03-002041PL Department Of Financial Services vs. Clifford Eugene Kiefer Status: Closed Recommended Order on Friday, April 2, 2004.

Summary: Respondent solicited and sold insurance policies for an insurance company that was not authorized to do business in Florida.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, )

)

Petitioner, )

) Case No. 03 - 2041PL

vs. )

)

CLIFFORD EUGENE KEIFFER, )

)

Respondent. )

)

RECOMMENDED ORDER

Notice was provided and on January 6, 2004, a formal

hearing was held in this case. Authority for conducting the

hearing is set forth in Sections 120.569 and 120.57(1), Florida

Statutes (2003). The hearing location was the St. John's County

Agricultura l Center, Conference Room, 3125 Agricultural Center

Drive, St. Augustine, Florida. The hearing was conducted by

Charles C. Adams, Administrative Law Judge.

APPEARANCES

For Petitioner: David J. Busch, Esquire

Department of Financial Services

612 Larson Building

200 East Gaines Street

Tallahassee, Florida 32399 - 0333

For Respondent: Joseph O. Stroud, Jr., Esquire

Rogers, Towers, P.A.

1301 Riverplace Boulevard, Suite 1500

Jacksonville, Florida 32207

STATEMENT OF THE ISSUE

Should discipline be imposed by Petitioner against

Respondent's insurance agent licenses as, Life (2 - 16), Life and

Health (2 - 18), and Health (2 - 40), held pursuant to Chapter 626,

Florida St atutes?

PRELIMINARY STATEMENT

By an Amended Administrative Complaint in Case No. 61528 -

03 - AG, Petitioner has accused Respondent of various violations

in the solicitation and sale of group health benefits insurance

policies, or contracts related to seve ral customers in

association with TRG Marketing, L.L.C. (TRG). By his acts

Respondent is alleged to have violated provisions of Chapters

624 and 626, Florida Statutes, subjecting him to discipline in

accordance with those chapters and Florida Administrati ve Code

Chapter 4 - 231.

On April 10, 2003, Petitioner served Respondent with the

original Administrative Complaint in Case No. 61528 - 03 - AG.

Respondent disputed the underlying facts in the administrative

complaint in an election of rights form receiv ed by Petitioner

on May 16, 2003. On June 2, 2003, the case was forwarded to the

Division of Administrative Hearings to assign an administrative

law judge to conduct a formal hearing. The case was assigned

and noticed to be heard August 6, 2003. Followi ng two

continuances, the case was heard on the date described. Over

objection Petitioner was allowed to amend the Administrative

Complaint in Case No. 61528 - 03 - AG. The amendment was allowed by

order dated June 24, 2003.

At hearing Petitioner presented the testimony of Bruce

Chambers, Vicki Brown, Alicia Moore, and Linda Davis as its

witnesses. Petitioner's Exhibits numbered 1 through 39 were

admitted as evidence. Respondent testified in his own behalf.

Respondent's Exhibits numbered 1 through 9 were admitted as

evidence.

Consistent with the instruction given at hearing, counsel

for Petitioner produced a matrix setting forth the number of

prosecutions from January 1, 2002, until the hearing date and

th eir disposition in relation to TRG. The matrix pertains to

the sale of the TRG health plan through Florida insurance agents

who were disciplined for those activities. The individual

licensees are identified, and the disciplinary sanctions imposed

are dep icted in the matrix. The parties, in particular

Respondent, were allowed to offer the document summarizing

imposition of discipline in other cases for comparison to

Respondent, in the event Respondent was found in violation of

provisions within the Amende d Administrative Complaint in Case

No. 61528 - 03 - AG. The matrix is received for those purposes, to

be used in conjunction with Petitioner's disciplinary guidelines

should a violation of the insurance law be established.

At the end of April or early M ay 2001, Respondent called

the offices of Petitioner. The topic concerned TRG, as

Respondent testified at hearing. In response, an unidentified

person told Respondent, "Yes, TRG is an ERISA program (ERISA

refers to the Employment/Retirement Income Securi ty Act of

1974). They have been operating in Florida for about 18 months

and we have no complaints." This conversation took place before

Respondent became affiliated with TRG. The purpose of the call

and the response made, as argued in the course of the hearing

and through subsequent written argument following the hearing,

was to try and establish that Respondent had acted with "due

diligence" before becoming involved with TRG. The issue of due

diligence will be discussed in more detail. Preliminarily, the

statement which Respondent attributed to the unknown person he

spoke to by telephone in the Petitioner's office is hearsay as

defined at Section 90.801(1)(c), Florida Statutes (2003). The

statement attributable to the unknown person Respondent spoke to

by telephone, is a statement that may not be found as a fact

when considering hearsay exceptions set forth in Section 90.803,

Florida Statutes (2003), in particular, Section 90.803(18). In

the absence of any showing that the unknown individual was

acti ng in a representative capacity, under specific

authorization from Petitioner or as agent concerning a matter

within the scope of duties performed for the Petitioner, that

statement cannot be received for fact - finding purposes standing

alone. Nor has it b een shown as supplementary or an explanation

of other competent evidence as envisioned by Section

120.57(1)(c), Florida Statutes (2003).

The hearing transcript was filed on January 28, 2004. The

parties timely filed proposed recommended orders on o r before

the extended deadline for submission of those pleadings. The

proposed recommended orders have been considered in preparing

the recommended order.

FINDINGS OF FACT

The Parties

1. Petitioner was created in accordance with Section

20.13, Florida Statutes. Petitioner has been conferred general

power by the Legislature, to regulate the insurance industry in

Florida, in accordance with Section 624.307, Florida Statutes.

Chapter 626, Florida Statutes, grants Petitioner the authority

to license and discipline insurance agents doing business in

Florida.

2. Petitioner issued Respondent license No. A140590. At

times relevant to the inquiry, Respondent has been licensed in

Florida as agent for insurance in Life (2 - 16), and Life and

Health (2 - 18). O n December 2, 1992, Respondent had been issued

a Health (2 - 40) license, but that license is no longer valid

having been voluntarily cancelled. The cancellation occurred at

a time previous to December 18, 2003, when a license history

document was prepared, Petitioner's Exhibit numbered 1.

3. Respondent conducts business as an insurance agent

under the name Business Insurance Cafeteria. The business is

located at 828 Hamilton Avenue, St. Augustine, Florida.

4. Respondent has been licensed as an insu rance agent for

over 50 years, 44 years of which have been in Florida. Acting

as an insurance agent has been Respondent's principal

occupation. During that time the emphasis in his business has

been on health insurance.

TRG Affiliation

5. In April 20 01, an acquaintance and insurance agent

Ellen Averill introduced Respondent to Robert Trueblood, Sr.

Respondent understood that Mr. Trueblood was the Managing

General Agent for TRG. Mr. Trueblood, at the time, was from

Hobe Sound, Florida. Mr. Trueblood gave information to

Respondent about TRG pertaining to its involvement in the

insurance business. Mr. Trueblood told Respondent that

individuals within TRG were personal friends of Mr. Trueblood.

6. In turn, Respondent made a call to Petitioner at th e

end of April or first part of May 2001. Someone that he spoke

to, whose identity and position within the Petitioner's

hierarchy was not established in the record, made a comment

which cannot be established as fact given its hearsay nature.

Nonetheless, following this conversation, Respondent became

affiliated with the TRG organization which Respondent understood

to be an ERISA program, not subject to Petitioner's oversight.

At that time, Respondent's knowledge of what an ERISA program

entailed was base d upon reading he had done in the past.

Respondent was of the impression that the ERISA program was

under the auspices of the federal government, as opposed to the

state government. Respondent had never taken specific courses

concerning the ERISA program before his engagement with TRG.

Respondent's involvement with TRG was his first effort to market

what he considered to be ERISA program insurance.

7. When Respondent commenced his participation with TRG,

he believed that an ERISA program was institu ted by a document

filed with the Department of Labor outlining insurance benefits

and that TRG had put up reserves associated with the ERISA

program. Respondent did not obtain anything in writing from the

Department of Labor concerning TRG as an ERISA pro gram. To

begin with, Respondent believed that ERISAs had to involve 51 or

more lives in being before coverage could be obtained. Again,

this was not a market that Respondent had worked in but he

understood that ERISAs involved coverage of that number of

individuals. From conversations with Mr. Trueblood and Tom

Dougherty, another managing General Agent for TRG, of Cocoa

Beach, Florida, Respondent became persuaded that ERISAs could be

marketed to companies with a single life being insured or two to

three lives in a small group market.

8. Respondent relied on Mr. Trueblood when Mr. Trueblood

told Respondent that ERISA, as a federal program did not have to

be licensed by the state. Mr. Dougherty made a similar comment

to Respondent. Ms. Averill also co mmented to Respondent

concerning her impression about TRG as an ERISA program. From

this record, Respondent was not officially told by persons

within the Petitioner's agency, that the TRG program was an

ERISA program that did not have to be licensed in Fl orida.

9. TRG provided Respondent marketing material. Respondent

was impressed with the "very professional" appearance of that

material. Respondent's Exhibit numbered 1 admitted into

evidence is constituted of material provided to Respondent by

TRG. It refers to the TRG health plan under "the Redwood

Group." It refers to marketing under an organization identified

as Premier Financial Group USA, Inc. It describes PPO networks

available with the TRG products. The document refers to the

TRG/USA healt h plan (the Redwood Group, L.L.C./USA Services

Group, Inc.) and various versions of employer health and welfare

benefit plans and a client fee schedule effective May 1, 2001,

for enrollees in the 80/60 plan and 90/70 plan. Participant co -

pays for physicia n office visits are related. Those plans

identified in the material describe the amount of deductibles

according to age groups and participation by members and

additional family participants. The TRG document speaks of

benefits attributable to the 80/60 and 90/70 health plans. This

information contained comments about the Redwood Companies -

Corporate Overview.

10. Respondent's Exhibit numbered 1 comments upon the

ERISA program and the provision of health benefits for employees

through self - funded empl oyee health and welfare benefit plans as

a means, according to the document, to exempt those plans from

state insurance regulation.

11. Respondent's Exhibit numbered 1 touts what it claims

are savings to be derived compared to current health insurance

plans held by prospective purchasers.

12. Respondent's Exhibit numbered 1 contains an associate

application agreement setting forth policies and procedures that

Respondent would be obligated to meet as an associate with TRG

acting as an independent co ntractor.

13. Respondent's Exhibit numbered 1 contains an

application format for prospective enrollees in the TRG

preferred provider plans to execute in applying for coverage.

14. Respondent's Exhibit numbered 1 refers to Robert W.

Trueblood, Sr., as being affiliated with Premier Financial

Group, USA Inc., under the TRG banner.

15. Mr. Trueblood sent Respondent's Exhibit numbered 1 to

Respondent.

16. Respondent began his contacts with TRG in May 2001 and

wrote his first enrollment contract in association with TRG in

August or September 2001.

17. Beyond that time, Respondent was notified on

November 27, 2001, that effective November 30, 2001, a cease and

desist order had been issued against TRG's offering its health

coverage in Florida.

18. The commissions earned by Respondent in selling the

TRG health insurance product ranged from five to seven percent.

Respondent earned less than $1,000.00 in total commissions when

selling TRG health insurance products.

19. The persons who partici pated with TRG in its preferred

provider plan were referred to the claims administrator of USA

Services.

20. Participants in the TRG preferred provider plan sold

by Respondent received information outlining the benefits.

Participants received medical I .D. cards. This information was

provided directly to the participants. Respondent was aware of

the information provided to the participants. An example of

this information is set out in Respondent's Exhibit numbered 2.

21. In offering the TRG health coverage, Respondent told

his customers that this plan was not under the purview of the

Department of Insurance in Florida, that this was an ERISA

program. Respondent told his customers that any problems

experienced with the program could be addressed th rough resort

to the federal court. Respondent did remind the customers that

making the Florida Department of Insurance aware of their claims

could create a record in case they went to federal court.

22. Respondent is familiar with the prohibition agai nst

acting as an insurance agent for companies not authorized to

transact business in Florida. But he held to the opinion that

TRG was an ERISA program under the federal auspices and not

subject to Petitioner's control.

23. At the inception, Respo ndent believed that offering

the TRG health insurance coverage would be an acceptable choice.

That proved not to be true. When it was discovered that TRG

would not pay claims related to health coverage for policies

Respondent sold to his customers, Respo ndent made an attempt to

find replacement coverage.

24. To this end, Respondent had received information

reflected in Respondent's Exhibit numbered 5. The document

discussed the prospect that insurance would be provided from the

Clarendon Insurance Co mpany (Clarendon), using the provider

Network Beechstreet, with Baftal/Quik Quote Insurance Brokers in

Plantation, Florida, being involved in the process to substitute

coverage for TRG. Baftal is the shorthand reference for Bertany

Association for Travel and Leisure, Inc. Baftal is an insurance

agency.

25. Respondent made some explanation to his customers

insured through TRG of the prospect of using Clarendon to take

over from TRG, which had not honored any of the claims for

reimbursement made by Resp ondent's customers. A copy of this

December 28, 2001, correspondence from Respondent to TRG's

insureds who had been sold policies through Respondent, is

reflected in Respondent's Exhibit numbered 6.

26. As described in Respondent's Exhibit numbered 7,

Baftal sent information concerning health care coverage to

business owners, to include Respondent's customers, as described

in the Amended Administrative Complaint. This correspondence

indicated that the benefit plan would become effective December

1, 2001, upon condition that the insured meet applicable

underwriting standards. This communication was made following

receipt of premiums paid by the insured. Reimbursement for

claims were to be processed through Advancement Administration

in Maitland, Flo rida.

27. Baftal did not assume the claims that had not been

honored by TRG, and Clarendon did not become the insurer for

those customers.

28. Baftal did not follow through with the offer to

provide health benefits to Respondent's customers who had be gun

with TRG. On February 11, 2002, as evidenced by Respondent's

Exhibit numbered 8, Baftal wrote the customers to advise that

health benefits would not be provided. That exhibit mentions

American Benefit Plans through a Mr. David Neal and some

intention for Mr. Neal's organization to provide a benefits

program, including insurance through Clarendon, as administered

through Advanced Administration. The Baftal communication goes

on to say that Baftal had learned that Clarendon was not an

insurer on the pr ogram, that the only insurer on the program was

an offshore insurance company about which Baftal had not

received credible information. The letter remarks that premiums

paid to Baftal by the customers were being returned.

29. On April 4, 2002, as related in Respondent's Exhibit

numbered 9, TRG wrote to persons who were identified as health

plan participants, to include Respondent's customers who are the

subject of the Amended Administrative Complaint. The letter

stated that due to a problem with USA Serv ices Group, the claims

administrator on November 30, 2001, when the TRG plan ended,

claims were not being paid. The correspondence remarks about

difficulties with USA Services experienced by TRG, promising

that TRG would fulfill obligations to the custome rs who were

participants in the health plan. Contrary to this promise, TRG

has not honored claims for those customers who are the subject

of the Amended Administrative Complaint.

30. On December 12, 2001, as reflected in Respondent's

Exhibit numbered 4, Petitioner had written consumers who had

enrolled in the TRG health plan to advise that the Petitioner

did not consider the TRG health plan to be an ERISA program.

Under the circumstances, the correspondence indicated that TRG

should have sought author ization from Petitioner to sell health

plans in Florida, which had not been done. The correspondence

refers to some acknowledgement by TRG that it was not an ERISA

program and needed to be licensed in Florida to conduct

business. The correspondence advis es the consumer to cease

payment of any further premiums to TRG, to include the

cancellation of automatic bank drafts for payment of premiums.

The correspondence advises the consumer to obtain replacement

insurance through Florida licensed insurance compa nies or HMOs.

The letter goes on to remind the consumer of certain plans that

were not licensed in Florida to conduct business because they

were perceived to be illegitimate companies. The communication

urged the consumer not to enroll in those health in surance

plans. Respondent was made aware of this communication.

Count I: Vicki Brown

31. Vicki Brown has a business known as Rainbows End Ranch

located in St. Johns County, Florida. This is a one - person

business involving boarding and training of horses.

32. Ms. Brown was interested in obtaining permanent health

insurance, in that her COBRA policy was expiring. As a

consequence, she was referred to Respondent by a friend.

33. Respondent met Ms. Brown at her place of business.

She explained to him her health insurance needs. Respondent

suggested obtaining health insurance through TRG. Ms. Brown

agreed. Ms. Brown paid $165.00 to TRG by check to cover the

premium for September 2001. Two additional amounts of $165.00

were withdrawn from her checking account to pay premiums to TRG

for the months that followed.

34. Subsequently, Ms. Brown received Petitioner's

December 12, 2001, letter informing her that TRG was not allowed

to conduct business in Florida, Petitioner's Exhibit numbered

13. Beyond that point, Ms. Brown had difficulties in her

attempt to be reimbursed for her medical treatment, presumably

covered by the TRG plan, by seeking reimbursement through

another insurance firm other than by TRG. That process was

pursued through Baftal in relation to insurance offered by

Clarendon.

35. Ms. Brown made Respondent aware that she had problems

with reimbursement and of the receipt of Petitioner's letter.

Respondent told her not to worry about the situation, that

things were going to be taken care of by Clarendon taking over

where TRG left off.

36. Ms. Brown received Respondent's form correspondence

dated December 28, 2001, explaining the switch from TRG to

Clarendon, Petitioner's Exhibit numbered 6.

37. Ms. Brown also received inf ormation from Advancement

Administration concerning Clarendon as the insurance company,

Beechstreet as the provider network, mentioning Baftal/Quik

Quote Insurance as brokers, Petitioner's Exhibit numbered 7.

38. Following her difficulties with TRG, on January 2,

2002, Ms. Brown wrote a check to the Baftal Escrow Account in

the amount of $513.40 for premiums in relation to Clarendon. As

can be seen, the payment to Clarendon represented an increase in

premium compared to TRG.

39. The check for $513 .40 had been written out to LPI

Clarendon and changed by Respondent to reflect the Baftal Escrow

Account.

40. In January 2002, Ms. Brown called Respondent and was

told that the paperwork he was filling out was wrong and that he

needed to complete new fo rms for Baftal "Insurance Brokers."

According to Respondent, that explained why the coverage through

Baftal had not gone into effect.

41. Ms. Brown had received Petitioner's Exhibit numbered

11, the communication from Baftal calling for additional

inf ormation as a prerequisite to obtaining insurance benefits

effective December 1, 2001. Information provided in the

document concerning issues related to her coverage was not

useful to Ms. Brown when she made inquiry consistent with the

instructions contai ned in the document.

42. Concerning her claims for reimbursement, Ms. Brown had

a health problem with her throat. In addressing the condition,

she was told by her primary care doctor, that when trying to

arrange for a specialist to attend her care thro ugh the

Beechstreet Provider Network, which was part of the health care

offered through the Baftal Agency, it was reported that

Beechstreet was bankrupt. Then Ms. Brown called Respondent to

ask his advice. Respondent told her he was not sure how to

respo nd "right now things are in a haywire." Beyond that point

Ms. Brown found out that Clarendon, part of the Baftal

arrangement was not going to insure her business. In

particular, Ms. Brown received the February 11, 2002,

communication from Baftal commenti ng that insurance would not be

provided through Baftal, remarking that Clarendon was not an

insurer. This communication is Petitioner's Exhibit numbered

12.

43. After the TRG and Baftal experiences, Ms. Brown tried

to be placed on her husband's health i nsurance policy but had

trouble getting a certificate to allow her to obtain that

coverage. This was in relation to the need for the existence of

continuing coverage before being placed on the husband's policy.

44. Fortunately, Ms. Brown was eventually able to get

insurance through her husband's policy.

45. Ms. Brown was dismayed by the difficulty experienced

in obtaining health insurance when she discovered that TRG and

Baftal would not meet her health insurance needs.

46. From the evidence, it has been determined that the TRG

plan purchased by Ms. Brown was the 80/60 plan with the

$1,000.00 deductible. Although Ms. Brown testified that her

medical bills in the period in question would total close to

$1,000.00, the evidence found in Petitione r's Exhibit numbered

8, constituted of medical bills around that time do not

approximate than amount.

47. Ms. Brown had received a TRG benefit handbook and

membership card, Petitioner's Exhibits numbered 9 and 10,

associated with her participation in t he 80/60 plan with a

$1000.00 deductible and co - pay of $10.00 for a physician office

visit and $20.00 for a specialist office visit.

48. In summary, none of the companies from whom Ms. Brown

purchased insurance through Respondent, commencin g with TRG,

have paid for any of her claims for reimbursement for medical

care during the relevant time period. In addition to not

receiving a reimbursement for premiums paid to TRG, Ms. Brown

did not receive the return of her premium paid to Baftal eithe r.

Count II: Alicia Moore

49. Alicia Moore at one time was employed by Respondent.

The position Alicia Moore held with Respondent's insurance

agency was that of general office clerk. Ms. Moore has never

been licensed in any capacity by Petitioner, rel ated to the sale

of insurance and has not taken courses to educate herself about

the insurance business. In addition to her employment with

Respondent, she purchased health insurance through Respondent

with TRG around September 2001.

50. Ms. Moore purchased the TRG health insurance policy in

the interest of her husband's subchapter S corporation, small

business. Her husband's name is Randy Moore. The name of the

company operated by the husband is M - 3 Enterprises, Inc. The

husband's company has one employee, Randy Moore. The Moores

resided in St. Augustine, Florida, at times relevant to the

inquiry.

51. The husband's business had been insured for health

coverage by Humana, until Humana determined that it was not

willing to provide health insurance for the company and the

Moores decided that the individual policies offered by Humana in

substitution for the group policy were too expensive.

52. The Moores chose TRG for health insurance after

Respondent had discussed seve ral health insurance plans

including individual or group policies. The reason for the

choice was the premium price.

53. On September 19, 2001, Randy Moore paid $434.00 for

the health insurance premium to Redwood Group, in the interest

of obtaining hea lth insurance from TRG. On November 2, 2001, an

additional $434.00 was debited from the checking account for M - 3

Enterprises, to TRG for premiums related to the health insurance

coverage.

54. Ms. Moore recalls Respondent telling her that the TRG

healt h plan was an ERISA plan but she has no knowledge about

ERISA plans being regulated under federal law. In that

connection, Ms. Moore commented in a statement given by

affidavit, that Respondent told her that TRG was not regulated

by Petitioner. Responden t explained to Ms. Moore that the

premium payments to TRG were lower in costs because TRG was an

ERISA program.

55. TRG sent correspondence to the Moores as participants

in the health plan. This is found as Petitioner's Exhibit

numbered 15. It encl osed a membership issued to Randy Moore

setting forth the $10.00 co - pay for a physician visit, $20.00

co - pay for a specialist office visit, and $50.00 co - pay for

emergency room visits associated with the participation in Plan

8033. The nature of the plan that the Moores had was a member -

plus family. The cover letter listed the telephone number for

the claims administrator USA Services to address claims or

customer services questions. Ms. Moore also received a packet

from TRG explaining the process of fil ing claims for health

care.

56. After obtaining the TRG health coverage, Ms. Moore and

her son received treatment for medical conditions contemplated

under the terms in the TRG plan. Notwithstanding the submission

of information for reimbursement rela ted to the charges, the

charges were not paid under the TRG plan. The total of these

claims was approximately $727.00. That $727.00 was less co -

payments already made for the medical services.

57. Ms. Moore made the Respondent aware that TRG was not

re imbursing her for medical bills. Respondent gave Ms. Moore

the telephone number for Tom Dougherty, Managing General Agent

for TRG, expecting Mr. Dougherty to be able to assist Ms. Moore

in dealing with outstanding medical bills. Ms. Moore called

Mr. Doug herty several times, but this did not lead to the

payment of the medical bills.

58. Ms. Moore also sent TRG a certified letter in August

2002 concerning bills outstanding since October 2001, attaching

the bills and information concerning payment of pre miums for the

coverage. This is reflected in Petitioner's Exhibit numbered

18.

59. Petitioner's Exhibit numbered 21 is a compilation of

information concerning the outstanding medical bills, and a

statement from Medical Accounts Services, Inc. (Medical

Accounts) concerning a current balance on June 17, 2002, of

$229.00. The Moores had to make an arrangement to repay the

money which was being collected through Medical Accounts.

60. It is not clear from the record the exact nature of

the member with fa mily plan that had been purchased by the

Moores. Consequently, the deductible in force when claims were

submitted for reimbursement is not readily apparent. Ms. Moore

in her testimony was unable to recall the amount of the

deductible for the policy issue d from TRG. It does appear from

a review of the fee schedule associated with the 80/60 plan and

the 90/70 plan offered by TRG, that the premium payments made

did not entitle the Moores to coverage associated with a $500.00

deductible or $250.00 deductible . The other possible amount for

the deductible, by process of elimination is $1,000.00.

61. The Moores received correspondence dated November 28,

2001, sent to Randy Moore as a TRG enrollee, indicating that the

coverage would end effective November 30, 2001, and reminding

Mr. Moore that, according to the correspondence, he would have

to find other health coverage as of December 1, 2001. This

correspondence, as with other similar correspondence that has

been discussed, promised to continue to process cla ims for

covered services incurred before the coverage ended. The TRG

letter terminating coverage for the Moores was received by the

Moores five days after the date upon which the correspondence

indicated that the coverage would no longer be in effect. Th is

circumstance was very disquieting to Ms. Moore. The claims by

Ms. Moore and her child were within the covered period for the

TRG policy as to their dates. The letter received from TRG is

Petitioner's Exhibit numbered 17.

62. Ms. Moore spoke to R espondent about obtaining coverage

when TRG discontinued its coverage. Respondent suggested that

the Moores affiliate with Baftal.

63. The Moores made a premium payment to Baftal but within

a week of being accepted for coverage, Baftal wrote to advis e

that coverage had been declined. Beyond that time, the Moores

obtained coverage from Medical Savings Insurance, a company that

they still use for health insurance.

64. Concerning Baftal, by correspondence dated

February 11, 2002, Baftal wrote the Moo res as a member, the form

letter that has already been described, in which the Moores were

told that they would not be provided health benefits. Given the

problem described with Clarendon Insurance Company, the letter

noted the return of the premium paid for coverage through

Baftal. A copy of the letter sent to the Moores is Petitioner's

Exhibit numbered 19. Baftal did not reimburse the Moores for

the outstanding claims totaling approximately $727.00.

Count III: Bruce Chambers

65. Bruce Chamber s was another customer who bought TRG

health insurance from Respondent.

66. Mr. Chambers was a Florida resident at the time he

purchased the TRG coverage. Mr. Chambers and his wife moved to

Florida from Georgia earlier in 2001. When they moved, the

prio r health insurance coverage that the Chambers held carried a

high premium given Ms. Chambers diabetic condition. Moving from

one state to the next also increased that premium. Under the

circumstances, the Chambers agreed to purchase the TRG Health

Plan.

67. At one time related to the transaction promoted by

Respondent, Mr. Chambers believed that TRG was licensed in

Florida. He held this belief even in the instance where

Respondent had commented that TRG was an ERISA program.

Mr. Chambers also execute d a coverage disclaimer in November

2001, upon a form from Respondent's agency noting that the

health, welfare program applied for was not under the auspices

of the Florida Department of Insurance. This is found as

Petitioner's Exhibit numbered 36.

6 8. After purchasing the TRG policy, the wife developed an

illness, and costs were incurred for services by the family's

personal physician and for hospitalization. In addition

Mr. Chambers had medical expenses. Exclusive of co - pays and the

deductibles t hat are applicable, Mr. Chambers paid $7,478.46 for

the health care he and his wife received. None of that amount

has been reimbursed through TRG as expected under the terms of

the TRG coverage.

69. Mr. Chambers paid $487.00 a month, plus $18.00 in

other fees, for two months related to coverage effective

October 1, 2001, extending into November 2001, a total of

$1,010.00 in premiums and fees paid to TRG. No premiums and

fees paid to TRG have been reimbursed.

70. The amount of premium paid by Mr. Chamber s corresponds

under the client fee schedule in effect May 1, 2001, associated

with the TRG Health Plan, as pertaining to an 80/60 plan for a

member and family with a $1,000.00 deductible.

71. Petitioner's Exhibit numbered 26 is constituted of the

calculat ion of the expenses, $7,478.46 and attaches billing

information, some of which is for services and care received

prior to December 1, 2001, and some of which is for services and

care beyond that date.

72. When Mr. Chambers discovered that TRG was n ot

reimbursing the costs which it was obligated to pay for health

care received by the Chambers, he contacted the Respondent and

TRG to gain satisfaction. He also contacted Petitioner.

73. When Mr. Chambers enrolled in the TRG plan he received

the tran smittal letter enclosing his benefits card, Petitioner's

Exhibit numbered 23. The membership card identified his

participation in plan 8033, with a co - pay for physician office

visits of $10.00, specialty office visits of $20.00, and

emergency room visits of $50.00.

74. Mr. Chambers received notice from the Petitioner,

presumably the December 12, 2001, notification concerning the

lack of authority for TRG to business in Florida and the advice

that CHEA (Consumer Health Education Association) was not

author ized to do business in Florida either.

75. On December 20, 2001, the Chambers wrote Respondent

concerning the unavailability of insurance through TRG and CHEA.

The Chambers asked Respondent to give them advice about a list

of "small group market carriers " they understood to offer health

plans. This letter to Respondent is found within Petitioner's

Exhibit numbered 25.

76. Also, within Petitioner's Exhibit numbered 25 was a

copy of the letter from Respondent to TRG insureds dated

December 28, 2001, which made mention of Clarendon as an

alternative to TRG. Within that same exhibit is correspondence

dated January 21, 2002, from the Respondent to enrollees in the

TRG plan, to include the Chambers, discussing Baftal and the

prospect that the latter company m ight honor TRG claims.

77. Finally, Petitioner's Exhibit numbered 25 contains an

August 21, 2002, letter from Mr. Chambers to TRG asking TRG to

pay for its portion of the medical expenses as reimbursement.

78. Petitioner's Exhibit numbered 27 is the Dece mber 1,

2001, application by Mr. Chambers to obtain medical benefits

through CHEA. The application also refers to EOS Health

Services. This predates Petitioner's warning about CHEA and EOS

being licensed to do business in Florida. On December 1, 2001,

M r. Chambers paid $487.00 for premium payments to EOS Health

Services and provided a voided check for future payments for

premiums by automatic withdrawal from his account. This effort

was made as a follow on to obtain health coverage when TRG no

longer pr ovided health insurance to the Chambers.

79. To obtain health coverage, Mr. Chambers paid $1,465.88

to the Baftal Escrow Account. This payment was made by a check

dated January 14, 2002. That money was refunded by Baftal on

January 12, 2002, and no cove rage was offered through that

company for health insurance.

80. Mr. Chambers had been provided information about the

opportunity to obtain insurance from Baftal as reflected in

Petitioner's Exhibit numbered 31.

81. Respondent had also suggested that Mr. Chambers apply

for health insurance from American Benefit Plan, following the

discontinuance of the TRG coverage. Mr. Chambers applied for

that coverage by documents dated February 18, 2002, in the

interest of his company, Bruce A. Cambers, CFP. Informat ion

concerning that application is found in Petitioner's Exhibit

numbered 32. American Benefit Plans was listed by Petitioner as

an entity not allowed to conduct business in Florida in the

December 12, 2001, letter of advice to insurance consumers

followi ng the problem with TRG.

82. Mr. Chambers wrote two checks, one in the amount of

$628.60 to Independent Managers Association and one for $799.68

to the Association of Independent Managers, Petitioner's

Exhibits numbered 35 and 33 respectively. The two checks were

written on February 18, 2002. Those checks were voided in

relation to payment for monthly insurance premiums and

association dues. The effect was to not accept those checks for

premium payments to obtain health insurance.

83. On March 5, 200 2, ACH Corporation of America wrote

Mr. Chambers stating that because of incorrect procedures, or

untimely submission, health coverage would not be extended,

pertaining to an application for Ultra Med Choice EPO. Ultra

Med was another health insurance bus iness which Petitioner in

its December 12, 2001, correspondence to health care consumers

had been identified as unlicensed to conduct health insurance

business in Florida. The letter declining coverage from ACH and

application information for a policy sou ght to become effective

December 1, 2001, is found within Petitioner's Exhibit numbered

34. This application was in relation to Bruce Chambers, CFP as

employer.

84. Mr. Chambers remains out of pocket for payments he had

to make for health care extended , principally to his wife, for

which TRG was obligated to provide reimbursement in part. None

of the other policies that Mr. Chambers attempted to obtain

worked out to substitute for the TRG obligation for

reimbursement for health care claims.

85. Even tually the Chambers were able to obtain health

insurance. At present the Chambers have a two - man group policy

through Mr. Chambers' business to provide health coverage.

86. Because of the problem with health insurance coverage,

Ms. Chambers was requi red to return to work. Her employment was

outside Mr. Chambers' company, as well as within his company.

87. As a result of Ms. Chambers' failure to make payments

to Flagler Hospital, where Ms. Chambers had received care, under

terms that should have involved TRG providing reimbursement for

costs, the bills were turned over to a collection agency

compromising the credit standing of the Chambers. For the most

part, the credit problems have been resolved.

Due Diligence

88. As established by testimony from Linda Davis, Analyst

II in Petitioner's Jacksonville Office, there is a means to

determine whether an insurance company has the necessary

certificate of authority to conduct insurance business in

Florida. This is accomplished by resort to the electro nic data

base maintained by Petitioner. A certificate of authority is an

indication that the insurance company has completed the

necessary requirements to be licensed or authorized to sell

insurance in Florida. As established through Petitioner's

Exhibit numbered 39, TRG/USA Health Plans, TRG Marketing L.L.C.

was not authorized to do business in Florida.

89. An insurance agent licensed in Florida, to include the

time frame envisioned by the Amended Administrative Complaint,

would have had access to th e data base identifying whether an

insurance company had the necessary certificate of authority to

conduct insurance business in Florida and could properly have

been expected to seek this information before engaging in the

sale of products from a company s uch as TRG. Rather than avail

himself of that opportunity, Respondent made some form of

inquiry to Petitioner on the subject of TRG, while apparently

ignoring the more fundamental consideration of whether TRG had

been granted a certificate of authority to conduct its business

in Florida, which should have been pursued. Ascertaining the

existence or nonexistence of a certificate of authority,

constitutes "due diligence" incumbent upon an agent before

engaging in the sale of insurance from a prospective ins urance

company.

Respondent's Disciplinary History

90. Petitioner has not taken disciplinary action against

Respondent before this case.

CONCLUSIONS OF LAW

91. The Division of Administrative Hearings has

jurisdiction over the parties and the subject m atter of this

proceeding in accordance with Sections 120.569 and 120.57(1),

Florida Statutes (2003).

92. This is a disciplinary case. Therefore, Petitioner

has the burden of proving the allegations in the Amended

Administrative Complaint by clear and co nvincing evidence. See

§ 120.57(1)(j), Fla.Stat. (2003); see also Department of Banking

and Finance, Division of Investor Protection v. Osborne Stearn

and Company , 670 So. 2d 932 (Fla. 1996); Ferris v. Turlington ,

510 So. 2d 292 (Fla. 1987); and Pou v. De partment of Insurance

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

93. Respondent's conduct under consideration pertains to

his affiliation with TRG and the solicitation and sale of health

insurance group policies to his customers Vicki Brown, Ali cia

Moore, and Bruce Chambers. Further, the case involves problems

experienced by those customers when they sought reimbursement

for charges related to health care received under terms of the

TRG policy.

94. The three - count Amended Administrative Compl aint

associated with the named customers alleged that the Respondent

violated the following statutory provisions and is subject to

discipline for his misconduct. In turn those provisions are:

§ 624.11(1), Fla. Stat. (2001).

(1) No person shall tr ansact insurance in

this state, or relative to a subject of

insurance resident, located, or to be

performed in this state, without complying

with the applicable provisions of this code.

§ 626.611, Fla. Stat. (2001).

-- The department shall deny an app lication

for, suspend, revoke, or refuse to renew or

continue the license or appointment of any

applicant, agent, title agency, solicitor,

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 trust -

worthiness to engage in the business of

insurance.

(8) Demonstrated lack of reasonably

adequate knowledge and technical competence

to engage in the transactions authorized by

the license or appointment.

§ 6 26.621, Fla. Stat. (2001)

-- 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,

solicitor, adjuster, customer

representative, service represen tative, 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 unde r circumstances

for which such denial, suspension,

revocation, or refusal is not mandatory

under s. 626.611:

* * *

(2) Violation of any provision of this code

or of any other law applicable to the

business of insurance in the cou rse of

dealing under the license or appointment.

* * *

(6) In the conduct of business under the

license or appointment, engaging in unfair

methods of competition or in unfair or

deceptive acts or practices, as prohibited

under P art IX of this chapter, or having

otherwise shown himself or herself to be a

source of injury or loss to the public or

detrimental to the public interest.

§ 626.901(1), Fla. Stat. (2001).

(1) No person shall, from offices or by

personnel or facilit ies located in this

state, or in any other state or country,

directly or indirectly act as agent for, or

otherwise represent or aid on behalf of

another, any insurer not then authorized to

transact such insurance in the state in:

(a) The solicitation, negotiation,

procurement, or effectuation of insurance or

annuity contracts, or renewals thereof;

(b) The dissemination of information as to

coverage or rates;

(c) The forwarding of applications;

(d) The delivery of policies or contracts;

* * *

(h) The collection or forwarding of

premiums;

95. Respondent holds license A140590, as an agent, in the

categories of Life (2 - 16) and Life and Health (2 - 18). As such,

he is subject to the aforementioned provisions when conside ring

his conduct under terms set forth in the Amended Administrative

Complaint.

96. Clear and convincing evidence was presented to prove

that TRG was an insurer not authorized to transact insurance in

this state and that Respondent served as agent for TRG in the

transaction of insurance in the relevant time period.

97. Section 624.10, Florida Statutes (2001), defines

transacting insurance as:

"Transact" with respect to insurance

includes any of the following, in addition

to other applicable provi sions of this code:

(1) Solicitation or inducement.

(2) Preliminary negotiations.

(3) Effectuation of a contract of

insurance.

(4) Transaction of matters subsequent to

effectuation of a contract of insurance and

arising out of it.

98. Respondent has violated Section 624.11, Florida

Statutes, and Section 626.901(1), Florida Statutes (2001), in

relation to transactions with Vicki Brown, Alicia Moore and

Bruce Chambers by doing business with TRG, an unauthorized

insurance company whose policies were sold to those customers.

99. Respondent did not exercise due diligence in

ascertaining TRG's status with Petitioner as an insurer before

engaging in business with that company. Respondent did not take

reasonable steps to discover whether TRG was authorized to

transact insurance in Florida.

100. The question was raised concerning the nature of the

insurance purchase made by the three customers from TRG with

Respondent serving as agent. Was it under the auspices of the

Employee Retirement Income Security Act of 1974 (ERISA), 29

U.S.C. § 1001 et. seq. , preempting those transactions from

consideration under Petitioner's regulatory authority in

Florida? Any intent by Respondent to rely upon the doctrine of

preemption, in the assert ion that the health plans purchased by

Respondent's customers from TRG were ERISA plans, is a form of

defense and the burden to prove facts necessary to establish

that defense resides with Respondent. The proof necessary

concerns questions of fact when ex amining whether the subject

plan is "an employee welfare benefit plan" sponsored by a single

employer or union, recognized under ERISA and preempted from

state regulation. See Metropolitan Life Insurance Co. v.

Taylor , 481 U.S. 58, 107 S. Ct. 1542, 95 L.E d. 2d 55 (1987); and

Kanne v. Connecticut General Life Ins. Co. , 867 F.2d 489 (9th

Cir. 1988), cert. denied 492 U.S. 906, 109 S. Ct. 3216, 106

L.Ed. 2d 566 (1989). See also Balino v. Department of Health

and Rehabilitative Services , 348 So. 2d 349 (Fla. 1 st DCA 1977).

101. Respondent bears the burden of establishing the

defense given the prima facie showing by Petitioner that TRG was

not authorized to transact insurance in Florida. He has not met

that burden.

102. When considering Respondent's con duct in the

transactions at issue, it is with the recognition that

Respondent has a fiduciary relationship, both with his customers

and the insurance company. See Natelson v. Department of

Insurance , 454 So. 2d 31 (Fla. 1st DCA 1984). With this in

mind, clear and convincing evidence has been shown that

Respondent violated Section 626.611(7) and (8), Florida Statutes

(2001). In all transactions complained about, the facts

reported demonstrate that from the inception Respondent acted

naively, if not irresp onsibly, when conducting business for TRG

and in his attempts to resolve the problems experienced by his

customers in advancing their claims for reimbursement. This

failure evidences a lack of fitness and reasonably adequate

knowledge and technical compet ence to engage in those

transactions.

103. While it cannot be said that Respondent engaged in

unfair methods of competition, or pursued unfair or deceptive

acts or practices, it has been shown that Respondent caused

injury, by the disruptive results th at followed the sale of the

TRG policy to each of his customers, including financial loss.

Consequently, as established by clear and convincing evidence,

Respondent has violated Section 626.621(6), Florida Statutes

(2001).

104. Given the violations de scribed in the preceding

paragraphs, clear and convincing evidence was presented that

Respondent has also violated Section 626.621(2), Florida

Statutes (2001).

105. In addition to the penalties that have been explained

before, Petitioner has the opport unity to impose discipline

consistent with Sections 626.681, and 626.691, Florida Statutes

(2001), in association with possible administrative fines and

probation as means of punishment.

106. In recommending a penalty for the misconduct, resort

is ma de to the guidelines set forth in Florida Administrative

Code Rule Chapter 4 - 231, in particular, Florida Administrative

Code Rules 4 - 231.040, 4 - 231.080, 4 - 231.090, 4 - 231.110 and 4 -

231.160. In addition, the matrix concerning prior disciplinary

actions take n against other licensees affiliated with TRG is

available. The matrix has limited utility, in that it does not

describe the underlying facts of those cases. It does describe

a range of punishment.

RECOMMENDATION

Upon the consideration of the fac ts found and the

conclusions of law reached, it is

RECOMMENDED:

That a Final Order be entered finding Respondent in

violation of Sections 624.11, 626.611(7) and (8), 626.621(2) and

(6), 626.901(1), Florida Statutes (2001); suspending his

licenses for n ine months; placing Respondent on two - years

probation; and requiring attendance at such continuing education

classes as deemed appropriate.

DONE AND ENTERED this 2nd day of April, 2004, in

Tallahassee, Leon County, Florida.

S

____________________________ _______

CHARLES C. ADAMS

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 th e Clerk of the

Division of Administrative Hearings

this 2nd day of April, 2004.

COPIES FURNISHED :

David J. Busch, Esquire

Department of Financial Services

Division of Legal Services

612 Larson Building

200 East Gaines Street

Tallahassee, Florida 3 2399 - 0333

Joseph O. Stroud, Jr., Esquire

Rogers Towers, P.A.

1301 Riverplace Boulevard, Suite 1500

Jacksonville, Florida 32207

Honorable Tom Gallagher

Chief Financial Officer

Department of Financial Services

The Capitol, Plaza Level 11

Tallahasse e, 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 subm it 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.