03-000415 Office Of Insurance Regulation vs. The Medical Escrow Society, Inc. Status: Closed Recommended Order on Friday, November 7, 2003.

Summary: Petitioner proved that Respondent willfully failed to report that a fraudulent insurance act was being committed by a Viator in 13 of 26 counts. Recommended fine and probation.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, )

)

Petitioner, )

)

vs. ) Case No. 03 - 0415

)

THE MEDICAL ESCROW SOCIETY, )

INC., )

)

Respondent. )

)

RECOMMEND ED ORDER

A final hearing was conducted in this matter before the

Honorable Daniel M. Kilbride, Administrative Law Judge of the

Division of Administrative Hearings, on July 10, 2003, in

Tallahassee, Florida.

APPEARANCES

For Petitioner: Michael H. Davidson , Esquire

Department of Financial Services

612 Larson Building

200 East Gaines Street

Tallahassee, Florida 32399 - 0333

For Respondent: Thomas J. Maida, Esquire

N. Wes Strickland, Esquire

Foley & Lardner

106 East College Avenue, Suite 900

Tallahassee, Florida 32301

STATEMENT OF THE ISSUES

Whether Respondent, The Medical Escrow Soci ety, Inc.,

violated Section 626.989(6), Florida Statutes, as alleged in the

twenty - six counts of the Administrative Complaint issued by

Petitioner, Department of Financial Services, on January 6,

2003; and

If Respondent is found to have violated any of th e twenty -

six counts of the Administrative Complaint, whether any such

violations were committed willfully or non - willfully.

PRELIMINARY STATEMENT

On January 6, 2003, Petitioner issued a twenty - six - count

Administrative Complaint charging Respondent with mul tiple

violations of the Florida Insurance Code. Respondent timely

filed a Petition for Administrative Proceeding Involving

Disputed Issues of Fact (Petition) in the above - styled matter

on January 27, 2003, substantially denying the allegations. On

Febru ary 5, 2003, Petitioner referred the Petition to the

Division of Administrative Hearings, where it was assigned to

the undersigned Administrative Law Judge and discovery ensued.

The case was abated at the request of the parties and then re -

set for hearing .

The parties submitted a Joint Pre - hearing Stipulation,

dated July 3, 2003. The Joint Pre - hearing Stipulation

incorporated by reference an attached Stipulation which was

executed by the parties on June 9 and 10, 2003. Pursuant to

those stipulations, the parties jointly agreed to narrow the

issues to be determined by the Administrative Law Judge to those

stated above. The alleged violations of Section 626.9917,

Florida Statutes, are not retained in the Joint Pre - hearing

Stipulation as issues to be determ ined by the Administrative Law

Judge. In addition, the parties have already stipulated to the

penalty to be imposed against Respondent in the event the

undersigned Administrative law Judge determines that Respondent

in fact violated Section 626.989(6), Fl orida Statutes, depending

upon whether any such violations are found to have been

committed willfully or non - willfully.

At the final hearing, Petitioner offered the testimony of

Janice S. Davis, a financial specialist employed by Petitioner.

Eight exhibit s were offered into evidence, all of which were

admitted without objection by Respondent. The exhibits included

the deposition testimony of Karla Pius, employee of Petitioner;

Janice J. Davis, financial specialist with Petitioner; Kathy

Odine, former viat ical supervisor, Processing Department for

Respondent; Judy Barbara, former viatical processor for

Respondent; and Chris Love, former executive vice president and

current president and owner of Respondent. One composite

exhibit was admitted which containe d twenty - six tabs.

Respondent offered no evidence.

The Transcript of the final hearing was filed on August 1,

2003. Following an order granting an extension of time to file

proposed recommended orders, the parties each filed their

proposals on September 5, 2003. Each party's proposal has been

given careful consideration in the preparation of this

Recommended Order. All citations are to Florida Statutes

(1999), unless otherwise indicated.

FINDINGS OF FACT

1. Petitioner, the successor agency to the Depar tment of

Insurance, regulates the viatical industry operating in Florida

pursuant to the section of the Insurance Code referred to as the

Viatical Settlement Act, Part X, Chapter 626. Prior to

enactment of the Viatical Settlement Act in 1996, Petitioner d id

not have jurisdiction to regulate viatical settlement

transactions.

2. Respondent is a Florida corporation which was and is

licensed as a viatical settlement broker in Florida, as well as

a number of other states. Respondent, on behalf of a viator and

for a fee, commission, or other valuable consideration, offers

or attempts to negotiate viatical settlement contracts between a

viator resident, in this state or other states, and one or more

viatical settlement providers, and did so at all times material

hereto. Respondent is currently owned by Christopher Lane

(Lane), who purchased the company from the prior owner in a

transaction which was approved by Petitioner on November 6,

2001. Lane is the current president of Respondent. At all

times material t o the allegations of the Administrative

Complaint, Lane neither owned nor controlled Respondent. At

all times material to the allegations of the Administrative

Complaint, Lane was an employee of Respondent, as a vice

president who handled marketing and n ew client relations.

3. Lane did not have any knowledge of the facts or

circumstances giving rise to the allegations of the

Administrative Complaint. Furthermore, under Lane's ownership

and management, Respondent has adopted and filed with Petitioner

an anti - fraud plan, pursuant to Section 626.99278, which was

first enacted in 2000.

4. In general, the business of viatical settlements

involves the sale by a policyholder to an investor or group of

investors of the policyholder's life insurance policy, prio r to

the policyholder's death, for an amount that is less than the

face value of the policy. Viatical settlement transactions

typically have been used by terminally ill individuals as a

means to obtain cash prior to their death, which could be used

for li fe - sustaining treatments or to relieve financial stress

during their lifetime. Recently, viatical settlement

transactions have also been marketed to elderly individuals who

are healthy but may no longer need life insurance and who want

to obtain money dur ing their lifetime for any number of reasons,

such as paying for health care.

5. There are various categories of persons involved in a

typical viatical settlement transaction. The policyholder who

is selling a life insurance policy is referred to as a "v iator."

A viator is typically represented by a viatical settlement

"broker" who represents the viator by obtaining quotes from

potential purchasers of the viator's policy, called viatical

settlement "providers." Viatical settlement providers, in turn,

se ek investors to fund the viatical settlement transactions.

Viatical settlement brokers and providers are required to be

licensed under the Viatical Settlement Act. As part of its

duties under the Viatical Settlement Act, Petitioner issues

licenses to via tical settlement brokers through its Bureau of

Agents and Agencies.

6. In each of the twenty - six counts of the Administrative

Complaint, Petitioner has alleged that Respondent possessed a

copy of an insurance policy application form, which when

compared t o information submitted on Respondent's forms,

demonstrates evidence of a fraudulent insurance act committed by

the particular viator. In that respect, paragraph 4 of the

Administrative Complaint states as follows:

Information available to the Department

reflects that Medical Escrow has, from

offices located in this state, offered or

attempted to negotiate viatical settlement

contracts between viators and one or more

viatical settlement providers in the

presence of circumstances whereby Medical

Escrow knew , or in the exercise of

reasonable diligence should have known or

been caused to believe, that the underlying

insurance policy had been procured through

fraud, or dishonesty, or misrepresentations

made by the viator on his application to the

insurance comp any issuing the policy in

question.

Consequently, as a threshold matter Petitioner must prove that

Respondent actually possessed the documents referenced in the

Administrative Complaint.

7. Petitioner's financial specialist, Janice S. Davis

(Davis), test ified that she obtained copies of the documents

referenced in the twenty - six counts of the Administrative

Complaint from a variety of sources as follows: (1) the

documents referenced in Counts One and Eight were obtained by

Petitioner in 1999 from an exam ination of a viatical settlement

provider named Mutual Benefits Corporation; (2) The documents

referenced in Counts Two, Three, Four, Five, Six, and Seven were

obtained by Petitioner in 2000 in response to a document

production request to a viatical settle ment provider named

Future First Financial Group; (3) the documents reference in

Count Nine were obtained by Petitioner in 2002 from an

examination of a viatical settlement provider named William Page

& Associates; and (4) the documents referenced in Count s Ten,

Eleven, Twelve, Thirteen, Fourteen, Fifteen, Sixteen, Seventeen,

Eighteen, Nineteen, Twenty, Twenty - one, Twenty - two, Twenty -

three, Twenty - four, Twenty - five, and Twenty - six were obtained by

Petitioner in 2000 from files which had been obtained from

R espondent by execution of a search warrant by the Offices of

Statewide Prosecution and Petitioner's Division of Insurance

Fraud.

8. With respect to the documents obtained from the first

three sources - Mutual Benefits Corporation, Future First

Financial Gro up, and William Page & Associates - Petitioner has

failed to offer proof that the referenced documents were ever

actually in the possession of Respondent. Although it may be

reasonable to presume that the actual forms of Respondent were

in the possession of Respondent at some point in connection with

the referenced viatical settlement transactions, Petitioner has

offered no testimony regarding how those records were maintained

by the three viatical settlement providers. Moreover,

Petitioner failed to offer any evidence that the insurance

policy applications were ever in the possession of Respondent.

Petitioner has offered no evidence upon which to make a finding

that Respondent actually possessed the particular insurance

policy applications which were obtai ned from the three viatical

settlement providers. While Petitioner offered testimony from

former employees of Respondent to the effect that Respondent

obtained insurance policy applications from viators in general ,

such testimony does not establish that t he particular insurance

policy applications in the possession of the three viatical

settlement providers were actually obtained by Respondent. None

of Respondent's application forms referenced by Petitioner in

the Administrative Complaint required submiss ion of an insurance

application. Because Petitioner has failed to offer any

evidence that the particular insurance policy applications

referenced in Counts One, Two, Three, Four, Five, Six, Seven,

Eight, and Nine were ever actually possessed by Respondent ,

there is no basis upon which to make a finding of fact that

Respondent should have reported to Petitioner anything set forth

in such insurance policy applications. Petitioner may not

penalize Respondent based upon a mere assumption that Respondent

posse ssed the insurance policies referenced in those nine counts

of the Administrative Complaint.

9. With respect to the documents referenced by Petitioner

in Counts Ten through Twenty - six, Davis testified that copies of

those documents were obtained from Resp ondent's files which had

been obtained by the Office of Statewide Prosecution and the

Division of Insurance Fraud through execution of a search

warrant in 2000. Although Davis had no involvement in or

personal knowledge concerning the circumstances surrou nding the

execution of that search warrant, this evidence is sufficient to

substantiate its allegations that Respondent actually possessed

the insurance applications referenced by Petitioner in Counts

Ten through Twenty - six of the Administrative Complaint in its

files.

10. In Count Ten of the Administrative Complaint, Viator

Eight submitted to Philadelphia Life Insurance Company an

insurance policy application, dated March 21, 1996, which

represented that Viator Eight had not been treated for or

diagnosed with Acquired Immune Deficiency Syndrome (AIDS) within

the last ten years. Viator Eight submitted to Respondent an

application form, dated July 8, 1998, which represented that

Viator Eight had first been diagnosed with AIDS in 1989. The

question on Respo ndent's application asks for the date of first

diagnosis of the "current medical condition" which is described

in the preceding question. While Viator Eight's description of

his "current medical condition" on Respondent's application

includes "AIDS," it a lso includes a "history of Hodgekins

Lymphoma" as well as other conditions. The information on

Respondent's application does not specify whether the 1989

diagnosis was for AIDS or the other disorders listed as Viator

Eight's "current medical condition"; h owever, this information

is sufficient to alert Respondent's employees that a fraudulent

insurance act is being or has been committed and trigger the

reporting requirement of the statute.

11. In Count Eleven of the Administrative Complaint,

Viator Eight s ubmitted to Manhattan Life Insurance Company an

insurance policy application, dated July 3, 1996, which

represented that Viator Eight had not consulted with or been

treated by any licensed physician or medical practitioner within

the last five years and wa s in excellent health. Viator Eight

submitted to Respondent an application, dated July 8, 1998,

which represented that Viator Eight had first been diagnosed

with AIDS in 1989 and was being attended by Dr. Ronald Wiewora.

The "current medical condition" d escribed by Viator Eight in

Respondent's application form states a diagnosis in 1989 of AIDS

and Hodgekins Lymphoma, and "recent difficulties with protein

inhibitors . . ." This is sufficient information to require the

reporting of potential fraud under t he statute.

12. In Count Twelve of the Administrative Complaint,

Viator Nine submitted to Time Insurance Company an insurance

policy application, dated August 6, 1996, which represented that

Viator Nine had not had a physical examination, diagnostic test,

medical treatment, health impairment, or been advised to undergo

any treatment within the past five years. However, the

application also represented that he had not been diagnosed with

AIDS or AIDS - related complex (ARC) or received treatment for it

withi n the past ten years. Viator Nine submitted to Respondent

an application, dated August 15, 1997, which stated that Viator

Nine had AIDS and had first been diagnosed Human

Immunodeficiency Virus (HIV) positive in February 1991. This

was sufficient informa tion to require the reporting of potential

fraud under the statute.

13. In Count Thirteen of the Administrative Complaint,

Viator Nine submitted to Jackson National Life Insurance Company

an insurance policy application, dated March 5, 1992, which

represe nted that Viator Nine had not been treated by a physician

or other medical practitioner, or been a patient in a clinic or

medical facility, or been diagnosed or treated for AIDS or any

other immunological disorder, within the past five years.

Viator Nine submitted to Respondent an application, dated

August 15, 1997, which represented that Viator Nine had first

been diagnosed with AIDS in February 1991 and was not presently

employed. This was sufficient information to require the

reporting of potential fr aud under the statute.

14. In Count Fourteen of the Administrative Complaint,

Viator Nine submitted to Interstate Assurance Company an

insurance policy application, date March 21, 1993, which

represented that within the last ten years Viator Nine had not

been diagnosed or treated by a member of the medical profession

for an immune system disorder and that within the last five

years he had not been hospitalized or treated by a member of the

medical profession or consulted a physician or been prescribed

any medication. Viator Nine submitted to Respondent an

application, dated August 15, 1997, which stated that Viator

Nine had AIDS and had first been diagnosed HIV positive in

February 1991. Although the insurance application did not

specifically request disc losure of a diagnosis of HIV positive

and did not define the term "immune system disorder" to include

a diagnosis of HIV positive, Viator Nine's disclosure on

Respondent's application of a diagnosis of HIV positive was

sufficient to alert an employee of Re spondent to report the

potential for fraud under the statute and to require that this

information be reported.

15. In Count Fifteen of the Administrative Complaint,

Viator Nine submitted to Interstate Assurance Company an

insurance policy application, dat ed March 4, 1994, which

represented that, within the last ten years, Viator Nine had not

been diagnosed or treated by a member of the medical profession

for an immune system disorder and that within the last five

years he had not been hospitalized or treat ed by a member of the

medical profession or consulted a physician or been prescribed

any medication. Viator Nine submitted to Respondent an

application, dated August 15, 1997, which stated that Viator

Nine had AIDS and had first been diagnosed HIV positiv e in

February 1991 and that Dr. Leslie Diaz represented on

Respondent's "Physician's Questionnaire - HIV Disease" form,

dated, September 4, 1997, that Viator Nine had the HIV disease

and a life expectancy of five to ten years. Although the

insurance applica tion did not define the term "immune system

disorder" to include a diagnosis of HIV positive, Viator Nine's

disclosure on Respondent's application of a diagnosis of HIV

positive was sufficient to alert an employee of Respondent of

the need to report the po tential for fraud under the statute.

16. In Count Sixteen of the Administrative Complaint,

Viator Nine submitted to Security Mutual Life Insurance Company

an insurance policy application, dated November 4, 1997, which

represented that Viator Nine had not been treated for or had any

known indication of AIDS, ARC, or tested positive for HIV

antibodies. Viator Nine submitted to Respondent an application,

dated August 15, 1997, which stated that Viator Nine had AIDS,

had first been diagnosed HIV positive in F ebruary 1991, and was

being treated by Dr. Leslie Diaz. This is sufficient to trigger

the reporting requirement of the statute.

17. In Count Seventeen of the Administrative Complaint,

the evidence submitted indicated that Viator Nine submitted to

Columbi a Universal Life Insurance Company an insurance policy

application for a face amount coverage of $70,000, dated

August 28, 1998, which represented that Viator Nine had not been

diagnosed with any immune deficiency disease. Viator Nine

submitted to Respon dent an application, dated August 15, 1997,

which stated that Viator Nine had AIDS, had first been diagnosed

HIV positive February 1991, and was being treated by Dr. Leslie

Diaz. On Respondent's form submitted in 1997, Viator Nine

indicated that he had a preexisting life insurance policy, in

the face amount of $200,000, with Columbia Universal Life issued

on December 28, 1985. There is no apparent connection between

Respondent's application, dated August 15, 1997, and the

Columbia Universal Life applicati on, dated August 28, 1998, that

would trigger the necessity of an employee of Respondent to make

a report.

18. In Count Eighteen of the Administrative Complaint,

Viator Nine submitted to Philadelphia Life Insurance Company an

insurance policy application, dated August 28, 1998, which

represented that Viator Nine had not been told that he had

tested positive for exposure to the HIV infection and that to

the best of his knowledge, his health was not impaired in any

way. Viator Nine submitted to Respondent a n application, dated

August 15, 1997, which stated that Viator Nine had AIDS, had

first been diagnosed HIV positive in February 1991, and was

being treated by Dr. Leslie Diaz. Respondent's application

relates to an individual life policy issued by the Col umbus

Mutual Insurance Company, in the face amount of $200,000, dated

December 28, 1985. There is no apparent connection between

Respondent's application, dated August 15, 1997, and the

Philadelphia Life Insurance Company policy application, dated

August 28, 1998. Therefore, there was no obligation to report.

19. In Count Nineteen of the Administrative Complaint,

Viator Nine submitted to Respondent an application, dated

August 15, 1997, which stated that Viator Nine had AIDS, had

first been diagnosed HI V positive in February 1991, and was

being treated by Dr. Leslie Diaz. Viator Nine submitted to

United Home Life Insurance Company an insurance policy

application, dated April 23, 1999, which represented that within

the last ten years Viator Nine had not tested positive for

exposure to the HIV infection, had not tested positive for

antibodies to the AIDS virus, and had not consulted a medical

practitioner within the last five years. Respondent's

application relates to an individual life policy issued by

C olumbus Mutual Insurance Company, in the face amount of

$200,000, dated December 28, 1985. There is no apparent

connection between Respondent's application, dated August 15,

1997, and the United Home policy application, dated April 23,

1999. Therefore, t here was no obligation to report.

20. In Count Twenty of the Administrative Complaint,

Viator Ten submitted to Respondent an application form, dated

August 15, 1997, which represented that Viator Ten had AIDS, had

first been diagnosed HIV positive in Febr uary 1991, and was

being treated by Dr. Leslie Diaz. Viator Ten submitted to

Federal Home Life Insurance Company an insurance policy

application, dated October 20, 1997, which represented that

within the last ten years Viator Ten had not tested positive f or

exposure to the AIDS virus, had not been treated for the AIDS

virus, and had not consulted a medical practitioner within the

last five years. Respondent withheld this insurance policy from

sale for a period of time because Respondent knew that Viator

T en had not yet submitted the application for the policy to the

life insurance company and that it contained false information.

Respondent had an obligation to report these discrepancies.

21. In Count Twenty - one of the Administrative Complaint,

Viator Ele ven submitted to Manhattan Life Insurance Company an

insurance policy application, dated April 25, 1996, which

represented that Viator Eleven had not consulted, been examined

or treated by any licensed physician or medical practitioner

within the last five years. Viator Eleven submitted to

Respondent an application, dated April 14, 1998, in the

attachments it stated that Viator Eleven had first been

diagnosed HIV positive in September 1991, and as of November

1995 had been diagnosed with AIDS and had recei ved treatment

from a physician since that time. Although the insurance

application does not request any information regarding any

diagnosis or treatment for AIDS or HIV, Viator Eleven stated

that he did not have a family physician, had not seen a

physic ian in the past, and was not taking any medication. This

was obviously false, and Respondent should have reported it.

22. In Count Twenty - two of the Administrative Complaint,

Viator Twelve submitted to Southern Farm Bureau Life Insurance

Company an insur ance policy application, dated July 1, 1996,

which represented that Viator Twelve had not been told that he

had or had been treated for an immune deficiency disorder, AIDS,

ARC, or had test results indicating exposure to the HIV virus.

Viator Twelve submi tted to Respondent an application, dated

December 3, 1996, which represented that Viator Twelve had

"asymptomatic HIV" and had first been diagnosed in 1991. This

was sufficient to trigger the reporting requirement.

23. In Count Twenty - three of the Admini strative Complaint,

Viator Twelve submitted to Primerica Life Insurance Company an

insurance policy application, dated July 30, 1996, which

represented that Viator Twelve had not within the past ten years

been diagnosed or treated for AIDS or any immune de ficiency

disorder or tested positive for exposure to the HIV virus.

Viator Twelve submitted to Respondent and application, dated

December 3, 1996, which represented that Viator Twelve had

"asymptomatic HIV" and had first been diagnosed in 1991. This

was sufficient to trigger the reporting requirement.

24. In Count Twenty - four of the Administrative Complaint,

Viator Thirteen submitted to Nationwide Life Insurance Company

an insurance policy application, dated July 25, 1997, which

represented that Viator T hirteen had not within the past five

years been diagnosed or treated for AIDS, ARC, or any other

immune deficiency syndrome and had not been examined or treated

by any physician or medical practitioner, or by any hospital,

clinic, or medical facility not p reviously mentioned on the

application. Viator Thirteen submitted to Respondent an

application, dated January 12, 1998, which represented that

Viator Thirteen had been diagnosed HIV positive in 1992 and had

been diagnosed with AIDS in 1994 and that inform ation supplied

by Viator Thirteen's physician on Respondent's "Physician's

Questionnaire - HIV Disease" form confirmed those representations.

Although Respondent withheld Viator Thirteen's policy from sale

for a period of time, Respondent's personnel noted that Viator

Thirteen had lied on the application. Respondent failed to

report this fact to Petitioner.

25. In Count Twenty - five of the Administrative Complaint,

Viator Three submitted to Respondent an application, dated

April 11, 1995, which represented that Viator Three had been

diagnosed HIV positive in May 1986 and had been diagnosed with

AIDS in March 1995. Viator Three submitted to Allstate Life

Insurance Company an insurance policy application, dated

July 31, 1995, which represented that Viator T hree had never

been diagnosed with or treated for AIDS, ARC, or an AIDS - related

condition. Since the application for the life insurance policy

and the application to Respondent were submitted prior to the

enactment of the Viatical Settlement Act, Responde nt had no duty

to report possible fraud in this instance, since it occurred

prior to July 1, 1996, the effective date for the statute.

26. In Count Twenty - six of the Administrative Complaint,

Viator Three submitted to Respondent an application, dated

Dece mber 3, 1996, which represented that Viator Three had been

diagnosed HIV positive in May 1986 and had been diagnosed with

AIDS on September 4, 1996, and that on Respondent's "Physician's

Questionnaire - HIV Disease" form, dated May 18, 1995, submitted

by Dr. Carroll L. Cook, confirmed those representations. Viator

Three submitted to Nationwide Life Insurance Company an

insurance policy application, dated October 20, 1995, which

represented that Viator Three had not, within the last five

years, been diagnosed with or treated for AIDS, ARC, or any

other immune deficiency disorder. This is sufficient to trigger

the reporting requirement.

27. The evidence is clear and convincing, as to Counts

Ten, Eleven, Twelve, Thirteen, Fourteen, Fifteen, Sixteen,

Twenty, Tw enty - one, Twenty - two, Twenty - three, Twenty - four, and

Twenty - six of the Administrative Complaint that Respondent, in

the performance of its role as a viatical settlement broker,

routinely received from viators and reviewed written information

about their me dical condition, particularly regarding the

presence of an HIV/AIDS diagnosis, that directly and materially

contradicted information supplied by that same viator on one or

more written and corresponding insurance policy applications,

also routinely receive d and reviewed by Respondent. The same

viators who represented on the relevant life insurance policy

applications that they did not have HIV or AIDS represented on

viatical applications that they did have that condition during

the same material times. Th is is especially true, wherein

Viator Nine submitted eight applications to Respondent on the

same date, August 15, 1997. In each instance, the contrast is

so great that any reasonable person, especially an employee of

Respondent in the viatical industry, would have to know or

believe that the life insurance policy being offered for sale

through Respondent had been obtained through misrepresentations

made by the viator on or in support of the insurance policy

application. Respondent not only failed to repo rt those

circumstances to Petitioner, but proceeded to offer many of

those policies for sale to viatical settlement providers.

28. The evidence is clear and convincing that Respondent,

during the relevant time period, had no company policy requiring

or ev en acknowledging an obligation to report such matters to

Petitioner and that the usual and prevalent custom of Respondent

was to send the applications to providers without comment. Only

after 1999 did Respondent instruct its employees to direct such

suspi cious viatical applications to the attention of a company

vice - president. Even then, no reports were filed with

Petitioner.

29. Thus, Respondent's admitted failure to report cannot

be ascribed to the negligence or inattention of a company

officer or empl oyee to his or her duty to fulfill a company

policy requiring such reports, since there was no such policy.

It is clear that Respondent simply ignored the reporting

requirements in the statute and, in most instances, offered the

tainted viatical applicati ons/insurance policies for sale to

viatical settlement providers without comment.

30. Accordingly, it is found that any and all admitted

failures to report the circumstances alleged in Counts Ten

through Sixteen, Twenty through Twenty - four, and Twenty - s ix in

the Administrative Complaint were willful.

CONCLUSIONS OF LAW

31. The Division of Administrative Hearings has

jurisdiction of the parties and the subject matter of these

proceedings. Sections 120.569, 120.57(1), 231.262(5), and

Chapter 626, Florida Statutes (2003).

32. This proceeding involves disciplinary action against

Respondent's viatical settlement broker's license and is,

therefore, penal in nature. State ex rel Vining v. Florida Real

Estate Commission , 281 So. 2d 487 (Fla. 1973). The burde n of

proof to establish the facts upon which Petitioner seeks to

discipline Respondent's license is on Petitioner. Balino v.

Dept. of Health and Rehabilitative Services , 348 So. 2d 349

(Fla. 1st DCA 1977). The standard of proof required in this

matter is that the charges must be proved by Petitioner through

the introduction of clear and convincing evidence. Department

of Banking and Finance v. Osborne Stern & Co. , 670 So. 2d 932

(Fla. 1996). Petitioner has the burden of proving by clear and

convincing e vidence each of the allegations in the

Administrative Complaint. Ferris v. Turlington , 510 So. 2d 292

(Fla. 1987).

33. Section 626.989(6), in pertinent part, requires all

department licensees and their employees to report to Petitioner

knowledge or belie f that a fraudulent insurance act is being or

has been committed, that upon conviction would constitute a

felony or misdemeanor under the insurance code or

Section 817.234. The constitutionability of this statute has

been upheld in Accelerated Benefits C orporation v. Department of

Insurance , 813 So. 2d 117 (Fla. 1st DCA 2002).

34. Section 817.234 provides felony penalties for various

fraudulent insurance practices, including providing false or

misleading information, or concealing material fact informati on,

on or in support of an application for insurance.

35. Section 626.9917 proscribes viatical settlement

brokers from engaging in fraudulent or dishonest practices, or

otherwise showing that they are untrustworthy or incompetent to

act as viatical settle ment brokers.

36. The admitted and proven activities of Respondent

unquestionably violated the reporting requirements imposed on

every licensee by Section 626.989(6). These violations, in

turn, also constitute showings of untrustworthiness to lawfully

ac t as a viatical settlement broker, thus contravening

Section 626.9917.

37. Willfulness is essentially a matter of intent, and

intent is usually determined by circumstantial evidence.

Plantation Key Developers v. Colonial Mortg. Etc. , 559 F.2d 164

(5th C ir. 1979); Florida East Coast Ry. Co. v. Thompson , 111 So.

525 (Fla. 1927); Phifer v. Steenburg , 64 So. 265, reh. den. 64

So. 265 (Fla. 1914); Heineman v. State , 327 So. 2d 898 (Fla. 3rd

DCA 1976), cert. den. 336 So. 2d 1182; Gavin v. State , 259 So.

2d 274 (Fla. 3rd DCA 1968), cert. den. 221 So. 2d 746; State v.

Gantt , 217 S.E. 2d 3, at 5 (N.C. App. 1975); State v. Evans , 548

P.2d 772, at 777 (Kan. 1976). The circumstantial evidence

material to the issue of willfulness here admits of no other

reasonable co nclusion than that the company simply ignored

Section 626.989(6) and proceeded as if it did not exist. There

is not even a scintilla of evidence that the company ever

intended or even tried to comply with the reporting requirement

of Section 626.989(6). No profession of ignorance of the law

can overcome the plainly stated duty of all department licensees

to report the known or believed fraudulent insurance practices

in question. As a department licensee, it was incumbent on

Respondent to comply with the reporting requirement of Section

626.989(6). This it simply did not do, or even try to do. On

the basis of the record evidence, it must be concluded that

Respondent's reporting violations were willful. Accelerated

Benefits Corporation v. Department of I nsurance , supra.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that the Department of Financial Services enter

a final order as follows:

1. Dismissing Counts One through Nine, Seventeen,

Eighteen, Ninetee n, and Twenty - five.

2. Finding Respondent guilty of violating

Section 626.989(6) in Counts Ten, Eleven, Twelve, Thirteen,

Fourteen, Fifteen, Sixteen, Twenty, Twenty - one, Twenty - two,

Twenty - three, Twenty - four, and Twenty - six of the Administrative

Complain t; and

3. In conformity with the Joint Pre - hearing Stipulation

and the earlier, seven - page stipulation of the parties, finding

the violations in question willful, and imposing an

administrative fine in the amount of $30,000 and subjecting

Respondent to tw o years of probation under the terms and

conditions set forth in the seven - page stipulation, paragraph 5.

DONE AND ENTERED this 7th day of November, 2003, in

Tallahassee, Leon County, Florida.

S

DANIEL M. KILBRIDE

Adminis trative 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 Admin istrative Hearings

this 7th day of November, 2003.

COPIES FURNISHED :

Michael H. Davidson, Esquire

Department of Financial Services

612 Larson Building

200 East Gaines Street

Tallahassee, Florida 32399 - 0333

Thomas J. Maida, Esquire

N. Wes Strickland, E squire

Foley & Lardner

106 East College Avenue, Suite 900

Tallahassee, Florida 32301

Honorable Tom Gallagher

Chief Financial Officer

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0300

Mark Casteel, General Counsel

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0300

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. A ny exceptions

to this Recommended Order should be filed with the agency that

will issue the final order in this case.