06-002096PL Department Of Financial Services vs. Michael D. Carll Status: Closed Recommended Order on Wednesday, January 31, 2007.

Summary: Respondents, who wrote and sold plans for in-home care, which made misrepresentations and false and worthless promises, should have their licences suspended for 24 months.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANACIAL )

SERVICES, )

)

Petitioner, )

)

vs. ) Case Nos. 06 - 2096PL

) 06 - 2097PL

MICHAEL D. CARLL and )

JAMES W. CRAIN, JR., )

)

Respondents. )

)

RECOMMENDED ORDER

Administrative Law Judge (ALJ) Daniel Manry conducted the

formal hearing of these consolidated cases on October

10 through 12, 2006, in Sarasota, Florida, for the Division of

Administrative Hearings (DOAH).

APPE ARANCES

For Petitioner: Philip M. Payne, Esquire

David J. Busch, Esquire

Division of Legal Services

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

For Respondent Marc S. Nurik, Esquire

Crain: Patsy Zimmerman, Esquire

Genovese, Joblove & Battista

200 East Broward Boulevard, Suite 1110

Ft. Lauderdale, Florida 33301

For R espondent Joan H. Donnelly, Esquire

Carll: 1290 North Palm Avenue, Suite 107

Sarasota, Florida 34236

STATEMENT OF THE ISSUES

The issues are whether the alleged actions of the

respondents demonstrate a lack of fitness or trus tworthiness to

engage in the business of insurance within the meaning of

Subsection 626.611(7), Florida Statutes (2004), and, if so, what

penalty should be imposed. (All statutory references are to

Florida Statutes (2004) unless otherwise stated.)

PRELIMIN ARY STATEMENT

Petitioner filed an administrative complaint against each

respondent on May 22, 2006. Each requested a formal hearing.

Petitioner referred the requests to DOAH, and the ALJ

consolidated the requests with the agreement of the parties.

At the hearing, Petitioner presented the testimony of five

witnesses and submitted 12 exhibits for admission into evidence.

The respondents testified, called two other witnesses, and

submitted 11 joint exhibits.

Respondent Carll submitted one additional ex hibit, and

Respondent Crain submitted two additional exhibits. None of the

parties called expert witnesses.

The identity of the witnesses and exhibits and the rulings

regarding each are reported in the six - volume Transcript of the

hearing filed with DOAH on November 27, 2006. Pursuant to the

agreement of the parties at the conclusion of the hearing,

Petitioner timely filed its Proposed Recommended Order (PRO) on

December 26, 2006. Mr. Carll and Mr. Crain timely filed their

respective PROs on December 22 and 27, 2006.

FINDINGS OF FACT

1. Petitioner is the state agency responsible for

regulating insurance agents in Florida. The respondents, Crain

and Carll, are licensed as Life and Health insurance agents

pursuant to respective license numbers A056967 and A040734.

2. The respondents have known each other for approximately

13 years. During that time, the two engaged in the business of

selling health insurance. Mr. Carll was an independent

contractor, but Mr. Crain was Mr. Carll's only boss.

3. Mr. C rain wholly owns two Florida corporations that he

operates as insurance agencies. The two corporations are

identified in the record as International Life and Health

Services of Manatee County, Inc. (Manatee), and International

Life and Health Services of Sarasota County, Inc. (Sarasota).

4. Mr. Crain owns two other Florida corporations. They

are identified in the record as Independent Living Home Care

Agency, Inc. (Home Care Agency), and Independent Living Home

Care Membership Association, Inc. (Home Care).

5. Home Care promises in a plan written by Mr. Crain to

provide plan purchasers with access to discounted in - home care

(the plan). Approximately 44 Florida residents purchased the

plan in 2005 and 2006 from insurance agents, including Mr.

Carll, who, as agents for Mr. Crain, Manatee, or Sarasota,

previously sold health insurance to some of the plan purchasers.

6. Mr. Crain is personally and fully liable for the acts

of the selling insurance agents within the meaning of

Section 626.839. Mr. C rain is a health insurance agent who is

the president and sole shareholder of a health insurance agency.

7. Mr. Crain directly supervised and controlled the

insurance agents who sold the plan in Florida. Mr. Crain wrote

the plan and trained the insuran ce agents in the content of the

plan, sales techniques, how to exclude impaired customers, and

how to determine whether a customer was an appropriate candidate

to purchase a plan. Mr. Crain did not obtain a legal opinion

concerning his final version of th e plan.

8. The plan satisfies the statutory definition of

insurance. However, the plan is not health insurance that the

legislature has expressed its intent to regulate. 1

9. The plan promises Home Care will provide a purchaser of

a membership with acce ss to in - home care from a third - party

provider, denominated as a "caregiver," at a cost substantially

less than the market rate caregivers normally charge for such

services (discounted home care services). The plan promises to

refund 120 percent of the me mbership fee if Home Care were

unable to provide access to discounted home care services.

10. The plan excludes medical care from the definition of

home care services. Home care services include companion and

homemaker services; housekeeping and laundry services;

transportation services for doctor visits, groceries, and visits

with friends; meal preparation; assistance with dressing and

undressing; organizing files and bills; not burdening loved

ones; protecting assets and heir's inheritance; gaining res pect;

and preserving one's legacy while gaining respect and dignity.

11. The plan offers memberships for four, six, and eight

years. Only four and six - year memberships are pertinent to this

proceeding.

12. The respective cost for each four and six - yea r

membership is $2,475 and $3,475. Home Care promises each member

will have access to discounted home care services for respective

benefit periods of 1.5 and 2.5 years. The cost of membership

does not apply toward the cost of discounted home care service s.

13. Services are not available at the discounted rate for

the first 90 days after the date a purchaser requests services

(the elimination period). 2 The elimination period is 180 days

"for pre - existing conditions". 3

14. An additional payment of $1,3 95 reduces the normal

elimination period from 90 to 60 days, extends the membership

period an additional two years, and extends the respective

benefit periods by one year. The plan charges an additional

25 percent if a purchaser elects installment paymen ts.

15. The plan promises home care services at substantial

discounts below the market rate. The discounted plan rates are

$94 for 24 hours of service; $72 for eight hours of service; and

$36 for four hours of service. Market rates in the community

ra nge from $204 to $480 for 24 hours of service and from $16 to

$18 an hour for shorter periods. 4

16. The 44 plans sold in Florida generated approximately

$192,000 in membership fees for Home Care. Mr. Crain deposited

the fees into a bank account he create d for Home Care and for

which Mr. Crain is the sole authorized signatory. Home Care

paid commissions to insurance agents ranging from 50 and 60

percent of the sale proceeds.

17. The allegations in this proceeding pertain to four of

the 44 plan purchase rs. Ms. Janet McClurkin purchased the plan

in April 2005 in two installments totaling $2,112. Ms. Ruth

Frakes purchased the plan in February 2005 in two installments

totaling $4,870. Ms. Carin Clareus purchased the plan in

February 2005 for one payment of $1,953. Ms. Eva Muller

purchased the plan in March 2005 for one payment of $3,475. 5

18. A finding of guilt requires proof of one or more of

five essential allegations, the first of which alleges the four

plan purchasers are elderly women who, at the time of purchase,

were "disabled" and suffered from "diminished mental capacity."

The four sales allegedly violated the plan prohibition against

sales to anyone "not of sound mind or body."

19. The four plan purchasers are clearly elderly women.

At the time of the hearing, Ms. McClurkin was 94 years old. 6

Ms. McClurkin is Canadian, has been widowed for approximately

35 years, has no children or nearby family, and lives alone.

Her nephew had power of attorney at the time of the hearing.

20. Ms. McCl urkin suffered from hearing and memory loss.

She had worn two hearing aids for about a year, was recovering

from surgery for breast cancer two years earlier, and had

functioned for over 15 years with two artificial hips.

21. Ms. Frakes was 90 years o ld at the time of the

hearing. 7 Ms. Frakes had been widowed for approximately 26 years

and had no children and no surviving relatives. Ms. Frakes wore

a Life Alert alarm, had been wearing two hearing aids for

approximately seven years, had been reading t hrough a magnifying

glass for approximately five years, was taking medication for

high blood pressure, and suffered from arthritis.

22. Ms. Clareus was 97 years old at the time of the

hearing and resided in a community of about 200 senior citizens. 8

She immigrated to the United States in 1928, had been widowed

for approximately four years at the time of the hearing, and had

no children and no nearby relatives. Ms. Clareus had been

legally blind for approximately eight years but was able to read

through a n assistive device in her residence.

23. Ms. Muller was approximately 85 years old at the time

of the hearing. She immigrated from Germany and then became a

U.S. citizen, all in a time frame not disclosed in the record.

24. Ms. Muller had been divor ced early in her life and

lived alone in a mobile home community. She had no nearby

relatives and experienced memory problems. Ms. Muller owns an

automobile but does not drive. Friends drive for her. After

purchasing the plan, Ms. Muller executed a pow er of attorney

naming Ms. Ingrid Eglsaer as her general power of attorney.

25. At the time of the hearing, the four witnesses

demonstrated confusion and difficulty in recalling specific

facts. However, their confusion and impaired memory at the

hearing w as not clear and convincing evidence that the witnesses

were incompetent when they purchased the plan.

26. The allegation of incompetence at the time of purchase

may be supported by inference or surmise, but inference and

surmise do not satisfy the requ irement for clear and convincing

evidence. 9 Petitioner submitted no expert testimony concerning

the mental capacity of a purchaser at the time of the purchase.

27. Petitioner next alleges the respondents misrepresented

that Home Care would provide home care services and home medical

care without further charge. Each Administrative Complaint

admits the alleged misrepresentation conflicts with the terms of

the plan. 10 The plan promises access to discounted home care

services and states that the membersh ip fee does not apply

toward charges for discounted home care services. 11

28. The evidence is less than clear and convincing that

the respondents misrepresented the contents of the plan in a

manner that led purchasers to believe they would receive home

ca re services or home medical care without additional charge.

Testimony of the four purchasers concerning verbal

representations by insurance agents during sales transactions is

confused, is not precise and explicit, and is less than clear

and convincing.

29. Each purchaser may have inferred that she was

purchasing insurance for either home care services or home

medical care without an additional charge. Some purchasers had

previously purchased such insurance from the same insurance

agent. Each sale inc luded a consultation in which the insurance

agent reviewed other insurance held by the purchaser.

30. The plan included terms that sounded to elderly women

like familiar insurance terms. For example, the plan requires

the purchaser to apply for coverag e and employs terms such as

"Eligible Persons," "Effective Date," "Elimination Period,"

"Limitations and Exclusions," and "Benefit Discount Period."

31. The plan extends the elimination period when "pre -

existing conditions" exist, describes home care prov iders as

"caregivers," and discusses "co - payments." The plan includes a

disclosure form and a medical release form.

32. The evidence is less than clear and convincing that

the respondents made promises or representations, other than

those in the plan, to induce a purchaser to infer that the plan

entitled her to discounted home care or medical care at no

additional charge. Rather, the terms of the plan were

purposefully confusing and induced the four elderly women to

draw the desired inference.

33. Pet itioner also alleges the respondents made false and

worthless promises that defrauded the purchasers. However, it

is unnecessary to resolve the allegations of fraud in this

case. 12

34. This case can be resolved if the evidence supports one

of two remaini ng allegations. First, the respondents allegedly

misrepresented the access to discounted caregiver services that

a purchaser acquired upon payment of a membership fee. Second,

the promises of access to discounted caregiver services that the

respondents m ade to each of the four plan purchasers were false

and worthless. 13

35. The plan misrepresented the access to caregivers that

a purchaser acquired upon payment of a membership fee. The plan

provides, in relevant part:

If a member joins the association th ey are

guaranteed the homecare discounts provided

for in the contractual agreement.

Respondent Crain, Exhibit 1, at 4.

36. The plan does not name or otherwise identify a

caregiver responsible for supplying the discounted caregiver

services "guaranteed" in the plan. In that regard, the plan is

factually distinguishable from a home care plan that passed

judicial scrutiny in an unrelated proceeding. 14

37. Neither Mr. Crain nor Home Care possessed a legal

right to require a caregiver to provide discounted services in

accordance with the terms of the plan. Neither Mr. Crain nor

Home Care possessed the practical ability to ensure that a

caregiver would provide home care services at any price, much

less the discounted prices promised in the plan. 15

38. The absence of either a legally enforceable right or

practical ability to ensure that a caregiver would provide the

discounted home care services promised in the plan were material

facts that Mr. Crain did not disclose to purchasers. The

failure to disclose material facts was willful and

misrepresented the access to discounted caregiver services that

a purchaser acquired upon payment of a membership fee.

39. Testimony from Mr. Crain concerning his practical

ability to ensure delivery of discounted care giver services was

neither credible nor persuasive to the fact - finder. Mr. Crain

discussed home care services with a number of caregivers. Based

on those conversations, Mr. Crain developed a list of caregivers

he said he could call in the future to reque st discounted

caregiver services promised in the plan if and when one of the

44 purchasers requested services (the list). 16

40. The list evolved between January 2005 and September

2006. Mr. Crain advertised for caregivers in local newspapers.

The collec tive responses numbered between 100 and 200.

41. Mr. Crain or a staff - member collected the contact

information for each responder and questioned each responder

concerning, among other things, their qualifications and

experience. The final list identi fied 15 caregivers.

42. Mr. Crain described the list of 15 in answers to

questions from the fact - finder:

[Q] Well, I want to make sure I understand

clearly. So, you ran an ad. People called

in, you took down their contact information,

and did you run [abuse registry] screens on

these people?

[A] Yes, I did.

[Q] Okay. You mentioned earlier 200

responded. Did all 200 make the list?

[A] The list? . . .

[Q] . . . The list I'm referring to is the

list referred to in testimony of . . .

[insurance] agents of yours that said you

maintained a list of contract individuals

. . . Did you maintain a list?

[A] I had a list of potential caregivers

from the original ad, yes.

* * *

[Q] So you ran two ads. You had some

responses to the first ad, a nd overwhelming

responses to the second ad, and when you

talked to the person, what did [you] do

. . . ?

[A] They call in -- I briefly qualify them.

* * *

[Q] And what kind of information do you

collect?

[A] Name, address, phone number, work

his tory, educational history . . . . ethical

behavior . . . . [and abuse] screening

. . . . [I]f the agency they work for

currently or in the past could not fax me a

copy of . . . screening . . . by AHCA

[Agency for Health Care Administration],

then I could then screen them myself.

[Q] [H]ow many of these people did you

actually either screen or get faxes of their

screen?

[A] About seven.

[Q] Out of how many?

[A] Altogether, I had spoken to no less

than a hundred people.

[Q] From both ads?

[A] Cor rect. . . .

[Q] How many of the seven did you screen

yourself?

[A] Three. . . .

[Q] Okay. Now, you talked to a hundred.

Did you compile a resource list?

[A] Yes, I did.

[Q] And how many . . . , of the hundred,

made the resource list?

[A] I ha d at least 15 potentially eligible

people that could work for me, but I had

seven that could go at any moment. Or not

at any moment but that were available,

already screened with experience and ready

to go. Or around seven.

Transcript (TR) at 581 - 585.

43. Mr. Crain did not bond or insure any of the

15 potentially eligible caregivers. Mr. Crain explained the

bonding procedure in the following testimony:

[Q] [The plan] . . . talks about having

people bonded, insured, and fully screened,

correct?

[A] Yes.

[Q] Now, we've already talked about

screening. How would you make arrangements

to bond and insure someone?

[A] If they were employed, to bond a person

is a one - page form . . . [y]ou . . . deliver

to this insurance agency . . . down the road

from my office . . . and putting a hundred

dollars for every ten thousand dollars of

bonding you want. . . .

[Q] So, when in the process would you bond

and insure someone?

[A] The day or the day before they went out

to the actual care.

[Q] So actually, p rior to having a request

for services and actually arranging for

somebody to go out, you wouldn't have gone

through the trouble or expense of bonding or

insuring, correct?

[A] Correct.

[Q] Who actually bears the expense of

bonding and insuring?

[A] T he provider.

[Q] You mean the worker?

[A] Yeah. . . .

TR at 585 - 586.

44. The plan promised that access to discounted services

included a guaranteed refund equal to 120 percent of membership

if Home Care were unable to provide access to the discounte d

caregiver services promised in the plan. Mr. Crain wrote the

refund language to state:

17. 120% money back guarantee. If [Home

Care] cannot provide homemaker and companion

services at the discounted rate as governed

by this contract, the company shall pay the

member all the fees paid plus an additional

20%. Due to severe, unprecedented,

skyrocketing costs for caregivers, or an

unforeseen increase in the demand for

personnel, the company will make this

refund. [Home Care] has a big

responsibility to p rovide quality home care

services to all of it's [sic] members. Even

though management owners and outside

professionals have thoroughly though [sic]

out almost every variable in making this

contract both beneficial to the customers

and profitable for [Hom e Care], no one can

predict the future. Therefore it is agreed

by both parties that by entering into this

contract that the legal remedy for [Home

Care's] possible inability to provide the

service at the discounted rate, is for [Home

Care] to refund 120% of the member's fee

after reviewing the case with legal counsel

as provided for by [Home Care] regarding the

unusual circumstances of the said member.

Respondent Crain, Exhibit 1, at 7.

45. The promise that access to discounted caregiver

services inclu des a guaranteed refund of 120 percent of the

membership fee is a false promise. The promise is not

conditioned on any discernable legal standard or any other

standard capable of objective measurement. Rather, the

applicable standard is a subjective stan dard to be interpreted

at the sole discretion of Mr. Crain.

46. Mr. Crain willfully included the false refund promise

in the plan. As Mr. Crain explained:

[A] The right to get a refund? After five

days, they don't have a right to get a

refund.

[Q] Do you or have you, on behalf of the

company, given refunds to persons beyond the

five - day period?

[A] Yes.

[Q] Is that at your discretion?

[A] Yes.

[Q] Is there any particular policy or plan

regarding when and how to give a refund and

how much?

[A] No.

TR at 614.

47. Mr. Crain is the sole arbiter of the entitlement to a

refund and the amount of the refund to be paid. For example,

Mr. Crain paid Ms. Muller 120 percent of her membership fee but

paid only a prorated amount to Ms. Clareus. 17

48. The promise to refund 120 percent of the membership

fee is worthless. Mr. Crain willfully included the worthless

promise in the plan.

49. The refund obligation is owed solely by Home Care, and

Home Care has not retained sufficient reserves to fund it s

contractual obligation. 18 Mr. Crain withdrew virtually all of

the $192,000 in membership fees to pay commissions, operating

costs, and similar expenses.

50. On June 19, 2006, Home Care had $946 in its bank

account. The last refund obligation Home Ca re owes to the two

unpaid purchasers in this proceeding will not expire until

sometime in 2011. The corporate promise to refund 120 percent

of the membership fee is worthless because it is an unfunded

obligation to pay refunds from non - existent reserves.

51. Mr. Carll did not exercise ordinary diligence, much

less the reasonable skill and diligence required of an insurance

agent, to examine the plan for misrepresentations and false

promises. Mr. Carll willfully failed to independently examine

the plan. As Mr. Carll explained during his testimony:

Jim was constantly on the phone interviewing

people, prospective caregivers, talking to

-- even to home health care agencies that

provide homemaker services, and it's my

understanding that he had compiled a lis t of

people who could be called in the event if

someone requested for [sic] service.

* * *

[Q] When you had meetings with Mr. Crain,

did you ask him questions?

[A] Yes.

[Q] What questions did you ask about the

plan?

[A] Oh, how does the elimin ation period

work. You know, when do services begin?

What do people have to do to get services?

Questions of that nature.

[Q] Anything else?

[A] Just questions about, you know, well

how to talk to these people and, you know,

what to look for when you walk into a house.

[Q] Did you ask Mr. Crain what ability he

had to ensure that these third party

contractors would provide their services for

the fees he guaranteed in the plan?

[A] Yes.

[Q] Okay. What did you ask him?

[A] I said, Well, how can we be sure that

these people will get the services that they

need when they ask for them?

[Q] And?

[A] He said that he had interviewed

numerous people. He had a list of people

that he could call . . . to provide

[discounted services]. . . .

[Q] Did you ask Mr. Crain what ability he

had to . . . enforce that representation

from them if, at some future time, he asked

them to provide that service, and they said

they no longer would?

[A] I didn't ask him that question.

[Q] So you didn't ask him if he had these

people under legal contract for the term of

the plan?

[A] No. . . . I have a lot of faith in Jim

Crain.

TR at 358 and 422 - 424.

52. Mr. Carll knew, or should have known, that the plan he

sold included misrepresentations. Mr. Carll knew, or should

have known, from the language of the plan that the refund

promise is false.

53. Each of the respondents is an insurance agent who

enjoyed a fiduciary relationship which arose from previous sales

of health insurance. Mr. Carll also enjoyed a f iduciary

relationship that arose during the previously discussed

consultative role he performed when he reviewed with plan

purchasers their existing insurance. As Mr. Carll explained

during his testimony:

[A] Well, a lot them, some of them were

referrals , some of them were people we

already knew.

[Q] How did you know them?

[A] That they had purchased insurance with

us before. You know, a lot of them called

the office.

[Q] For what purpose did they call?

[A] Well, they called the office looking

fo r the agent that sold them insurance.

TR at 360 - 361.

CONCLUSIONS OF LAW

54. DOAH has jurisdiction over the subject matter and

parties in this proceeding. §§ 120.569 and 120.57(1), Fla.

Stat. (2006); §§ 626.611(7) and 626.839. DOAH provided the

parti es with adequate notice of the formal hearing.

55. The burden of proof is on Petitioner. Petitioner must

show by clear and convincing evidence that: the respondents

committed the acts alleged in the administrative complaints; the

acts violated the statu tes charged in the complaints; and the

proposed penalty is reasonable. Department of Banking and

Finance, Division of Securities and Investor Protection v.

Osborne Stern and Company , 670 So. 2d 932 (Fla. 1996).

56. The evidence is clear and convincin g that Mr. Crain

wrote the plan to: misrepresent the promised access to

caregivers; and to make false and worthless promises of either

access to caregivers or a refund equal to 120 percent of the

membership fee. It is equally clear that Mr. Carll knew, o r

should have known, the plan he sold included misrepresentations

and false promises. The evidence is of sufficient weight to

convince the fact - finder, without hesitancy, as to the truth of

the specific allegations against each respondent. Inquiry

Concer ning a Judge No. 93 - 62 , 645 So. 2d 398, 404 (Fla. 1994);

Lee County v. Sunbelt Equities, II, Limited Partnership , 619 So.

2d 996, 1006 n. 13 (Fla. 2d DCA 1993); Slomowitz v. Walker , 429

So. 2d 797, 800 (Fla. 4th DCA 1983)).

57. Insurance agents enjoy th e benefit of public trust and

stand in a fiduciary relationship with their customers.

Natelson v. Department of Insurance , 454 So. 2d 31, 32 (Fla. 1st

DCA 1984). A person acting in a fiduciary capacity generally

has a duty to make a full and fair disclos ure of material facts

to the person reposing confidence in the fiduciary. Federal

Deposit Insurance Corporation v. Martin, et al. , 801 F. Supp.

617, 620 (Fla. Mid. Dist. 1992) (citations omitted).

58. It is clear and convincing to the trier of fact tha t

the acts committed by the respondents were willful. Willfulness

is an issue of fact to be determined by the trier of fact.

Roche Security and Casualty Company, Inc. v. Department of

Financial Services, Office of Insurance Regulation , 895 So. 2d

1139, 1 141 (Fla. 2d DCA 2005).

59. The fact - finder is not persuaded by testimony from

Mr. Carll that he had "a lot of faith" in the representations

and assurances he received from Mr. Crain. Mr. Carll, as an

insurance agent, is required to disclose to a purcha ser material

facts Mr. Carll knew or should have known concerning

misrepresentations and false promises in the plan. Cf . Forgione

v. Dennis Pirtle Agency, Inc. , 701 So. 2d 557, 560 (Fla. 1997)

(insurance agent is required to use reasonable skill and

dilig ence in obtaining appropriate insurance coverage),

distinguished on other grounds , Cowan Liebowitz & Latman, P.C.

v. Kaplan , 902 So. 2d 755, 762 (Fla. 2005) (qualifying ruling in

Forgione that claims for legal malpractice are not assignable);

Moss v. Appel , 718 So. 2d 199, 201 (Fla. 4th DCA 1998)

(fiduciary relationship of insurance broker arises from

consulting relationship, and broker has duty to disclose to

insured material facts concerning insurer); Randolph v.

Mitchell , 677 So. 2d 976, 978 (Fla. 5th DC A 1996) (insurance

agent has obligation to disclose to insured material facts known

to agent); State Farm Life Insurance Company v. Bass , 605 So. 2d

908, 910 (Fla. 3d DCA 1992)(reliance of putative insured on

insurance agent's undertaking is sufficient to trigger duty upon

agent to exercise reasonable skill and care to obtain

appropriate coverage).

60. Mr. Carll did not use reasonable skill and diligence

to determine that the plan he sold included misrepresentations

and false promises. Nor did Mr. Carll exercise ordinary

diligence, which would have disclosed the misrepresentations and

false promises in the plan. Mr. Carll's testimony that he

trusted the representations made to him by Mr. Crain does not

satisfy the requirement for Mr. Carll to exercise or dinary

diligence. Cf . Ramel v. Chasebrook Construction Company, Inc. ,

135 So. 2d 876, 881 (Fla. 2d DCA 1961) (a "representee" is

charged with knowledge of those facts he could have discovered

through ordinary diligence).

61. The disposition of this case does not depend on a

finding that Mr. Crain, as principal, is liable for alleged

misrepresentations of the plan by Mr. Carll, as agent. Rather,

each respondent individually made willful misrepresentations and

false or worthless promises by respectively w riting and selling

the plan.

62. Once Petitioner shows the respondents misrepresented

material facts and made false or worthless promises, Petitioner

is entitled to interpret the relevant statute to mean that such

acts demonstrate a lack of fitness or tru stworthiness to engage

in the business of insurance. An agency's interpretation of a

statute it is charged with enforcing is entitled to great

deference. Mack v. Department of Financial Services , 914 So. 2d

986, 989 (Fla. 1st DCA 2005).

63. Petitioner a rticulated technical reasons for deference

to agency expertise. Johnston, M.D. v. Department of

Professional Regulation, Board of Medical Examiners , 456 So. 2d

939, 943 - 944 (Fla. 1st DCA 1984). The plan written by Mr. Crain

and sold by Mr. Carll contains contractual provisions that have

a "public interest" insurance element. Protection of the public

from "schemes, deceptions, and insolvencies of third parties" is

a valid policy reason for the statutory interpretation adopted

by Petitioner. Cf. Liberty C are Plan , 710 So. 2d at 207

(approving the cited principle but reversing declaratory

statement that home care plan was health insurance).

64. The plan Mr. Crain wrote is similar to a home care

plan that was judicially determined in an unrelated proceeding

to be insurance. However, home care plans do not satisfy the

statutory definition of health insurance and are not regulated

by the legislature. Liberty Care Plan , 710 So. 2d at 205 - 206.

65. A determination that the plan does not satisfy the

statutory d efinition of insurance would not change the

disposition of this case. Courts have held that a licensee may

demonstrate a lack of fitness or trustworthiness to engage in

the business of insurance by acts unrelated to the insurance

business. Compare Paisle y v. Department of Insurance , 526 So.

2d 167 (Fla. 1st DCA 1988), and Natelson , 454 So. 2d at 32 (lack

of fitness demonstrated by felony convictions unrelated to

insurance), with Mack , 914 So. 2d at 988 - 989, and Ganter v.

Department of Insurance , 620 So. 2 d 202 (Fla. 1st DCA 1993)

(sale of auto club memberships are ancillary products).

66. The statutory penalty for a violation of Subsection

626.611(7), is mandatory suspension for a period prescribed in

Florida Administrative Code Rule 69B - 231.080(7). The Rule

prescribes a suspension of six months for each offense but does

not authorize revocation. Deviation from a valid, existing rule

is grounds for remand by a reviewing court. § 120.68(7)(e)2.,

Fla. Stat. (2006). Compare Dyer v. Department of Insurance and

Treasurer , 585 So. 2d 1009 (Fla. 1st DCA 1991) (agency cannot

impose penalty not authorized by statute), with Roche Surety and

Casualty Company, Inc. v. Department of Financial Services,

Office of Insurance Regulation , 895 So. 2d 1139 (Fla. 2d DCA

200 5), and Cottrill v. Department of Insurance , 685 So. 2d 1371

(Fla. 1st DCA 1996) (penal statutes are strictly construed).

67. Each respondent committed four separate violations of

Subsection 626.611(7), punishable by a license suspension of six

months. Several mitigating and aggravating factors must be

considered. Mr. Crain repaid some membership fees received by

Home Care. However, the respondents traded on their fiduciary

relationships for financial gain, which was substantial, as was

the financial loss to three of the purchasers. Each purchaser

is elderly and vulnerable.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that Petitioner enter a final order finding the

respondents guilty of violating Sub section 626.611(7), for the

reasons stated herein, and suspending their licenses for

24 months from the date the proposed agency action becomes

final.

DONE AND ENTERED this 31st day of January, 2007, in

Tallahassee, Leon County, Florida.

S

DANIEL MANRY

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675 SUNCOM 278 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 31st day of January, 2007.

ENDNOTES

1/ See Liberty Care Plan v. Department of Insurance , 710 So. 2d

202, 205 - 206 (Fla. 1st DCA 1998).

2/ It is unclear to the trier of fact whether the 1 .5 and 2.5 -

year benefit periods begins to run from the date of the request

for services and, therefore, includes the elimination period, or

begins to run on the first day after the expiration of the

elimination period.

3/ Paragraph 11 of the Plan identif ied in the record as

Respondent, Crain's Exhibit 1 (RN - 1).

4/ The plan also offers a prescription discount benefit that is

not material to the disposition of this case.

5/ Mr. Carll and another selling agent were both involved in

the sale to Ms. McClur kin. The relative involvement of each

agent is not material to the disposition of the allegations

against Mr. Carll.

6/ Ms. McClurkin turned 95 on January 12, 2007.

7/ Ms. Frakes turned 90 on October 16, 2006.

8/ Ms. Clareus turned 97 on September 1 7, 2006.

9/ Bowling v. Department of Insurance , 394 So. 2d 165, 172

(Fla. 1st DCA 1981).

10/ For example, paragraphs 8 and 10 of the administrative

complaints against Mr. Carll and Mr. Crain respectively allege

that the respondents:

. . . led the el derly consumer to believe

that they would receive both discount

homemaker/companion services and home

medical care services. . . . However, upon

closer reading, the Home Care membership

plan, despite its cost, only purports to

provide access to discount h omemaker service

providers and does not provide the actual

homemaker or home medical care services.

11/ The plan actually misrepresents that it is not insurance,

but the administrative complaints do not include that allegation

as a ground for discipline. Rather, the administrative

complaints allege, inter alia , that the respondents

misrepresented the plan as insurance for home care services or

home medical care and collected "premiums" even though the plan

was not insurance and merely provided access to discounted home

care services. The issue of whether the plan satisfied the

statutory definition of insurance is not material to the

disposition of this case.

12/ The elements of fraud are not material to the disposition

of this case. For reasons stated hereinafter, the trier of fact

finds that insurance agents who make false and worthless

promises to purchasers demonstrate a lack of fitness and

trustworthiness to engage in the business of insurance, within

the meaning of Section 626.611(7), irrespective of whether such

actions satisfy the elements of fraud.

13/ The relevant allegations against Mr. Crain appear in the

Administrative Complaint in paragraphs 25, 27, 32, 34, 40, 42,

48, and 50. The pertinent allegations against Mr. Carll appear

in the Adm inistrative Complaint in paragraphs 23, 25, 30, 32,

38, 40, 46, and 48.

14/ Liberty Care Plan , 710 So. 2d at 205 - 206.

15/ It is unnecessary to resolve the factual dispute concerning

the economic feasibility of the discounts promised in the plan.

16/ The parties devoted a substantial amount of hearing time to

the efforts of one purchaser to obtain services after she broke

her arm. The details of the ordeal are not relevant to the

disposition of this case.

17/ Home Care made refunds to approximately ten purchasers.

Home care refunded membership fees to Ms. McClurkin and

Ms. Calreus. The remaining refunds were limited to what

Mr. Crain testified were "premium" overpayments or

miscalculations. TR at 616 - 617.

18/ The expiration dates for the unuse d portion of the

membership fees at issue in this proceeding range between

February 2009 and March 2011.

COPIES FURNISHED :

Philip M. Payne, Esquire

David J. Busch, Esquire

Division of Legal Services

Department of Financial Services

200 East Gaines Stree t

Tallahassee, Florida 32399

Marc S. Nurik, Esquire

Patsy Zimmerman, Esquire

Genovese, Joblove & Battista

200 East Broward Boulevard, Suite 1110

Ft. Lauderdale, Florida 33301

Joan H. Donnelly, Esquire

1290 North Palm Avenue, Suite 107

Sarasota, Flori da 34236

Honorable Alex Sink

Chief Financial Officer

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0300

Daniel Summer, General Counsel

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, F lorida 32399 - 0307

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

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

to this Recommended Order should be filed with the agency that

will i ssue the Final Order in this case.