08-005444PL Department Of Financial Services vs. Henry Symeao Demayo Status: Closed Recommended Order on Wednesday, August 19, 2009.

Summary: Respondent is guilty of not remitting surplus lines tax on one policy and failing to file quarterly affidavits.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, )

)

Petitioner, )

)

vs. ) Case No. 08-5444PL

)

HENRY SYMEAO DEMAYO, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case

before Larry J. Sartin, an Administrative Law Judge of the

Division of Administrative Hearings, on March 18 and 19, 2009,

in Tallahassee, Florida.

APPEARANCES

For Petitioner: Robert Alan Fox, Senior Attorney

Division of Legal Services

Department of Financial Services

612 Larson Building

200 East Gaines Street

Tallahassee, Florida 32399-0333

For Respondent: Sophie Demayo, Esquire

9100 Southwest 115th Terrace

Miami, Florida 33176

STATEMENT OF THE ISSUES

The issues in this case are whether Respondent, Henry

Symeon Demayo, committed the offenses alleged in an

Administrative Complaint, as amended, issued by Petitioner, the

Department of Financial Services and, if so, what penalty should

be imposed.

PRELIMINARY STATEMENT

On or about April 21, 2004, Petitioner issued a seven-count

Administrative Complaint, Petitioner's Case No. 74314-04-AG,

alleging that Henry Symeon Demayo had violated certain statutory

provisions governing the conduct of Florida insurance agents.

Respondent, through counsel, filed an Election of Rights form

with Petitioner requesting a formal hearing to contest the

allegations of fact contained in the Administrative Complaint.

A copy of the Administrative Complaint and Respondent’s

Election of Rights form were filed by Petitioner with the

Division of Administrative Hearings on October 24, 2008. The

matter was designated DOAH Case No. 08-5444PL and was assigned

to the undersigned.

The final hearing was initially scheduled for January 13,

2009, by Notice of Hearing by Video Teleconference entered

November 14, 2008. A request by Respondent to reschedule the

hearing was granted by Order entered January 14, 2009. The

final hearing was rescheduled to be heard on March 18 and 19,

2009, again by video teleconference.

On December 12, 2008, Petitioner filed Department of

Financial Services’ Motion to Amend Administrative Complaint.

That Motion was granted by an Order entered December 22, 2008.

The Administrative Complaint, as amended, will be referred to in

this case as the Administrative Complaint.

Although the final hearing had been scheduled to be

conducted by video teleconference between Respondent’s county of

residence, Miami-Dade County, and Tallahassee, the parties and

all witnesses appeared at the Tallahassee, Florida hearing

location. On the first day of the hearing, only the court

reporter appeared from Miami. On the second day of the hearing,

all participants in the hearing appeared in Tallahassee.

At the final hearing, Petitioner presented the testimony of

Carolyn M. Daniels and Sean Fisher as part of its case-in-chief

and in rebuttal to Respondent’s case. Petitioner also presented

the testimony of Thomas Abel by deposition (Petitioner’s

Exhibit 11). Respondent testified on his own behalf.

Petitioner also had admitted Petitioner’s Exhibits numbered 1,

pages 1 through 2, 12 through 17, 19 through 47, 49 through 86

of 2, 4 through 7, 8 through 9, 11 through 18, 18a, 19 through

20, and 22 through 23. A ruling on the admissibility of page 18

of Petitioner’s Exhibit 2 and Petitioner’s Exhibit 21 was

reserved. Respondent had Respondent’s Exhibit 1 admitted.

Page 18 of Petitioner’s Exhibit 2 is hereby rejected

because it was not properly identified. At one point during his

deposition testimony, Mr. Abel indicated that page 18 was “a

spreadsheet that I did on the laptop of the various policies

that I requested and looked at.” Page 20, lines 7-9,

Petitioner’s Exhibit 11. Mr. Abel later in the deposition was

to which he replied “I do not because I have worked off the

spreadsheet.” Page 27, lines 17-20, Petitioner’s Exhibit 11.

Petitioner’s Exhibit 21, to the extent relevant, is

admitted.

At the commencement of the hearing, Petitioner dismissed

Count VII of the Administrative Complaint.

The two-volume Transcript of the final hearing was filed on

April 15, 2009. By Notice of Filing Transcript issued the same

day, the parties were informed that their proposed recommended

orders were due on or before May 15, 2009. On April 30, 2009,

Respondent filed a Motion for Additional Time to Submit Report

and Request to Share Transcript. Additional time was requested

due to the medical needs of counsel for Respondent. Petitioner

filed a response to the Motion indicating it had no objection,

but requesting that a new date be set for the filing of post-

hearing submittals. By Order entered May 6, 2009, counsel for

Respondent was ordered to provide information from her treating

physician on or before May 22, 2009, indicating when she could

return to work. Respondent filed a response to the May 6, 2009,

Order on May 22, 2009. It appearing that Respondent had not

served a copy of the response on Petitioner, a Notice of Ex-

Parte Communication and Establishing Date for Filing Proposed

Recommended Orders was entered on June 1, 2009. The parties

were given until June 30, 2009, to file proposed recommended

orders.

On June 30, 2009, Respondent filed a Motion for Extension

of Time to File Report and Proposed Order. Petitioner filed a

response in opposition to the requested eight-day extension. By

Order entered July 1, 2009, the Respondent’s second requested

extension of time was granted.

Petitioner filed a Proposed Recommended Order on July 8,

2009. That submittal was not docketed until July 9, 2009, the

date that Respondent filed a Report and Proposed Order. Both

post-hearing submittals have been fully considered in rendering

this Recommended Order.

Petitioner has only addressed Counts I, III, and IV in its

Proposed Recommended Order and has only requested a

recommendation that Respondent be found to have violated those

counts. Petitioner has also only addressed part of the facts

alleged in the Administrative Complaint in support of Counts I,

III, and IV. It is, therefore, assumed that Petitioner has

abandoned its prosecution of Counts II, V, and VI, in addition

to its dismissal of Count VII, and the facts alleged in the

Administrative Complaint in support of the remaining counts not

addressed in Petitioner’s Recommended Order.

On June 26, 2009, Petitioner filed Department of Financial

Services’ Motion to Reopen the Record for the Limited Purpose of

Completing the Monthly Report for the Third Quarter of 2007.

That Motion, which Respondent has not responded to, is hereby

granted.

The events at issue in this case were alleged to have taken

place between 1999 and 2003. All references to the Florida

Statutes will be to the codification applicable at the time the

event at issue took place unless otherwise noted.

FINDINGS OF FACT

A. The Parties .

1. Petitioner, the Department of Financial Services

(hereinafter referred to as the "Department"), is the agency of

the State of Florida charged with the responsibility for, among

other things, the investigation and prosecution of complaints

against individuals licensed to conduct insurance business in

Florida. Ch. 626, Fla. Stat.

2. Respondent Henry Symeon Demayo is currently and was at

the times relevant, licensed in Florida as a surplus lines agent

(01-20), general lines agent (02-20), life and health agent (02-

18), and health agent (02-40).

3. Mr. Demayo’s license number is A065749.

4. At all relevant times, Mr. Demayo is and was at the

times relevant, “self-appointed” as to his surplus lines

license. Mr. Demayo was the president of Brokerage Insurance

Group Corp., a insurance agency licensed since December 13,

2006.

B. Florida Surplus Lines Office Reviews

5. On February 3, 2003, the Florida Surplus Lines Service

Office (hereinafter referred to as the “FSLSO”), through its

agent, Thomas Abel, conducted a “no business review” of

Mr. Demayo’s surplus lines business. Mr. Abel requested and

received a total of 50 business files from Mr. Demayo, which he

reviewed.

6. As a part of his review, Mr. Abel scanned a number of

documents from the files provided to him by Mr. Demayo (pages 19

through 42 of Petitioner’s Exhibit 2). Mr. Abel also prepared a

spread-sheet, pages 16 and 17 of Petitioner’s Exhibit 2,

summarizing his findings, and an FSLSO Compliance Review Summary

(pages 14 and 15 of Petitioner’s Exhibit 2).

7. On April 15, 2003, Mr. Abel returned to Mr. Demayo’s

business to conduct a “secondary review.” Again, Mr. Abel

scanned documents from Mr. Demayo’s files (pages 49 through 63

of Petitioner’s Exhibit 2), prepared a spread-sheet (page 48 of

Petitioner’s Exhibit 2), and an FSLSO Compliance Review Summary

(pages 43 through 47 of Petitioner’s Exhibit 2).

8. As a result of Mr. Abel’s findings, the Department

issued the Administrative Complaint at issue in this case.

9. At some point during the reviews, Mr. Abel suggested to

Mr. Demayo that he had failed to properly report insurance

transactions which are the subject of some of the charges in the

Administrative Complaint. While not compelled to do so,

Mr. Demayo followed Mr. Abel’s advice and reported most, if not

all, those transactions to FSLSO, beginning in 2003. Mr. Demayo

also paid surplus lines tax, discussed, infra , on some of the

late reported insurance transactions.

C. Count I; Failure to Remit Surplus Lines Tax .

10. Section 626.932, Florida Statutes, requires that

surplus lines agents collect a tax equal to five percent of the

gross premium of all insurance premiums charged for the sale of

surplus lines insurance (hereinafter referred to as the “Tax”)

which has a Florida connection. The Tax is required to be

remitted by surplus lines agents to the FSLSO.

11. Surplus lines insurance on risks or exposures with no

connection with the State of Florida are not subject to the Tax.

As relevant to this matter, surplus lines insurance on, or with

respect to, vessels, cargo, or aircraft written under Section

626.917, Florida Statutes (essentially commercial marine and

aircraft surplus lines), is exempt from the Tax.

12. The Department alleged in Count I of the

Administrative Compliant that Mr. Demayo sold three separate

surplus lines insurance policies for which Tax was due that he

failed to remit. In its Proposed Recommended Order, the

Department has conceded that Mr. Demayo was not liable for Tax

on two of those policies, leaving only one policy at issue.

13. The policy which remains at issue is a policy sold to

Steiner Day Spa Group (hereinafter referred to as “Steiner”),

policy number 6476583, covering the period 10/31/2001 to

10/31/2002 (hereinafter referred to as the “Steiner Spa

Policy”).

14. Based upon documents provided to Mr. Abel by

Mr. Demayo, the Steiner Spa Policy was placed with Lexington

Insurance Company, a surplus lines insurer.

15. In a “FAX SHEET” dated October 29, 2001, also provided

by Mr. Demayo to Mr. Abel, which was sent from Brokerage

Insurance Group to “Southeastern Risk Specialists,” the

following is stated concerning payment for the Steiner Spa

Policy:

I will bill $54,322.42, distributed as

follows:

$51,555. Premium

35. Fee.

2,577.75 Tax

154.67 Service Fee

We are to handle the filings

16. Based upon another document provided by Mr. Demayo to

Mr. Able (page 23 of Petitioner’s Exhibit 2), Steiner Spa

(formerly The Greenhouse Spa), had a location at the Portofino

Bay Hotel, Orlando, Florida, which the Department argues gives

the policy a Florida connection.

17. Contrary to his representation in the “FAX SHEET,”

Mr. Demayo did not remit any Tax to FSLSO for the Steiner Spa

Policy.

18. According to Mr. Demayo, Steiner had purchased The

Greenhouse Spa, including the Orlando location, prior to

issuance of the Steiner Spa Policy. The Orlando location was,

according to Mr. Demayo, closed before the policy took effect

and, therefore, there was not risk insured in Florida.

19. Mr. Demayo did not explain, however, why the list of

spa locations included with the Lexington Insurance Company

policy included the Orlando location, why there is no mention in

any of the documentation concerning the Steiner Spa Policy of

the closing of the Orlando location, or, most importantly, why

his office informed Southeastern Risk Specialists that Brokerage

Insurance Group would be billing $2,577.75 of Tax for the

Steiner Spa Policy. His testimony, summarized in paragraph 18,

is therefore rejected as unconvincing.

20. Based upon the foregoing, it is found that Mr. Demayo

should have paid Tax for the Steiner Spa Policy.

D. Count III; Failure to File Quarterly Reports .

21. Section 626.931(1), Florida Statutes, requires that

surplus lines agents file with the FSLSO a quarterly affidavit,

“on forms as prescribed and furnished by the Florida Surplus

Lines Service Office, stating that all surplus lines insurance

transacted by him or her during such calendar quarter has been

submitted to the Florida Surplus Lines Service Office as

required.”

22. As of May 7, 2003, Mr. Demayo had failed to file a

quarterly report/affidavit with the FSLSO for the following

periods:

a. October 1999 through December 1999;

b. January 2000 through March 2000;

c. October 2000 through December 2000;

d. January 2001 through March 2001;

e. July 2001 through September 2001;

f. April 2002 through June 2002; and

g. July 2002 through September 2002;

23 Mr. Demayo also failed to timely file a quarterly

report/affidavit with FSLSO for the following periods:

a. April through June 2007;

b. July through September 2007;

c. October through December 2007; and

d. January through March 2008.

E. Count IV; Filing False Quarterly Reports and Failing to

Remit the Tax .

24. In the Administrative Complaint, the Department

alleges that Mr. Demayo filed false quarterly reports for nine

different quarters. For some of those reports, the Department

also alleged that Mr. Demayo failed to remit Tax. The

Department alleged specifically which policies were falsely

reported and for which policies, no Tax was remitted

(hereinafter collectively referred to as the “Disputed

Policies”).

25. In its Proposed Recommended Order, the Department has

addressed fewer quarterly reports and policies than alleged in

the Administrative Complaint. To the extent that reports or

policies included in the Administrative Complaint were not

addressed in the Proposed Recommended Order, those allegations

were not proved.

26. April 1999 through June 1999 Quarter .

a. Mr. Demayo signed a Quarterly Report Affidavit and Tax

Return (page 78 of Petitioner’s Exhibit 2)(hereinafter referred

to as the “Quarterly Report”), for the April 1, 1999, through

June 30, 1999, quarter, representing that “no surplus lines

business was transacted during the calendar quarter.”

Consequently, no Tax was paid.

b. On March 11, 2003, Mr. Demayo reported to the FSLSO

that he had written a surplus lines policy, which was placed

with Lloyd’s Underwriters at London (hereinafter referred to as

“Lloyd’s”), for Greater Atlantic Holdings, policy number

C35087/99, effective April 8, 1999 (hereinafter referred to as

the “Greater Atlantic Policy”).

c. The only evidence as to whether Tax was due on the

Greater Atlantic Policy came from Mr. Demayo, who testified that

Greater Atlantic Holdings was a Bahamian company and that all

the risks for the policy, since it was placed with Lloyd’s, was

located outside Florida. This testimony is credited and,

therefore, the transaction was not reportable and no Tax was

due.

27. July 1999 through September 1999 .

a. Mr. Demayo signed the Quarterly Report (page 79 of

Petitioner’s Exhibit 2), for the July 1, 1999, through

September 30, 1999, quarter, representing that “no surplus lines

business was transacted during the calendar quarter.”

Consequently, no Tax was paid.

b. On March 21, 2003, Mr. Demayo reported to the FSLSO

that he had written a surplus lines policy, which was placed

with Markel International Insurance Company Limited, for Trans-

Photo, policy number TE9900, effective August 5, 1999

(hereinafter referred to as the “Tans-Photo Policy”).

c. The Department has correctly pointed out that

Mr. Demayo’s testimony concerning Markel International Insurance

Company Limited and other companies with the name “Markel” in

them was confusing, at best. Mr. Demayo testified clearly and

convincingly, however, that the policy had no connection with

Florida and was, therefore, neither a reportable policy or one

subject to Tax. The only evidence concerning the nature of the

Trans-Photo Policy, provided by Mr. Demayo, was that the policy

was for marine cargo with no Florida exposure purchased.

28. April 2000 through June 2000 .

a. Mr. Demayo signed the Quarterly Report (page 81 of

Petitioner’s Exhibit 2), for the April 1, 2000, through June 30,

2000, quarter, representing that “no surplus lines business was

transacted during the calendar quarter.” No Tax was paid.

b. On February 28, 2003, Mr. Demayo reported to the FSLSO

that he had written a renewal surplus lines policy for Image,

which was placed with Lloyd’s, policy number C00564/00,

effective April 7, 2000 (hereinafter referred to as the “Images

Policy”).

c. The same date, Mr. Demayo reported to the FSLSO that he

had written a surplus lines policy for Greater Atlantic

Holdings, which was placed with American International Specialty

Lines Insurance, policy number EX54300046, effective April 14,

2000 (hereinafter referred to as the “Greater Atlantic Renewal

Policy”). Tax on this renewal policy was paid by Mr. Demayo on

or about April 30, 2003.

d. Finally, Mr. Demayo received additional premium for a

Greater Atlantic Holdings policy, policy number C35087/99,

placed with Lloyd’s. Additional premium was received twice, one

amount effective April 8, 2000, and the other effective

April 11, 2000 (hereinafter referred to as “GAH Additional

Premium”). These transactions were not reported until March 6,

2003, and March 11, 2003, respectively.

e. Image is a photo concessionaire which places photo

imaging equipment on ships, which is used outside of Florida.

The evidence failed to prove that the coverage for the Image

Policy had any connection with Florida.

e. The only evidence as to whether Tax was due on the

Greater Atlantic Policy came from Mr. Demayo, who testified that

Greater Atlantic Holdings was a Bahamian company and that all

the risks for the policy, since it was placed with Lloyds, was

located outside Florida. This testimony is credited. Therefore

the Greater Atlantic Renewal Policy and the GAH Additional

Premium transactions were not subject to Tax or reporting.

29. July 2000 through September 2000 .

a. Mr. Demayo signed the Quarterly Report (page 80 of

Petitioner’s Exhibit 2), for the July 1, 2000, through

September 30, 2000, quarter, representing that “no surplus lines

business was transacted during the calendar quarter” and that

zero Tax was paid.

b. On March 11, 2003, Mr. Demayo reported to the FSLSO

that he had received additional premium for a Greater Atlantic

Holdings policy, placed with Lloyd’s, policy number C35087/99,

effective August 18, 2000 (hereinafter referred to as the “Third

GAH Additional Premium”).

c. The only evidence as to whether Tax was due on the

Third GAH Premium came from Mr. Demayo, who testified that

Greater Altantic Holdings was a Bahamian company and that all

the risks for the policy for which the additional premium was

paid, since it was placed with Lloyds, was located outside

Florida. This testimony is credited. Therefore the Third GAH

Additional Premium transaction was not subject to Tax or

reporting.

30. April 2001 through June 2001 .

a. Mr. Demayo signed the Quarterly Report (page 83 of

Petitioner’s Exhibit 2), for the April 1, 2001, through June 30,

2001, quarter, representing that “no surplus lines business was

transacted during the calendar quarter” and that zero Tax was

paid.

b. On February 28, 2003, Mr. Demayo reported to the FSLSO

that he had placed a renewal policy for Image, placed with

Lloyd’s, policy number C00564/01, effective May 11, 2001

(hereinafter referred to as the “Image Renewal Policy”).

c. The only evidence as to whether Tax was due on the

Image Renewal Policy came from Mr. Demayo, who testified that

the Image Renewal Policy was a marine policy with no Florida

exposure. This testimony is credited. Therefore the Image

Renewal Policy was not subject to Tax or reporting.

31. October 2001 through December 2001 .

a. Mr. Demayo signed the Quarterly Report (page 84 of

Petitioner’s Exhibit 2), for the October 1, 2001, through

December 31, 2001, quarter, representing that “no surplus lines

business was transacted during the calendar quarter” and that

zero Tax was paid.

b. On February 6, 2003, Mr. Demayo reported to the FSLSO

that he had placed a new business policy for Maritime

Telecommunication, placed with Lloyd’s, policy number C00606/01,

effective November 9, 2001 (hereinafter referred to as the

“Maritime Policy”).

c. On the same date, Mr. Demayo also reported that he had

placed a renewal policy for Image Photo Services, Inc., with

American International Specialty Lines Insurance Company, policy

number EX54300010, effective November 30, 2001 (hereinafter

referred to as the “IPS Renewal Policy”). Tax on the IPS

Renewal Policy was paid on or about April 30, 2003.

d. Finally, Mr. Demayo also reported that he had placed a

renewal policy for Ocean Images with Lloyd’s, policy number

51/2001LP, effective October 19, 2001 (hereinafter referred to

as the “Ocean Renewal Policy”).

e. The only evidence as to whether Tax was due on the

Image Renewal Policy or the Ocean Renewal Policy came from

Mr. Demayo, who testified that both were marine policies with no

Florida exposure. This testimony is credited. Therefore the

Image Renewal Policy and the Ocean Renewal Policy were not

subject to Tax or reporting.

32. January 2003 through March 2003 .

a. Mr. Demayo signed the Quarterly Report (page 86 of

Petitioner’s Exhibit 2), for the January 1, 2003, through

March 31, 2003, quarter, representing that “no surplus lines

business was transacted during the calendar quarter” and that

zero Tax was paid.

b. On March 18, 2003, Mr. Demayo reported to the FSLSO

that he had placed a renewal policy for Image, placed with

Lloyd’s, policy number C7027/00, effective February 20, 2003

(hereinafter referred to as the “2003 Image Renewal Policy”).

c. The only evidence as to whether Tax was due on the 2003

Image Renewal Policy came from Mr. Demayo, who testified that

the 2003 Image Renewal Policy was a marine policy with no

Florida exposure. This testimony is credited. Therefore the

2003 Image Renewal Policy was not subject to Tax or reporting.

33. The evidence presented by the Department in support of

the allegations of Count IV was circumstantial and indirect.

The Department has suggested that the following proposed facts

support its position with regard to the April 1999 through June

1999 Quarterly Report, paragraph 35 of the Department’s Proposed

Recommended Order:

Respondent filed the policy with FSLSO

[Dept. Ex. No. 2 at 73]

Respondent did not backout the policy

from the FSLSO system. [Dept. Ex. No.

13].

If the policy should never have been

filed with FSLSO, as Respondent now

asserts, then Respondent would have

backed out the policy from the FSLSO

system. Southpoint Pharmacy , 596 So.2d

at 109 (an ALJ may make reasonable

inferences).

After all, Respondent has backed out

dozens of other policies and additional

premium transactions that he filed with

FSLSO, [Depart. Ex. No. 13], including

the contemporaneously filed policies

identified in Paragraphs 19a, 19d, and

19e of the Amended Complaint. [Dept.

Ex. No. 2 at 73, 74]; [Dept. Ex. No. 2

at 73 (Respondent entered new business

for Greater Atlantic Holdings (policy

number 361261011999) on 3/19/2003 with

FSLSO and backed out of that

transaction the very following day (the

Department incorrectly charged the

Respondent with the backout in ¶ 19b of

the Amended Complaint)]; [Dept. Ex. No.

13 at First Quarter 2007 at page 3].

And Respondent has had nearly six years

to back out this policy. [Dept. Ex.

No. 2 at 73 (policy filed with FSLSO on

3/19/2003)]. Yet, Respondent hasn’t

done so. [Dept. Ex. No. 13].

Additionally, Respondent claims that

Matt Webster and Lisa French, employees

of FSLSO, assisted him in backing out

policies that he filed in error, such

as policies that had no Florida risk.

[Tr. At 168, 238-239]. If Matt Webster

and Lisa French assisted Respondent,

there is a good reason why this policy

was not backed out of the FSLSO system;

the policy was required to be filed

with FSLSO. Southpointe Pharmacy , 596

So.2d at 109 (an ALJ may make

reasonable inferences).

The Department has suggested essentially the same proposed facts

support its position with regard to all of the Quarterly Reports

at issue in Count IV.

34. The Department’s argument that the suggested

inferences support the allegations of the Administrative

Complaint, is rejected. Mr. Demayo explained why he reported

the Disputed Policies: Mr. Able suggested that he do so, and

Mr. Demayo, concerned about the consequences of not reporting

them, followed Mr. Abel’s advice. Mr. Demayo’s explanation for

why the Disputed Policies were reported to FSLSO was a

reasonable one and, given the lack of evidence to the contrary,

has been credited. Therefore, no inference can reasonably be

drawn from the fact that Mr. Demayo reported the Disputed

Policies to FSLSO. Without this suggested inference, little is

left to support the Department’s allegations.

35. Ultimately, while Mr. Demayo’s testimony was often

self-serving and somewhat misleading, it was not his burden to

prove the true nature of the coverage of the Disputed Policies.

It was the Department that was required to prove, clearly and

convincingly, that the coverage of the Disputed Policies had a

connection with Florida. Virtually no such proof was presented

by the Department, while Mr. Demayo testified that none of the

policies had any connection with Florida. Mr. Demayo offered an

explanation of the nature of the coverage of each of the

Disputed Policies while the Department offered essentially no

direct evidence. The Department failed to prove that the

Disputed Policies had any connection with the State of Florida

and, therefore, Mr. Demayo was not required to report them in a

Quarterly Report or make payment of any Tax on them.

CONCLUSIONS OF LAW

A. Jurisdiction .

36. The Division of Administrative Hearings has

jurisdiction over the subject matter of this proceeding and of

the parties thereto pursuant to Sections 120.569 and 120.57(1),

Florida Statutes (2009).

B. The Burden and Standard of Proof .

37. The Department seeks to impose penalties against

Mr. Demayo through the Administrative Complaint that include

mandatory and discretionary suspension or revocation of his

licenses. Therefore, the Department has the burden of proving

the specific allegations of fact that support its charges by

clear and convincing evidence. See Department of Banking and

Finance, Division of Securities and Investor Protection v.

Osborne Stern and Co. , 670 So. 2d 932 (Fla. 1996); Ferris v.

Turlington , 510 So. 2d 292 (Fla. 1987); and Pou v. Department of

Insurance and Treasurer , 707 So. 2d 941 (Fla. 3d DCA 1998).

38. What constitutes "clear and convincing" evidence was

described by the court in Evans Packing Co. v. Department of

Agriculture and Consumer Services , 550 So. 2d 112, 116, n. 5

(Fla. 1st DCA 1989), as follows:

. . . [C]lear and convincing evidence

requires that the evidence must be found to

be credible; the facts to which the

witnesses testify must be distinctly

remembered; the evidence must be precise and

explicit and the witnesses must be lacking

in confusion as to the facts in issue. The

evidence must be of such weight that it

produces in the mind of the trier of fact

the firm belief or conviction, without

hesitancy, as to the truth of the

allegations sought to be established.

Slomowitz v. Walker , 429 So. 2d 797, 800

(Fla. 4th DCA 1983).

See also In re Graziano , 696 So. 2d 744 (Fla. 1997); In re

Davey , 645 So. 2d 398 (Fla. 1994); and Walker v. Florida

Department of Business and Professional Regulation , 705 So. 2d

652 (Fla. 5th DCA 1998)(Sharp, J., dissenting).

C. The Department's Charges .

39. Section 626.935, Florida Statutes (the “Surplus Lines

Law”), mandates that the Department revoke or suspend the

appointment of a surplus lines agent and all other insurance

licenses and appointments if an agent has committed any of a

number of acts specified therein.

40. Section 626.611, Florida Statutes, mandates that the

Department suspend or revoke the license of any insurance agent

if it finds that the agent has committed any of a number of acts

specified in that Section.

41. Section 626.621, Florida Statutes, gives the

Department the discretion to suspend or revoke the license of

any insurance agent if it finds that the agent has committed any

of a number of acts specified in that Section.

42. The Administrative Complaint contains seven counts.

The allegations of all of those counts, except part of Count I

and part of Count III, were either dismissed or not proved by

clear and convincingly evidence. Additionally, in its Proposed

Recommended Order, the Department has failed to argue that all

of the statutory violations alleged in the Administrative

Complaint concerning Counts I and III were proved.

43. As to Count I, it is alleged in the Department’s

Proposed Recommended Order that Mr. Demayo violated the

following statutory provisions: Sections 626.611(7)

(incorporated into the Surplus Lines Law by Section

Statutes.

44. As to Count III, it is alleged in the Department’s

Proposed Recommended Order that Mr. Demayo violated the

following statutory provisions: Sections 626.931(1); 626.611(7)

(incorporated into the Surplus Lines Law by Section

45. Count IV is not addressed because the evidence failed

to prove clearly and convincingly that Mr. Demayo committed any

of the acts alleged in that count.

D. Count I .

46. Section 626.935, Florida Statutes (see footnote 7 of

the Department’s Proposed Recommended Order, which is hereby

incorporated into this Recommended Order), provides the

following:

(1) The department shall . . . suspend,

revoke, or refuse to renew the appointment of

a surplus lines agent and all other licenses

and appointments held by the

licensee under this code, upon any of the

following grounds:

. . . .

(d) Failure to make and file his or her

quarterly reports when due as required by s.

626.931 .

(e) Failure to pay the tax on surplus

lines premiums, as provided for in this

Surplus Lines Law.

. . . .

(i) Violation of this Surplus Lines Law.

(j) For any other applicable cause for

which the license of a general lines agent

could be suspended, revoked, or refused

under s. 626.611 .

(2) The department may, in its

discretion, deny an application for,

suspend, revoke, or refuse to renew the

license or appointment of any surplus lines

agent upon any applicable ground for which a

general lines agent's license could be

suspended, revoked, or refused under s.

626.621 .

47. Section 626.611, Florida Statutes, provides, in

pertinent part, the following:

The department shall . . . suspend, revoke,

or refuse to renew or continue the license

or appointment of any applicant, agent,

title agency, adjuster, customer

representative, service representative, or

managing general agent, and it shall suspend

or revoke the eligibility to hold a license

or appointment of any such person, if it

finds that as to the applicant, licensee, or

appointee any one or more of the following

applicable grounds exist:

. . . .

(7) Demonstrated lack of fitness or

trustworthiness to engage in the business of

insurance.

. . . .

48. Section 626.621(2), Florida Statutes, provides:

The department may, in its discretion, deny

an application for, suspend, revoke, or

refuse to renew or continue the license or

appointment of any applicant, agent,

adjuster, customer representative, service

representative, or managing general agent,

and it may suspend or revoke the eligibility

to hold a license or appointment of any such

person, if it finds that as to the

applicant, licensee, or appointee any one or

more of the following applicable grounds

exist under circumstances for which such

denial, suspension, revocation, or refusal

is not mandatory under s. 626.611:

(2) Violation of any provision of the

Florida Insurance Code in the course of

dealing under the license or appointment.

. . . .

49. Section 626.932(2)(a), Florida Statutes, requires the

payment of the Tax by surplus lines agents such as Mr. Demayo:

The surplus lines agent shall make payable

to the Department of Insurance the tax

related to each calendar quarter's business

as reported to the Florida Surplus Lines

Service Office, and remit the tax to the

Florida Surplus Lines Service Office at the

same time as provided for the filing of the

quarterly affidavit, under s. 626.931 .

50. The evidence proved clearly and convincingly that

Mr. Demayo failed to pay Tax as required by Section

626.932(2)(a), Florida Statutes, on the Steiner Spa Policy.

Having violated this requirement of Florida Statutes, Mr. Demayo

has violated Section 626.935(1)(e), Florida Statutes, by having

failed “to pay the tax or service fee on surplus lines premiums,

as provided for in this Surplus Lines Law.”

51. As a consequence of having failed to comply with

Section 626.932(2)(a), Florida Statutes, and having violated

Section 626.935(1)(e), Florida Statutes, Mr. Demayo has also

violated Section 626.935(1)(i) and (j), and (2), Florida

Statutes; and Section 626.621(2), Florida Statutes.

52. Having failed to pay Tax on only one policy, the

evidence failed to prove that Mr. Demayo lacks fitness or

trustworthiness to engage in the business of insurance in

violation of Section 626.611(7), Florida Statutes.

E. Count III .

53. Section 626.931, Florida Statutes, provides, in

relevant part, the following:

Each surplus lines agent shall on or before

the end of the month next following each

calendar quarter file with the Florida

Surplus Lines Service Office an affidavit,

on forms as prescribed and furnished by the

Florida Surplus Lines Service Office,

stating that all surplus lines insurance

transacted by him or her during such

calendar quarter has been submitted to the

Florida Surplus Lines Service Office as

required.

This provision unambiguously requires the filing of an affidavit

from all Florida surplus lines agents representing that they

have properly submitted or reported all surplus lines insurance

transactions. The affidavit is required to be filed, even in

there is no insurance placed by an agent with a Florida

connection, to give the FSLSO a sworn assurance that an agent is

complying with the law.

54. Mr. Demayo has argued that the language “as required”

which ends Section 626.931 means that an agent is required to

file an affidavit only if he or she has written insurance with a

Florida connection. This argument is rejected. The “as

required” language modifies, not the requirement that an

affidavit be filed, but rather, that the agent has reported all

transactions in the proper manner.

55. The evidence proved clearly and convincingly that Mr.

Demayo failed to file the affidavit required by Section 626.931,

Florida Statutes, for most of the periods alleged in Count III.

He, therefore, violated Section 626.935(1)(d), Florida Statutes:

“[f]ailure to make and file his or her affidavit or reports when

due as required by s. 626.931.” As a consequence, Mr. Demayo

has also violated Section 626.935(1)(i) and (j), and (2),

Florida Statutes; and Section 626.621(2), Florida Statutes.

56. The evidence failed to prove that Mr. Demayo lacks

fitness or trustworthiness to engage in the business of

insurance in violation of Section 626.611(7), Florida Statutes,

due to his failure to file affidavits.

E. Penalty .

57. Florida Administrative Code Rule Chapter 69B-231

provides guideline penalties for violations of 626.621, Florida

Statutes. The suggested penalty for a violation of Section

626.621(2), Florida Statutes, is a suspension of three months.

Fla. Admin. Code R. 69B-231.090(2).

58. Section 626.961(1), Florida Statutes, authorizes the

Department to fine a Surplus Lines agent who fails to file an

affidavit or Quarterly Report “up to $50 per day for each day

the neglect continues, beginning the day after the report or

affidavit was due until the date the report or affidavit is

received.”

59. Section 626.961(2), Florida Statutes, authorizes the

Department to fine a Surplus Lines agent who fails to pay Tax

“up to $500 per day for each day the failure to pay continues,

beginning the day after the tax or service fees were due.”

60. Florida Administrative Code Rule 69B-231.160 provides

the following relevant aggravating and mitigation factors:

(1) For penalties other than those

assessed under Rule 69B-231.150, F.A.C.:

(a) Willfulness of licensee’s conduct;

(b) Degree of actual injury to victim;

(c) Degree of potential injury to victim;

(d) Age or capacity of victim;

(e) Timely restitution;

(f) Motivation of agent;

(g) Financial gain or loss to agent;

(h) Cooperation with the Department;

(i) Vicarious or personal responsibility;

(j) Related criminal charge; disposition;

(k) Existence of secondary violations in

counts;

(l) Previous disciplinary orders or prior

warning by the Department; and

(m) Other relevant factors.

61. The Department has suggested that Mr. Demayo’s

licenses be suspended for a period of six months and that he be

required to pay a fine of $20,000.00. These recommendations,

however, are based upon the assumption that the Department

proved more of the violations than have been found in this

Recommended Order to have been committed by Mr. Demayo.

Additionally, the Department has apparently not taken into

account the actual severity of the violations proven (the

failure to remit Tax on only one policy) and the fact that the

affidavits which were not filed were during periods for which no

Florida connected insurance was shown to have been written, it

is concluded that a suspension of 30 days and a fine of

$2,500.00 is more reasonable.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that a final order be entered by the

Department finding that Henry Symeon Demayo violated the

provisions of Chapter 626, Florida Statutes, described, supra ;

dismissing all other charges; suspending his licenses for a

period of three months; and requiring that he pay an

administrative fine of $2,500.00.

DONE AND ENTERED this 19th day of August, 2009, in

Tallahassee, Leon County, Florida.

___________________________________

LARRY J. SARTIN

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

This 19th day of August, 2009.

COPIES FURNISHED:

Robert Alan Fox, Senior Attorney

Division of Legal Services

Department of Financial Services

612 Larson Building

200 East Gaines Street

Tallahassee, Florida 32399-0333

Sophie Demayo, Esquire

9100 Southwest 115th Terrace

Miami, Florida 33176

Tracey Beal, Agency Clerk

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399-0390

Honorable Alex Sink

Chief Financial Officer

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399-0300

Benjamin Diamond, General Counsel

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399-0307

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.