount of the bond was not disclosed at final hearing but, per statute, must be at least $5,000.00. The surety company was not represented at final hearing. No defense was raised by the surety company concerning Petitioner’s attempt to attach the bond. Petitioner is entitled to payment in the amount of $7,975.00 for the products it provided to Respondent. Besides the amount set forth above, Petitioner claims the sum of $100.00 paid for the filing of his two claims against Respondent’s bond. The total sum owed to Petitioner by Respondent is $8,075.00.
Recommendation Based upon the findings of fact and conclusions of law set forth above, it is hereby RECOMMENDED that: Respondent shall pay to Petitioner, within 15 days of the entry of the Final Order, the sum of $8,075.00; If Respondent fails to timely make the aforementioned payment, the Department shall call upon Suretec Surety Company to pay over to the Department the full amount of Respondent’s bond; and The Department shall then turn the proceeds of the bond over to Petitioner to satisfy the debt that has been established. DONE AND ENTERED this 26th day of March, 2013, in Tallahassee, Leon County, Florida. S R. BRUCE MCKIBBEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 26th day of March, 2013. COPIES FURNISHED: Christopher E. Green, Esquire Department of Agriculture and Consumer Services Office of Citrus License and Bond Mayo Building, M-38 Tallahassee, Florida 32399-0800 Michael Cronin SureTec Insurance Company Suite 320 9737 Great Hills Trail Austin, Texas 78759 Greg Davenport Greg Davenport Enterprises, Inc. d/b/a Container Grown 613 Corbel Drive Naples, Florida 34110-1106 Kent O. Kelley A. W. Kelley’s Gardens Inc. 6901 Hendry Creek Drive Fort Myers, Florida 33908 Lorena Holley, General Counsel Department of Agriculture and Consumer Services 407 South Calhoun Street, Suite 520 Tallahassee, Florida 32399-0800 Honorable Adam Putnam Commissioner of Agriculture Department of Agriculture and Consumer Services The Capitol, Plaza Level 10 Tallahassee, Florida 32399-0810
The Issue The issue in this case is whether the license of Allen Franklin Meredith (Respondent) should be disciplined by the Department of Insurance and Treasurer (Petitioner) for allegedly allowing others to use his general lines insurance agent license, and to sign his name to insurance policy applications while Respondent was not present, as more particularly set forth in the Administrative Complaint issued herein on or about October 12, 1989.
Findings Of Fact At all times material hereto, Respondent has been licensed, and eligible for licensure, in the State of Florida as a life and health insurance agent, health insurance agent, and a general lines insurance agent. During April, 1989, Respondent approached Gordon Rowan, owner of Gordon Rowan Real Estate and Insurance in Winter Haven, Florida, to inquire whether Rowan would assist Respondent in obtaining a renewal of his general lines insurance agent license. Respondent was residing with his family in Georgia at the time, and told Rowan that his Florida general lines agent license was about to expire, and he needed to get licensed with a Florida company in order to apply for renewal. Rowan agreed to pay for Respondent's renewal fee, and for licensing him with a Florida Company doing business through Rowan's agency. On or about April 30, 1987, Rowan applied to National Insurance Associates for licensure on behalf of Respondent, and paid the applicable license fee. On or about May 20, 1987, Respondent was licensed with National Insurance Associates as a general lines insurance agent, and his Florida general lines license was renewed. Respondent admitted in an affidavit executed on November 16, 1987, that he did authorize Rowan to use his general lines license from the beginning of May to the end of June, 1987, while he was still living in Georgia. This authorization was in exchange for Rowan's assistance in obtaining Respondent's licensure with National Insurance Association, and renewal of his Florida license. However, at hearing Respondent testified that he never authorized Rowan to "use" his license, only to "place" his license with Rowan's agency. Rowan testified that Respondent had, in fact, told him that he could use his license and write business under it, including signing Respondent's name to policy applications, even though Respondent was not in the office and did not participate in these transactions. Rowan's assistant, May Satava, was present when Rowan and Respondent discussed their arrangement, and confirmed Rowan's testimony. Based upon the demeanor of the witnesses, as well as the affidavit executed by the Respondent shortly after the events involved in this matter, it is found that Respondent's uncorroborated testimony at hearing is not credible, while that of Rowan and Satava is found to be credible and consistent with statements made to Luis Rivera, the Petitioner's investigator, in October, 1987. Respondent did tell Rowan that he could use his general lines license to write business, and to sign his name to applications in exchange for Rowan's assistance in obtaining the renewal of his Florida general lines agent license. Working under Rowan's control and supervision, Satava did sign Respondent's name to approximately 48 policy applications from May through July, 1987, while Respondent actually signed only 3 additional policy applications during this period. Thus, the vast majority of business written under Respondent's license during this time was actually completed by Satava, an unlicensed person working under the control and supervision of Rowan, without any involvement of Respondent, pursuant to his agreement with Rowan that Rowan could use his license. Respondent did receive a commission payment in the amount of $200 from Rowan for June and July commissions. This represented Rowan's estimate of a reasonable payment to Respondent for the use of his license during this time when Satava signed Respondent's name to approximately 48 policy applications.
Recommendation Based upon the foregoing, it is recommended that Petitioner enter a Final Order suspending Respondent's general lines agent license, and eligibility for licensure, for a period of six months. DONE AND ENTERED this 9th Florida. day of March, 1990 in Tallahassee, DONALD D. CONN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 Filed with the Clerk of the Division of Administrative Hearings this 9th day of March, 1990. APPENDIX Rulings on the Petitioner's Proposed Findings of Fact: 1-2. Adopted in Finding 1. Adopted in Finding 2. Adopted in Finding 3. 5-6. Adopted in Finding 6. Adopted in Finding 7. Adopted in Finding 8. Respondent did not file Proposed Findings of Fact. COPIES FURNISHED: Gordon T. Nicol, Esquire 412 Larson Building Tallahassee, FL 32399-0300 Allen Franklin Meredith 140 Flamingo Drive Auburndale, FL 33823 Don Dowdell, Esquire General Counsel Department of Insurance The Capitol, Plaza Level Tallahassee, FL 32399-0300 Hon. Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, FL 32399-0300
