05-002630RP Attorneys` Title Insurance Fund, Inc., And Florida Land Title Association, Inc. vs. Financial Services Commission, And Office Of Insurance Regulation Status: Closed DOAH Final Order on Wednesday, May 17, 2006.

Summary: OIR failed to proved that procedures followed in publishing notice of intent to adopt Proposed Rule 690-186.003(l)(c) did not materially deviate from rulemaking procedures. Proposed Rule is, therefore, invalid exercise of delegated legislative authority.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

ATTORNEYS' TITLE INSURANCE )

FUND, INC., and FLORIDA LAND )

TITLE ASSOCIATION, INC., )

)

Petitioners, )

)

vs. )

)

FINANCIAL SERVICES COMMISSION, )

and OFFICE OF INSURANCE )

REGULATION, ) Case No. 05 - 2630RP

)

Respondents , )

)

and )

)

FIRST AMERICAN TITLE CO., )

)

Intervenor . )

___________________________ ______)

SUMMARY FINAL ORDER

This matter was presented to Patricia M. Hart, a duly -

assigned Administrative Law Judge of the Division of

Administrative Hearings. Based on the record in this case, the

stipulations of fact, the arguments of counsel, and th e relevant

statutory and case law, this matter is appropriate for summary

disposition.

APPEARANCES

For Petitioner s : Warren Husband, Esquire

Metz , Husband & Daughton , P.A.

Post Office Box 10909

Tallahassee, Florida 32302 - 2909

For Respondent s : Steven H. Parton, General Counsel

Jeffrey W. Joseph, Assistant General

Counsel

Office of Insurance Regulation

200 East Gaines Street

Tallahassee, Florida 32399 - 4206

For Intervenor: Fred R. Dudley, Esquire

Mia L. McKown, Esquire

Akerman, Senterfitt, P.A.

106 East College Avenue, Suite 1200

Tallahassee, Florida 32302

STATEMENT OF THE ISSUE

Whether Proposed Rule 69O - 186.003(1)(c) should be

invalidated on the grounds that it is an invalid delegation of

legislative authority as defi ned in Section 120.52(8), Florida

Statutes (2005) . 1

PRELIMINARY STATEMENT

On July 25, 2005, the Petitioners, the Attorneys' Title

Insurance Fund, Inc. ("Fund"), and the Florida Land Title

Association, Inc. ("Association"), filed with the Division of

Admin istrative Hearings a Petition to Determine the Invalidity

of Proposed Rules , in which they challenged Proposed Rule 69O -

186.003(1)(c) as an invalid exercise of delegated legislative

authority. Proposed Rule 69O - 186.003(1)(c) establishes premium

rates for junior loan title insurance policies ("JLP s "), and was

published by the Financial Services Commission ("Commission"),

Office of Insurance Regulation (" OIR "), in the June 3, 2005,

edition of Florida Administrative Weekly ("FAW"). The

Petitioners asserted i n the Petition that the p roposed rule

fails in various respects to satisfy the substantive

requirements of Section 627.782, Florida Statutes , and that,

therefore, the p roposed rule and the proposed JLP rate are

invalid because they "exceed the Commission's and the OIR 's

grant of rulemaking authority; they enlarge, modify, or

contravene the specific provisions of law implemented; they are

vague, fail to establish adequate standards for agency

decisions, or vest unbridled discretion in the agency; and they

ar e arbitrary and capricious."

On August 31, 2005, the Fund and Association filed a Motion

for Summary Final Order in which they contended that there were

no disputed issues of material fact and that a final order

should be entered invalidating Proposed Rule 69O - 186.003(1)(c)

as an invalid exercise of delegated legislative authority. 2 In

the motion, the Petitioners argued that the publication of the

proposed rule constituted a material failure of the Commission

and the OIR to follow applic able rulemaking pro cedures because

it was not approved by the agency head prior to its publication

as a proposed rule, which constituted a violation of

Section 120.54(3)(a)1., Florida Statutes, and because it was

promulgated pursuant to a delegation of rulemaking authority

t hat was not, itself, enacted as a rule. Neither the Commission

nor the OIR filed a written response to the Petitioners ' Motion

for Summary Final Order within the time specified in Florida

Administrative Code Rule 28 - 106.204(1). Oral argument was held

on the motion on September 20, 2005.

At the request of the undersigned, the OIR filed a written

response to the Petitioners' motion on September 23, 2005. In

addition, the Petitioners filed an Unopposed Motion for Leave to

File Amended Petition. The motion was granted in an order

entered September 23, 2005, and, on September 26, 2005, the

Petitioners filed an Amended Petition to Determine the

Invalidity of Proposed Rules and of Agency Statements Required

to b e Adopted as Rules Pursuant to Section 120.54. In the

Amended Petition, the Petitioners included as grounds for

invalidating Proposed Rule 69O - 186.003(1)(c) the material

failure of the Commission and the OIR to follow the rulemaking

procedures set forth in Chapter 120, Florida Statutes, by

causing the pr oposed rule to be published without the approval

of the agency head and by promulgating the proposed rule in

accordance with a rulemaking procedure that was not itself

enacted as a rule. Finally, the parties filed a Joint

Stipulation of Facts on September 26, 2005, which includes all

facts material to entry of this Summary Final Order.

FINDINGS OF FACT

Based on the record of this proceeding, the following

findings of fact are made:

Background

1. The Commission was created by statute effective

January 7, 2003. It is composed of the Governor, the Attorney

General, the Chief Financial Officer, and the Commissioner of

Agriculture . The Commission members "serve as agency head of

the Financial Services Commission." § 20.121(3), Fla. Stat .

2. The OIR is an "office" of the Commission and is

"responsible for all activities concerning insurers and other

risk bearing entities . . . ." The OIR is headed by a director,

who is also known as the Commissioner of Insurance Regulation.

§ 20.121(3)(a)1., Fla. Stat.

3. Pertinent to this proceeding, the legislature

delineated the powers to be exercised by the Commission and the

OIR , respectively, in Section 20.121(3), Florida Statutes, as

follows:

(c) Powers. -- Commission members shall serve

as the agency head for purpo ses of

rulemaking under ss. 120.536 - 120.565 by the

commission and all subunits of the

commission. Each director is agency head

for purposes of final agency action under

chapter 120 for all areas within the

regulatory authority delegated to the

director's office. [ 3 ]

Stipulated Facts (verbatim)

The following stipulated facts are adopted as findings of

fact for the purpose of this Final Order:

4. On Februa ry 25, 2003, the Commission met, considered ,

and approved an agenda item involving the rulemaking proc ess to

be used by the Commission, the OIR , and the Office of Financial

Regulation . The rulemaking procedure that is under

consideration in this case involves the Commission's delegat ion

to the OIR of the authority to engage in certain rulemaking

activitie s. A true and correct copy of that agenda item, as

approved by the Commission, and the relevant pages of the

transcript of that meeting, are attached hereto as "Appendix A."

5. On May 13, 2003, the Commission met and without

objection approved the minute s of the Commission's February 25,

2003, meeting.

6. The rulemaking process and delegation set forth in

Appendix A permit the OIR to initiate rulemaking and to publish

a proposed rule without the prior approval of the Commission,

but require the Commissio n to approve the proposed rule prior to

its filing for final adoption pursuant to S ection 120.54(3)(e),

Florida Statutes.

7. Since its adoption in 2003, the Commission and the OIR

have routinely employed the rulemaking process described in

Appendix A and used this delegation of rulemaking authority in

promulgating rules regulating the insurance industry.

8. The Commission and the OIR employed the rulemaking

process described in Appendix A and used this delegation of

rulemaking authority in promulgating th e proposed JLP ru le that

is the subject of the pending rule challenge.

9. In May 2005, the OIR issued an o rder approving the JLP

forms that had previously been submitted by First American Title

Insurance Company. Shortly thereafter, on June 3, 2005, the OIR

published a proposed rule in the Florida Administrative We ekly

that would set an industry - wide premium rate for the newly

approved JLP forms.

10. Pursuant to the OIR 's notice of proposed rulemaking, a

public hearing was held on July 13, 2005, at which interested

parties had the opportunity to speak and address the provisions

of the proposed rule. The OIR 's counsel specifically stated on

the record during the hearing that the rulemaking process was

ongoing and that the "final" hearing for the proposed rule would

be subsequently noticed in the Florida Administrative Weekly and

held before the Governor and Cabinet sitting as the Commission.

11. On or about July 25, 2005, the Fund and the

Association filed a petition with the Division of Administrative

He arings challenging the validity of the proposed JLP rule.

12. Consistent with the Commission's routine practice, a

notice of the "final" hearing before the Commission on the

proposed JLP rule will be published in Part VI of the Florida

Administrative Week ly ("Notices of Meetings, Workshops and

Public Hearings") , and a copy of the notice will be mail ed to

all persons who notified the OIR of their interest in the

proposed JLP rule, including the F und and the Association .

Statutory rulemaking procedures

13 . A "rule" is defined in Section 120.52(15), Florida

Statutes, as " each agency statement of general applicability

that implements, interprets, or prescribes law or policy or

describes the procedure or practice requirements of an agency

and includes any form which imposes any requirement or solicits

any information not specifically required by statute or by an

existing rule ."

14 . Section 120.54, Florida Statutes, sets forth the

rulemaking procedures that are to be followed by all Florida

agencies, including the Commission, see § 120.52(1)(b)4., Fla.

Stat., and these procedures constitute the exclusive process for

the promulgation and adoption of rules in Florida. See

§ 120.54(1)(a) and (3)(c)2., Fla. Stat. The rulemaking

procedures mandated in Section 120.5 4, Florida Statutes, are

detailed and comprehensive and contain two primary requirements:

public notice at each step of the rule - development and

rule - adoption process and an opportunity, throughout the

rulemaking process, for the public and substantia lly affected

persons to be heard with respect to any rule an agency proposes

to adopt. See § 120.54(2) and (3), Fla. Stat.

15 . Generally, the first step in the rulemaking process is

"rule development," as described in Section 120.54(2), Florida

Statutes. The agency is required to give notice of its intent

to develop proposed rules in the FAW "before providing notice of

a proposed rule as required by paragraph (3)(a)," and the notice

must " indicate the subject area to be addressed by rule

development, pro vide a short, plain explanation of the purpose

and effect of the proposed rule, cite the specific legal

authority for the proposed rule, and include the preliminary

text of the proposed rules, if available . . . ."

§ 120.54(2)(a), Fla. Stat. The agency m ay also hold public

workshops during the rule development process, and it must hold

a public workshop " if requested in writing by any affected

person, unless the agency head explains in writing why a

workshop is unnecessary." Id.

16 . Once the agency has developed a proposed rule, it must

follow the adoption procedures set forth in Section 120.54(3),

Florida Statutes. Foremost among these procedures is

publication of notice of the agency's "intended action" in the

FAW. This notice must be published by th e agency "[p] rior to

the adoption, amendment, or repeal of any rule other than an

emergency rule " and only " upon approval of the agency head ."

§ 120.54(3)(a)(1), Fla. Stat. The notice " must state the

procedure for requesting a public hearing on the propo sed rule"

and must include

a short, plain explanation of the purpose

and effect of the proposed action; the full

text of the proposed rule or amendment and a

summary thereof; a reference to the specific

rulemaking authority pursuant to which the

rule is ad opted; and a reference to the

section or subsection of the Florida

Statutes or the Laws of Florida being

implemented, interpreted, or made specific.

§ 120.54(3)(a)1., Fla. Stat.

17 . If requested in writing, a public hearing must be

conducted by the agenc y prior to adoption of a proposed rule in

order to " give affected persons an opportunity to present

evidence and argument on all issues under consideration." See

§ 120.54(3)(c)1., Fla. Stat. Once this public hearing has been

held, the agency may modify o r withdraw the proposed rule or may

adopt the proposed rule by filing it with the Department of

State. See § 120.54(3)(d) and (e), Fla. Stat. If the agency

decides to modify the substance of a proposed rule after the

final public hearing or after the tim e for requesting a public

hearing has passed, any substantive change in the rule "must be

supported by the record of public hearings held on the rule,

must be in response to written material received on or before

the date of the final public hearing, or mu st be in response to

a proposed objection by the [Administrative Procedures]

committee." § 120.54(3)(d)1., Fla. Stat. The agency must also,

among other things, publish notice of the change and the reasons

for the change in the FAW. Id.

18 . When the age ncy has determined that the proposed rule

is ready for adoption, it must file with the Department of State

"three certified copies of the rule it proposes to adopt, a

summary of the rule, a summary of any hearings held on the rule,

and a detailed written s tatement of the facts and circumstances

justifying the rule. § 120.54( 3 )(e) 1. , Fla. Stat. T he proposed

rule must be filed for adoption "no less than 28 days nor more

than 90 days after the notice required by paragraph (a) [of

Section 120.54(3), Florida S tatutes] , " § 120.54(3)(e)2., Fla.

Stat.; the proposed rule is adopted upon filing with the

Department of State and becomes effective 20 days a fter it is

filed . § 120.54(3)(e)6., Fla. Stat.

19 . In addition to the opportunities to be heard at public

hearin gs specified in Section 120.54, Florida Statutes, persons

who are substantially affected by a proposed rule may file a

petition with the Division of Administrative Hearings requesting

an administrative hearing to determine the validity of the

proposed rule , pursuant to Section 120.56, Florida Statutes,

which provides in pertinent part:

1) GENERAL PROCEDURES FOR CHALLENGING THE

VALIDITY OF A RULE OR A PROPOSED RULE. --

(a) Any person substantially affected by a

rule or a proposed rule may seek an

administr ative determination of the

invalidity of the rule on the ground that

the rule is an invalid exercise of d elegated

legislative authority.

* * *

(e) Hearings held under this section shall

be de novo in nature. The standard of proof

shall be the preponder ance of the evidence.

Hearings shall be conducted in the same

manner as provided by ss. 120.569 and

120.57 , except that the administrative law

judge's order shall be final agency action.

The petitioner and the agency whose rule is

challenged shall be adv erse parties. . . .

(2) CHALLENGING PROPOS ED RULES; SPECIAL

PROVISIONS. --

(a) Any substantially affected person may

seek an administrative determination of the

invalidity of any proposed rule by filing a

petition seeking such a determination with

the d ivision [of Administrative Hearings]

within 21 days after the date of publication

of the notice required by s. 120.54 (3)(a),

within 10 days after the final public

hearing is held on the proposed rule as

provided by s. 120.54 (3)(c), within 20 days

after the preparation of a statement of

estimated regulatory costs required pursuant

to s. 120.541 , if applicable, or within 20

days after the date of publication of the

notice required by s. 120.54 (3)(d). The

petition shall state with particularity the

objections to the proposed rule and the

reasons that the proposed rule is an invalid

exercise of delegated legislative authority.

The petitioner has the burden of going

forward. The agency then has the burden to

prove by a preponderance of the evidence

that the pr oposed rule is not an invalid

exercise of delegated legislative authority

as to the objections raised. Any person who

is substantially affected by a change in the

proposed rule may seek a determination of

the validity of such change. Any person not

subst antially affected by the proposed rule

as initially noticed, but who is

substantially affected by the rule as a

result of a change, may challenge any

provision of the rule and is not limited to

challenging t he change to the proposed rule.

* * *

(c) When any substantially affected person

seeks determination of the invalidity of a

proposed rule pursuant to this section, the

proposed rule is not presumed to be valid or

invalid.

CONCLUSIONS OF LAW

20 . The Division of Administrative Hearings has

jurisdict ion over the subject matter of this proceeding and of

the parties thereto pursuant to Section 120.56, Florida

Statutes.

21 . The primary issue presented by the Amended Petition to

Determine the Invalidity of Proposed Rules and of Agency

Statements Required to b e Adopted as Rules Pursuant to

Section 120.54 is whether the Commission's delegation to the OIR

of the authority to publish in the FAW the notice of intent to

adopt Proposed Rule 69O - 186.003(1)(c), without the prior

approval of the Commission, constit utes a material failure to

follow the statutory rulemaking procedures set forth in

Section 120.54(3), Florida Statutes, which would render Proposed

Rule 69O - 186.003(1)(c) invalid pursuant to Section 120.52(8)(a),

Florida Statutes.

22 . T he Fund and the Ass ociation have "the burden of going

forward" with the production of evidence to establish the bases

for their assertion that Proposed Rule 69O - 186.003(1)(c) is an

invalid exercise of delegated legislative authority.

§ 120.56(2)(a), Fla. Stat. The OIR then has "the burden to

prove by a preponderance of the evidence that the proposed rule

is not an invalid exercise of delegated legislative author ity as

to the objections raised. Id.

23 . Based on the findings of fact herein, the Fund and the

Association have established that the rulemaking procedures used

by the Commission and the OIR with respect to Proposed Rule 69O -

186.003(1)(c) deviated from the rulemaking procedures set forth

in Section 120.54(3), Florida Statutes. Specifically, the

publication by the O IR in the June 3 , 2005, edition of the FAW

of a notice of intent to adopt Proposed Rule 69O - 186.003(1)(c)

constituted a deviation from the rulemaking procedures set forth

in Section 120.54(3), Florida Statutes, because it was done

without the Commission's having approved either the text of the

proposed rule or the publication of the notice.

24 . The plain language of Section 120.54(3)(a), Florida

Statutes, requires the approval of the "agency head" before

publication in the FAW of the notice of an agency's intent to

adopt a proposed rule. In Section 20.121(3)(c), Florida

Statutes, the Legislature specifically designated the Commission

as the "agency head for purposes of rulemaking under

ss. 120.536 - 120.565 by the commission and all subunits of the

commissio n ". (Emphasis added.) For purposes of final agency

action under Chapter 120, Florida Statutes, the authority of the

director of the OIR to act as agency head is specifically

limited in Section 20.121(3)(c), Florida Statutes, to "areas

within the regulato ry authority delegated to the director's

office."

25 . Furthermore, the Commission's delegation to the

director of the OIR of its responsibility as agency head to

approve proposed rules prior to publication of the notice

required by Section 120.54(3)(a)1., Florida Statutes, is not

supported by the general grant of power in Section 20.05(1)(b),

Florida Statutes, that permits department heads

to execute any of the powers, duties, and

functions vested in the department or in an

administrative unit thereof thro ugh

administrative units and through assistants

and deputies designated by the head of the

department from time to time, unless the

head of the department is explicitly

required by law to perform the same without

delegation.

It is a maxim of statutory con struction "that a specific statute

controls over a general statute covering the same subject

matter." Cone v. Florida Dep' t of Health , 886 So. 2d 1007, 1012

(Fla. 1st DCA 2004) , citing Gretz v. Unemployment Appeals

Comm'n , 572 So. 2d 1384, 1386 (Fla. 1959 )("It is a well settled

rule of statutory construction, . . . that a special statute

covering a particular subject matter is controlling over a

general statutory provision covering the same and other subjects

in general terms."); State, Bd of Trustees of t he Internal

Improvement Fund v. Day Cruise Ass'n, Inc. , 794 So. 2d 696, 701

(Fla. 1st DCA 2001). Section 20.121(3)(c), Florida Statutes,

expressly identifies the Commission as the agency head for

purposes of rulemaking within the area of its jurisdiction over

insurance, and the provisions of Section 20.12 1 (3)(c), Florida

Statutes, control the general power to delegate responsibility

given to department heads set forth in Section 20.05(1)(b),

Florida Statutes. Therefore, the Commission, as the agency

head, must approve proposed rules for publication in the FAW as

intended agency action pursuant to Section 120.54(3)(a), Florida

Statutes, and the failure of the Commission to do so constitutes

a deviation from the rulemaking requirements in

Section 120.54(3), Florida Statutes.

26 . The question then becomes whether the Commission's

delegation of authority to the OIR to approve the publication of

proposed rules constitutes a material failure to follow

rulemaking procedures that renders Proposed Rule 69O -

186.003( 1)(c) invalid pursuant to Section 120.52(8)(a), Florida

Statutes. Section 120.56(1)(c), Florida Statutes, provides in

pertinent part:

. . . The failure of an agency to follow the

applicable rulemaking procedures or

requirements set forth in this chapter s hall

be presumed to be material; however, the

agency may rebut this presumption by showing

that the substantial interests of the

petitioner and the fairness of the

proceeding have not been impaired.

T he OIR argues that it has presented credible evidence t hat

neither the substantial interests of the Fund and /or the

Association nor the fairness of the proceeding have been

impaired by the deviation from the rulemaking procedures and

that, therefore, the Commission and the OIR have materially

followed the rule making procedures in Section 120.54, Florida

Statutes. This argument is, however , rejected: The conclusion

urged by the OIR, that it has materially adhered to the

applicabl e statutory rulemaking procedures with respect to

Proposed Rule 69O - 186.003(1)(c) , would not logically follow even

if the OIR were to present evidence sufficient to rebut the

presumption set forth in Section 120.56(2), Florida Statutes.

27 . Presumptions were addressed at length by the court in

Caldwell v. Division of Retirement, Depart ment of

Administration , 372 So. 2d 438, 440 (Fla. 1979), which observed:

A presumption has been defined as an

inference required by a rule of law to be

drawn as to the existence of one fact from

the existence of some other established

basic fact or combina tion of facts.

3 B. Jones, Jones on Evidence § 3.1 (6th ed.

1972). The Florida courts recognize one

type of rebuttable presumption as a

"bursting bubble" presumption or vanishing

presumption. The Court in Nationwide Mutual

Insurance Co. v. Griffin , 222 So.2d 754, 756

(Fla. 4th DCA 1969), discussed the vanishing

pre sumption as follows:

A presumption is a rule

of law which attaches to

certain evidentiary

facts and is productive

of certain procedural

consequences. The

presumption is not

itself evidence and has

no probative value.

Florida follows

generally (albeit not

always) what is

sometimes called the

Thayerian rule to the

effect that when

credible evidence comes

into the case

contradicting the basic

fact or facts giving

rise to the presumption,

the presumption vanishes

and the issue is

determined on the

evidence ju st as though

no presumption has ever

existed. . . .

See also § 90.302(1), Fla. Stat.; Ehrhardt, C. W., Florida

Evidence (2005), §§ 302.1 and 303.1.

28 . The statutory presumption in Section 120.56(1)(c),

Florida Statutes, is a "bursting bubble" or "vanish ing"

presumption that does not affect the burden of proof in this

case but only serves to shift the burden of persuasion to the

OIR to present evidence to rebut the presumption that any

deviation by an agency from the statutory rulemaking procedures

is mat erial. Accordingly, if the OIR were to offer credible

evidence to establish that the substantial interests of the Fund

and the Association and the fairness of the proceeding were not

impaired by the deviation from the applicable rulemaking

procedures , the statutory presumption that the deviation is

material would vanish, and the case would proceed "as though no

presumption has ever existed."

29 . In this case, the Fund and the Association have

challenge d the validity of a proposed rule on the grounds that

"[t]he agency has materially failed to follow the applicable

rulemaking procedures or requirements set forth in this

chapter." § 120.52(8)(a), Fla. Stat. T he OIR , therefore, h as

the burden of prov ing by a preponderance of the evidence that

the deviation from the statutory rulemaking procedures was not

material. See § 120.56(2)(a), Fla. Stat. Even had the OIR

presented evidence sufficient to rebut the presumption in

Section 120.56(2), Florida Statutes, the presumption would

merely have vanished, but the evidentiary burden would remain

with the OIR. Accordingly, it is not necessary to consider

whether the OIR has rebutted the presumption of materiality.

30 . Based on the findings of fact herein, the OIR has

failed to prove by a preponderance of the eviden ce that the

rulemaking procedure adopted by the Commission as an agenda item

at its February 25, 2003, meeting, delegating to the OIR the

authority to publish proposed rules in the FAW without the

Commission's approval does not constitute a material failur e to

follow the rulemaking procedures set forth in Section 120.54,

Florida Statutes.

31 . First, the delegation of authority by the Commission

to the OIR to publish proposed rules in the FAW prior to

approval by the Commission constitutes a material failur e to

follow applicable statutory rulemaking procedures because

n either the Commission nor any agency has the authority to adopt

rulemaking procedures that are not consistent with those set

forth in Section 120.54, Florida Statutes. The only grant in

Chapt er 120, Florida Statutes, of legislative authority for an

agency to enact rules relating to the procedures for the

development and adoption of rules is found in Section 120.54(5),

Florida Statutes, which requires the Administration Commission

to adopt unif orm rules establishing "procedures that comply with

the requirements of this chapter." § 120.54(5)(a)1., Fla. Stat.

Pursuant to this requirement, the Administration Commission

enacted the Uniform Rules of Procedure, Florida Administrative

Code Rule Chapt er s 28 - 101 through 110, which include in Florida

Administrative Code Rule Chapter 28 - 103 provisions relating to

rulemaking. Nothing in this rule chapter authorizes the

procedures adopted by the Commission, and, even though an agency

such as the Commission "may seek exceptions to the uniform rules

of procedure by filing a petition with the Administration

Commission," there is no authority in Chapter 120, Florida

Statutes, for an agency to adopt rules or non - rule procedures

that deviate from the explicit req uirements for rule development

or adoption set forth in detail in Section 120.54, Florida

Statutes.

32 . Among the rules that the Administration Commission was

directed to adopt were "[u] niform rules for the scheduling of

public meetings, hearings, and wor kshops" and "[u]niform rules

for use by each agency that provide procedures for conducting

public meetings, hearings, and workshops, and for taking

evidence, testimony, and argument at such public meetings,

hearings, and workshops, in person and by means o f

communications media technology. . . ." § 120.54(5)(b), Fla.

Stat. Florida Administrative Code Rule 28 - 103.004(4), Uniform

Rules of Procedure, provides:

(4) If the notice of intent to adopt,

amend, or repeal a rule did not notice a

public hearing and the agency determines to

hold a public hearing, the agency shall

publish notice of a public hearing in the

same manner as is required for publication

of a notice of rulemaking at least 7 days

before the scheduled public hearing. The

notice shall specify t he date, time, and

location of the public hearing, and the

name, address, and telephone number of the

agency contact person who can provide

information about the public hearing.

It is the practice of the OIR to make a verbal announcement at

the public hea ring referenced in the notice of intent to adopt a

proposed rule that there will be another "final" public hearing

conducted by the Commission before the proposed rule is filed

with the Florida Department of State for adoption. The written

notice of this "final" public hearing is not published in the

section of the FAW in which notices of rule development and of

the intent to adopt proposed rules are published but, rather, is

routinely published in a separate section of the FAW which

includes notices of me etings such as meetings of the Governor

and Cabinet and the agendas for these meetings . The routine

practice of the Commission and the OIR with respect to notice of

the public hearing at which a proposed rule is considered for

adoption by the Commission i s, therefore, inconsistent with

Florida Administrative Code Rule 28 - 103.004(4) .

33 . This practice of the Commission and the OIR in

publishing noti ce of the "final" public hearing in a section of

the FAW that does not include publication of proposed rules

could seriously impede the right of the public t o participate in

the rulemaking process . A member of the public that is

interested in a proposed rule but does not attend the public

hearing conducted by the OIR after publication of the notice of

intent to adopt a proposed rule , is not familiar with the

February 25, 2003, agenda item , and is not aware that the notice

of the "final" public hearing before the Commission is not

published in the section of the FAW dealing with proposed rules

c ould lose the oppor tunity to be heard. As articulated by the

Florida Supreme Court in NAACP, Inc. v. Florida Bd. of Regents ,

863 So. 2d 294, 298 (Fla. 2003) , a case involving the question

of standing to challenge a proposed rule, " . . . a key purpose

of the [Florida Adminis trative Procedures Act] was to expand

rather than restrict public participation in the administrative

process." See also Florida Home Builders Ass'n v. Department of

Labor & Employment Security , 412 So. 2d 351, 353 (Fla.

1982)( quoted with approval in the NAACP case) ("Expansion of

public access to the activities of governmental agencies was one

of the major legislative purposes of the new Administrative

Procedure Act.")

34 . In addition, t he procedure adopted by the Commission

constitutes a material failure to follow the applicable

statutory rulemaking procedures because it interjects

uncertainty into a rulemaking procedure that has been defined in

great detail by statute . The publication in the FAW of the

notice of an agency's intent to adopt a proposed ru le is a

signal to persons interested in the proposed rule that the

agency has gone through the rule - development process set forth

in Section 120.54(2), Florida Statutes; that the agency has

formulated the final articulation of an agency policy or

procedure or of the implementation or interpretation of a

statutory grant of power; and that this final articulation has

been a pproved by the agency head. The procedure adopted by the

Commission , and under which Proposed Rule 69O - 186.003(1)(c) was

developed, howev er, allows the OIR to publish as a proposed rule

only a preliminary statement of intended agency action.

Consequently, a n interested person may submit written material

to the OIR and/ or attend and present evidence and argument at

the public hearing refer e nced in the notice of intent to adopt a

proposed rule in the expectation of addressing the agency head's

final ve rsion of the proposed rule, only to be required to

engage in the same process before the Commission when it

considers the proposed rule for "fi nal" adoption. This results

in duplication of effort on the part of the agency and of

persons interested in the proposed rule.

35 . In this case, the expectation that the text of

Proposed Rule 69O - 186.003(1)(c) published in the June 3, 2005,

edition of th e FAW was the final articulation of the OIR 's

proposed rule was explicitly elicited by the statement in the

notice that the proposed rule had been approved by the "agency

head." The Fund and the Association requested a public hearing

as directed in the no tice and appeared and presented evidence

and argument at the public hearing. It was only at the July 13,

2005, public hearing that the attendees were advised that it was

not the final public hearing on the proposed rule but that

another hearing would be h eld by the Commission , at some

unspecified time in the future, at which Proposed Rule 69O -

186.003(1)(c) would be considered for "final" adoption.

36 . The deviation from statutory rulemaking procedures by

the Commission's delegation of authority to the OIR to publish

the notice of intent to adopt a proposed rule in the FAW also

introduces ambiguity into the timelines for challenging the

validity of a proposed rule . Section 1 20.56(2)(a), Florida

Statutes, requires a substantially affected person to file a

p etition with the Division of Administrative Hearings requesting

a determination of the validity of a proposed rule "within

21 days after the publication of the notice required by

s. 120.54(3)(a)" or "within 10 days after the final public

hearing is held on the proposed rule as provided by

s. 120.54(3)(c) . " If a public hearing is not timely requested

in response to the notice of intent to adopt a proposed rule, a

substantially affected person must file a petition to challenge

the proposed rule with the Divi sion of Administrative

Hearings within 21 days after the notice is published. Formal

rule - challenge proce dures will, therefore, be initiated even

though the Commission must, under its procedure, conduct a final

hearing before the rule is finally adopted a nd may, as a result

of that hearing, choose to withdraw or modify the proposed rule

prior to final adoption.

37 . W hen, as in this case, a public hearing is requested

and held on the date included in the notice of intent to adopt a

proposed rule , a substan tially affected person could reasonably

question the legal significance on the statutory timeframe for

filing a petition challenging the proposed rule of an oral

announcement made at the public hearing that the Commission

would consider final approval of t he proposed rule at another

public hearing to be held at an unspecified time in the future.

The public hearing held pursuant to the notice of intent to

adopt a proposed rule is the last action required by statute

prior to adoption of the proposed rule, s e e §120.54(3)(e), Fla.

Stat., and, but for the extra - statutory procedure adopted by the

Commission, the OIR could f ile the proposed rule for adoption

after this public hearing . An issue , therefore, arises as to

whether an oral announcement of the intent to hold a subsequent

public hearing is sufficient to transform the duly - noticed

public hearing into a "preliminary" hearing of no significance

in calculating the time within which a petition challenging the

validity of the proposed rule would have to be file d pursuant to

Section 120.56(2)(a), Florida Statutes. The procedure adopted

by the Commission, therefore, interjects uncertainty into

statutory rulemaking procedures that are intended to be

comprehensive and not subject to alteration by an agency except

u nder very limited circumstances. See 120.54(5)(a), Fla. Stat.

38 . Finally, and perhaps most importantly, the procedure

adopted by the Commission constitutes a material failure to

follow the applicable statutory rulemaking procedures because

the Commissio n has abd icated to the OIR its responsibility as

agency head for the purpose of rulemaking to formulate policy

and procedures and to interpret and implement statutory grants

of power in the area of insurance regulation. The Commission

has delegated to the OIR the responsibility for formulat ing

proposed rules and for conduct ing all of the pre - adoption

rulemaking procedures specified in Section 120.54(2) and (3),

Florida Statutes, without oversight by the Commission. The

Commission does not review the subst ance of the proposed rule

until after the notice of intent to adopt a proposed rule, which

includes the text of the proposed rule, has been published in

the FAW and after a public hearing has been held on the proposed

rule or after 21 days from publication of the notice have

expired without a request for a public hearing . At this point,

however, the ability of the Commission to modify the text of the

proposed rule is limited by the provisions of

Section 120.54( 3)(d)1., Florida Statutes, which provides in

p ertinent part:

After the public hearing on the proposed

rule, or after the time for requesting a

hearing has expired, if the rule has not

been changed from the rule as previously

filed with the [Administra tive Procedures]

committee, or contains only techni cal

changes, the adopting agency shall file a

notice to that effect with the

[Administrative Procedures] committee at

least 7 days prior to filing the rule for

adoption. Any change, other than a

technical change that does not affect the

substance of the r ule, must be supported by

the record of public hearings held on the

rule, must be in response to written

material received on or before the date of

the final public hearing, or must be in

response to a proposed objection by the

[Administrative Procedures] committee. . . .

* * *

2. After the notice required by

paragraph (a) and prior to adoption, the

agency may withdraw the rule in whole or in

part.

(Emphasis added.)

39 . Public hearings on proposed rules are for the purpose

of "giv[ing] affected perso ns an opportunity to present evidence

and argument on all issues under consideration.

§ 120.24(3)(c)1., Fla. Stat. Florida Administrative Code

Rule 28 - 103.004 provides in pertinent part:

(5) The purpose of a public hearing is to

provide affected persons and other members

of the public a reasonable opportunity for

presentation of evidence, argument and oral

statements, within reasonable conditions and

limitations imposed by the agency to avoid

duplication, irrelevant comments,

unnecessary delay, or disrup tion of the

proceeding.

(6) The agency head, any member thereof, or

any person designated by the agency head may

preside at the public hearing. The agency

must ensure that the persons responsible for

preparing the proposed rule are available to

explain the agency's proposal and to respond

to questions or comments regarding the

proposed rule.

The Commission is not, therefore, free to modify a proposed rule

after it conducts the "final" public hearing prior to adoption

to correspond with its notion of app ropriate agency policy or

procedures or statutory interpretation and implementation; the

Commission may only withdraw the proposed rule and begin the

rulemaking process anew or make modifications in accordance with

the provisions of Section 120.54(3)(d)2., Florida Statutes.

40 . Based on careful consid eration of the stipulated

facts, the statutory rulem aking procedures , and the relevant

legal authority, it is concluded that Proposed Rule 69O -

186.003(1)(c) is an invalid exercise of delegated legislative

auth ority because publication of Proposed Rule 69O - 186.003(1)(c)

without the approval of the Commission, as agency head,

constitutes a material failure to follow the applicable

statutory rulemaking procedures .

ORDER

Based on the foregoing Findings of Fact an d Conclusions of

Law, it is ORDERED that Proposed Rule 69O - 186.003(1)(c)

constitutes an invalid exercise of delegated legislative

authority and is, therefore, invalid.

DONE AND ORDERED this 1 7 th day of May , 200 6 , in

Tallahassee, Leon County, Florida.

S

___________________________________

PATRICIA M. HART

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675 SUNCOM 278 - 9675

Fax Fil ing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 1 7 th day of May , 200 6 .

ENDNO TES

1 / All references her ein are to the 2005 edition of the Florida

Statutes unless otherwise indicated.

2 / On August 22, 2005, the OIR, on behalf of itself and the

Commission, filed a Motion for Entry of a Summary Final Order,

in which it requested entry of an order dismissing the Petition

to Determine the Invalidity of Proposed Rules filed with the

Division of Administrative Hearings. The OIR included two

grounds in support of the Motion for Summary Final Order:

First, the OIR argued that the Division does not have

jurisdicti on to conduct proceedings on the Petition to Determine

the Invalidity of Proposed Rules because Proposed Rule 69O -

186.003(1)(c) has not been finally approved for adoption by the

Commission. Second, the OIR argued that the Fund and the

Association do not h ave standing to pursue their challenge

because they are not "substantially affected" by the proposed

rule. The OIR's motion was denied in an order entered

October 25, 2005.

3 / The legislature also created the Office of Financial

Regulation ("OFS") as an "office" of the Commission. The OFS is

responsible for regulating banks and other financial

institutions, finance companies, and the security industry. The

Commission is the agency head of the OFS, which is itself headed

by a director, also known as the Commissioner of Financial

Regulation. § 20.121(3)(a)2., Fla. Stat.

COPIES FURNISHED:

Warren Husband, Esquire

Metz , Husband & Duaghton , P.A.

Post Office Box 10909

Tallahassee, Florida 32302 - 2909

Fred R. Dudley, Esquire

Akerman Senterfitt

106 East Collega Avenue, Suite 1200

Post Office Box 1877

Tallahassee , Florida 32302

Steven H. Parton, General Counsel

Office of Insurance Regulation

Financial Services Commission

200 East Gaines Street

Tallahassee, Florida 32399 - 4206

Douglas A. Mang, Esquire

Mang Law Firm, P.A.

660 East Jefferson Street

Tallahassee , Florida 32302

Honorable Tom Gallagher

Chief Financial Officer

Department of Financial Services

The C apitol, Plaza Level 11

Tallahassee, Florida 32399 - 0300

Carlos G. Mu ñ iz, General Counsel

Department of Financial Services

The C apitol, Plaza Level 11

Tallahassee, Florida 32399 - 0300

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is

entitled to judicial review pursuant to Section 120.68, Florida

Statutes. Review proceedings are governed by the Florida Rules

of Appellate Procedure. Such proceedings are commenced by

filing the original Notice of Appeal with the agency clerk of

the Division of Administrative Hearings and a copy, accompanied

by filing fees prescribed by law, with the District Court of

Appeal, F irst District, or with the District Court of Appeal in

the Appellate District where the party resides. The notice of

appeal must be filed within 30 days of rendition of the order to

be reviewed.