06-002097PL Department Of Financial Services vs. James W. Crain, Jr.
 Status: Closed
Recommended Order on Wednesday, January 31, 2007.


View Dockets  
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.

1STATE OF FLORIDA

4DIVISION OF ADMINISTRATIVE HEARINGS

8DEPARTMENT OF FINANACIAL )

12SERVICES, )

14)

15Petitioner, )

17)

18vs. ) Case Nos. 06 - 2096PL

25) 06 - 2097PL

29MICHAEL D. CARLL and )

34JAMES W. CRAIN, JR., )

39)

40Respondents. )

42)

43RECOMMENDED ORDER

45Administrative Law Judge (ALJ) Daniel Manry conducted the

53formal hearing of these consolidated cases on October

6110 through 12, 2006, in Sarasota, Florida, for the Division of

72Administrative Hearings (DOAH).

75APPE ARANCES

77For Petitioner: Philip M. Payne, Esquire

83David J. Busch, Esquire

87Division of Legal Services

91Department of Financial Services

95200 East Gaines Street

99Tallahassee, Florida 32399

102For Respondent Marc S. Nurik, Esquire

108Crain: Patsy Zimmerman, Esquire

112Genovese, Joblove & Battista

116200 East Broward Boulevard, Suite 1110

122Ft. Lauderdale, Florida 33301

126For R espondent Joan H. Donnelly, Esquire

133Carll: 1290 North Palm Avenue, Suite 107

140Sarasota, Florida 34236

143STATEMENT OF THE ISSUES

147The issues are whether the alleged actions of the

156respondents demonstrate a lack of fitness or trus tworthiness to

166engage in the business of insurance within the meaning of

176Subsection 626.611(7), Florida Statutes (2004), and, if so, what

185penalty should be imposed. (All statutory references are to

194Florida Statutes (2004) unless otherwise stated.)

200PRELIMIN ARY STATEMENT

203Petitioner filed an administrative complaint against each

210respondent on May 22, 2006. Each requested a formal hearing.

220Petitioner referred the requests to DOAH, and the ALJ

229consolidated the requests with the agreement of the parties.

238At the hearing, Petitioner presented the testimony of five

247witnesses and submitted 12 exhibits for admission into evidence.

256The respondents testified, called two other witnesses, and

264submitted 11 joint exhibits.

268Respondent Carll submitted one additional ex hibit, and

276Respondent Crain submitted two additional exhibits. None of the

285parties called expert witnesses.

289The identity of the witnesses and exhibits and the rulings

299regarding each are reported in the six - volume Transcript of the

311hearing filed with DOAH on November 27, 2006. Pursuant to the

322agreement of the parties at the conclusion of the hearing,

332Petitioner timely filed its Proposed Recommended Order (PRO) on

341December 26, 2006. Mr. Carll and Mr. Crain timely filed their

352respective PROs on December 22 and 27, 2006.

360FINDINGS OF FACT

3631. Petitioner is the state agency responsible for

371regulating insurance agents in Florida. The respondents, Crain

379and Carll, are licensed as Life and Health insurance agents

389pursuant to respective license numbers A056967 and A040734.

3972. The respondents have known each other for approximately

40613 years. During that time, the two engaged in the business of

418selling health insurance. Mr. Carll was an independent

426contractor, but Mr. Crain was Mr. Carll's only boss.

4353. Mr. C rain wholly owns two Florida corporations that he

446operates as insurance agencies. The two corporations are

454identified in the record as International Life and Health

463Services of Manatee County, Inc. (Manatee), and International

471Life and Health Services of Sarasota County, Inc. (Sarasota).

4804. Mr. Crain owns two other Florida corporations. They

489are identified in the record as Independent Living Home Care

499Agency, Inc. (Home Care Agency), and Independent Living Home

508Care Membership Association, Inc. (Home Care).

5145. Home Care promises in a plan written by Mr. Crain to

526provide plan purchasers with access to discounted in - home care

537(the plan). Approximately 44 Florida residents purchased the

545plan in 2005 and 2006 from insurance agents, including Mr.

555Carll, who, as agents for Mr. Crain, Manatee, or Sarasota,

565previously sold health insurance to some of the plan purchasers.

5756. Mr. Crain is personally and fully liable for the acts

586of the selling insurance agents within the meaning of

595Section 626.839. Mr. C rain is a health insurance agent who is

607the president and sole shareholder of a health insurance agency.

6177. Mr. Crain directly supervised and controlled the

625insurance agents who sold the plan in Florida. Mr. Crain wrote

636the plan and trained the insuran ce agents in the content of the

649plan, sales techniques, how to exclude impaired customers, and

658how to determine whether a customer was an appropriate candidate

668to purchase a plan. Mr. Crain did not obtain a legal opinion

680concerning his final version of th e plan.

6888. The plan satisfies the statutory definition of

696insurance. However, the plan is not health insurance that the

706legislature has expressed its intent to regulate. 1

7149. The plan promises Home Care will provide a purchaser of

725a membership with acce ss to in - home care from a third - party

740provider, denominated as a "caregiver," at a cost substantially

749less than the market rate caregivers normally charge for such

759services (discounted home care services). The plan promises to

768refund 120 percent of the me mbership fee if Home Care were

780unable to provide access to discounted home care services.

78910. The plan excludes medical care from the definition of

799home care services. Home care services include companion and

808homemaker services; housekeeping and laundry services;

814transportation services for doctor visits, groceries, and visits

822with friends; meal preparation; assistance with dressing and

830undressing; organizing files and bills; not burdening loved

838ones; protecting assets and heir's inheritance; gaining res pect;

847and preserving one's legacy while gaining respect and dignity.

85611. The plan offers memberships for four, six, and eight

866years. Only four and six - year memberships are pertinent to this

878proceeding.

87912. The respective cost for each four and six - yea r

891membership is $2,475 and $3,475. Home Care promises each member

903will have access to discounted home care services for respective

913benefit periods of 1.5 and 2.5 years. The cost of membership

924does not apply toward the cost of discounted home care service s.

93613. Services are not available at the discounted rate for

946the first 90 days after the date a purchaser requests services

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

"967for pre - existing conditions". 3

97414. An additional payment of $1,3 95 reduces the normal

985elimination period from 90 to 60 days, extends the membership

995period an additional two years, and extends the respective

1004benefit periods by one year. The plan charges an additional

101425 percent if a purchaser elects installment paymen ts.

102315. The plan promises home care services at substantial

1032discounts below the market rate. The discounted plan rates are

1042$94 for 24 hours of service; $72 for eight hours of service; and

1055$36 for four hours of service. Market rates in the community

1066ra nge from $204 to $480 for 24 hours of service and from $16 to

1081$18 an hour for shorter periods. 4

108816. The 44 plans sold in Florida generated approximately

1097$192,000 in membership fees for Home Care. Mr. Crain deposited

1108the fees into a bank account he create d for Home Care and for

1122which Mr. Crain is the sole authorized signatory. Home Care

1132paid commissions to insurance agents ranging from 50 and 60

1142percent of the sale proceeds.

114717. The allegations in this proceeding pertain to four of

1157the 44 plan purchase rs. Ms. Janet McClurkin purchased the plan

1168in April 2005 in two installments totaling $2,112. Ms. Ruth

1179Frakes purchased the plan in February 2005 in two installments

1189totaling $4,870. Ms. Carin Clareus purchased the plan in

1199February 2005 for one payment of $1,953. Ms. Eva Muller

1210purchased the plan in March 2005 for one payment of $3,475. 5

122318. A finding of guilt requires proof of one or more of

1235five essential allegations, the first of which alleges the four

1245plan purchasers are elderly women who, at the time of purchase,

1256were "disabled" and suffered from "diminished mental capacity."

1264The four sales allegedly violated the plan prohibition against

1273sales to anyone "not of sound mind or body."

128219. The four plan purchasers are clearly elderly women.

1291At the time of the hearing, Ms. McClurkin was 94 years old. 6

1304Ms. McClurkin is Canadian, has been widowed for approximately

131335 years, has no children or nearby family, and lives alone.

1324Her nephew had power of attorney at the time of the hearing.

133620. Ms. McCl urkin suffered from hearing and memory loss.

1346She had worn two hearing aids for about a year, was recovering

1358from surgery for breast cancer two years earlier, and had

1368functioned for over 15 years with two artificial hips.

137721. Ms. Frakes was 90 years o ld at the time of the

1390hearing. 7 Ms. Frakes had been widowed for approximately 26 years

1401and had no children and no surviving relatives. Ms. Frakes wore

1412a Life Alert alarm, had been wearing two hearing aids for

1423approximately seven years, had been reading t hrough a magnifying

1433glass for approximately five years, was taking medication for

1442high blood pressure, and suffered from arthritis.

144922. Ms. Clareus was 97 years old at the time of the

1461hearing and resided in a community of about 200 senior citizens. 8

1473She immigrated to the United States in 1928, had been widowed

1484for approximately four years at the time of the hearing, and had

1496no children and no nearby relatives. Ms. Clareus had been

1506legally blind for approximately eight years but was able to read

1517through a n assistive device in her residence.

152523. Ms. Muller was approximately 85 years old at the time

1536of the hearing. She immigrated from Germany and then became a

1547U.S. citizen, all in a time frame not disclosed in the record.

155924. Ms. Muller had been divor ced early in her life and

1571lived alone in a mobile home community. She had no nearby

1582relatives and experienced memory problems. Ms. Muller owns an

1591automobile but does not drive. Friends drive for her. After

1601purchasing the plan, Ms. Muller executed a pow er of attorney

1612naming Ms. Ingrid Eglsaer as her general power of attorney.

162225. At the time of the hearing, the four witnesses

1632demonstrated confusion and difficulty in recalling specific

1639facts. However, their confusion and impaired memory at the

1648hearing w as not clear and convincing evidence that the witnesses

1659were incompetent when they purchased the plan.

166626. The allegation of incompetence at the time of purchase

1676may be supported by inference or surmise, but inference and

1686surmise do not satisfy the requ irement for clear and convincing

1697evidence. 9 Petitioner submitted no expert testimony concerning

1705the mental capacity of a purchaser at the time of the purchase.

171727. Petitioner next alleges the respondents misrepresented

1724that Home Care would provide home care services and home medical

1735care without further charge. Each Administrative Complaint

1742admits the alleged misrepresentation conflicts with the terms of

1751the plan. 10 The plan promises access to discounted home care

1762services and states that the membersh ip fee does not apply

1773toward charges for discounted home care services. 11

178128. The evidence is less than clear and convincing that

1791the respondents misrepresented the contents of the plan in a

1801manner that led purchasers to believe they would receive home

1811ca re services or home medical care without additional charge.

1821Testimony of the four purchasers concerning verbal

1828representations by insurance agents during sales transactions is

1836confused, is not precise and explicit, and is less than clear

1847and convincing.

184929. Each purchaser may have inferred that she was

1858purchasing insurance for either home care services or home

1867medical care without an additional charge. Some purchasers had

1876previously purchased such insurance from the same insurance

1884agent. Each sale inc luded a consultation in which the insurance

1895agent reviewed other insurance held by the purchaser.

190330. The plan included terms that sounded to elderly women

1913like familiar insurance terms. For example, the plan requires

1922the purchaser to apply for coverag e and employs terms such as

"1934Eligible Persons," "Effective Date," "Elimination Period,"

"1940Limitations and Exclusions," and "Benefit Discount Period."

194731. The plan extends the elimination period when "pre -

1957existing conditions" exist, describes home care prov iders as

"1966caregivers," and discusses "co - payments." The plan includes a

1976disclosure form and a medical release form.

198332. The evidence is less than clear and convincing that

1993the respondents made promises or representations, other than

2001those in the plan, to induce a purchaser to infer that the plan

2014entitled her to discounted home care or medical care at no

2025additional charge. Rather, the terms of the plan were

2034purposefully confusing and induced the four elderly women to

2043draw the desired inference.

204733. Pet itioner also alleges the respondents made false and

2057worthless promises that defrauded the purchasers. However, it

2065is unnecessary to resolve the allegations of fraud in this

2075case. 12

207734. This case can be resolved if the evidence supports one

2088of two remaini ng allegations. First, the respondents allegedly

2097misrepresented the access to discounted caregiver services that

2105a purchaser acquired upon payment of a membership fee. Second,

2115the promises of access to discounted caregiver services that the

2125respondents m ade to each of the four plan purchasers were false

2137and worthless. 13

214035. The plan misrepresented the access to caregivers that

2149a purchaser acquired upon payment of a membership fee. The plan

2160provides, in relevant part:

2164If a member joins the association th ey are

2173guaranteed the homecare discounts provided

2178for in the contractual agreement.

2183Respondent Crain, Exhibit 1, at 4.

218936. The plan does not name or otherwise identify a

2199caregiver responsible for supplying the discounted caregiver

2206services "guaranteed" in the plan. In that regard, the plan is

2217factually distinguishable from a home care plan that passed

2226judicial scrutiny in an unrelated proceeding. 14

223337. Neither Mr. Crain nor Home Care possessed a legal

2243right to require a caregiver to provide discounted services in

2253accordance with the terms of the plan. Neither Mr. Crain nor

2264Home Care possessed the practical ability to ensure that a

2274caregiver would provide home care services at any price, much

2284less the discounted prices promised in the plan. 15

229338. The absence of either a legally enforceable right or

2303practical ability to ensure that a caregiver would provide the

2313discounted home care services promised in the plan were material

2323facts that Mr. Crain did not disclose to purchasers. The

2333failure to disclose material facts was willful and

2341misrepresented the access to discounted caregiver services that

2349a purchaser acquired upon payment of a membership fee.

235839. Testimony from Mr. Crain concerning his practical

2366ability to ensure delivery of discounted care giver services was

2376neither credible nor persuasive to the fact - finder. Mr. Crain

2387discussed home care services with a number of caregivers. Based

2397on those conversations, Mr. Crain developed a list of caregivers

2407he said he could call in the future to reque st discounted

2419caregiver services promised in the plan if and when one of the

243144 purchasers requested services (the list). 16

243840. The list evolved between January 2005 and September

24472006. Mr. Crain advertised for caregivers in local newspapers.

2456The collec tive responses numbered between 100 and 200.

246541. Mr. Crain or a staff - member collected the contact

2476information for each responder and questioned each responder

2484concerning, among other things, their qualifications and

2491experience. The final list identi fied 15 caregivers.

249942. Mr. Crain described the list of 15 in answers to

2510questions from the fact - finder:

2516[Q] Well, I want to make sure I understand

2525clearly. So, you ran an ad. People called

2533in, you took down their contact information,

2540and did you run [abuse registry] screens on

2548these people?

2550[A] Yes, I did.

2554[Q] Okay. You mentioned earlier 200

2560responded. Did all 200 make the list?

2567[A] The list? . . .

2573[Q] . . . The list I'm referring to is the

2584list referred to in testimony of . . .

2593[insurance] agents of yours that said you

2600maintained a list of contract individuals

2606. . . Did you maintain a list?

2614[A] I had a list of potential caregivers

2622from the original ad, yes.

2627* * *

2630[Q] So you ran two ads. You had some

2639responses to the first ad, a nd overwhelming

2647responses to the second ad, and when you

2655talked to the person, what did [you] do

2663. . . ?

2666[A] They call in -- I briefly qualify them.

2675* * *

2678[Q] And what kind of information do you

2686collect?

2687[A] Name, address, phone number, work

2693his tory, educational history . . . . ethical

2702behavior . . . . [and abuse] screening

2710. . . . [I]f the agency they work for

2720currently or in the past could not fax me a

2730copy of . . . screening . . . by AHCA

2741[Agency for Health Care Administration],

2746then I could then screen them myself.

2753[Q] [H]ow many of these people did you

2761actually either screen or get faxes of their

2769screen?

2770[A] About seven.

2773[Q] Out of how many?

2778[A] Altogether, I had spoken to no less

2786than a hundred people.

2790[Q] From both ads?

2794[A] Cor rect. . . .

2800[Q] How many of the seven did you screen

2809yourself?

2810[A] Three. . . .

2815[Q] Okay. Now, you talked to a hundred.

2823Did you compile a resource list?

2829[A] Yes, I did.

2833[Q] And how many . . . , of the hundred,

2843made the resource list?

2847[A] I ha d at least 15 potentially eligible

2856people that could work for me, but I had

2865seven that could go at any moment. Or not

2874at any moment but that were available,

2881already screened with experience and ready

2887to go. Or around seven.

2892Transcript (TR) at 581 - 585.

289843. Mr. Crain did not bond or insure any of the

290915 potentially eligible caregivers. Mr. Crain explained the

2917bonding procedure in the following testimony:

2923[Q] [The plan] . . . talks about having

2932people bonded, insured, and fully screened,

2938correct?

2939[A] Yes.

2941[Q] Now, we've already talked about

2947screening. How would you make arrangements

2953to bond and insure someone?

2958[A] If they were employed, to bond a person

2967is a one - page form . . . [y]ou . . . deliver

2981to this insurance agency . . . down the road

2991from my office . . . and putting a hundred

3001dollars for every ten thousand dollars of

3008bonding you want. . . .

3014[Q] So, when in the process would you bond

3023and insure someone?

3026[A] The day or the day before they went out

3036to the actual care.

3040[Q] So actually, p rior to having a request

3049for services and actually arranging for

3055somebody to go out, you wouldn't have gone

3063through the trouble or expense of bonding or

3071insuring, correct?

3073[A] Correct.

3075[Q] Who actually bears the expense of

3082bonding and insuring?

3085[A] T he provider.

3089[Q] You mean the worker?

3094[A] Yeah. . . .

3099TR at 585 - 586.

310444. The plan promised that access to discounted services

3113included a guaranteed refund equal to 120 percent of membership

3123if Home Care were unable to provide access to the discounte d

3135caregiver services promised in the plan. Mr. Crain wrote the

3145refund language to state:

314917. 120% money back guarantee. If [Home

3156Care] cannot provide homemaker and companion

3162services at the discounted rate as governed

3169by this contract, the company shall pay the

3177member all the fees paid plus an additional

318520%. Due to severe, unprecedented,

3190skyrocketing costs for caregivers, or an

3196unforeseen increase in the demand for

3202personnel, the company will make this

3208refund. [Home Care] has a big

3214responsibility to p rovide quality home care

3221services to all of it's [sic] members. Even

3229though management owners and outside

3234professionals have thoroughly though [sic]

3239out almost every variable in making this

3246contract both beneficial to the customers

3252and profitable for [Hom e Care], no one can

3261predict the future. Therefore it is agreed

3268by both parties that by entering into this

3276contract that the legal remedy for [Home

3283Care's] possible inability to provide the

3289service at the discounted rate, is for [Home

3297Care] to refund 120% of the member's fee

3305after reviewing the case with legal counsel

3312as provided for by [Home Care] regarding the

3320unusual circumstances of the said member.

3326Respondent Crain, Exhibit 1, at 7.

333245. The promise that access to discounted caregiver

3340services inclu des a guaranteed refund of 120 percent of the

3351membership fee is a false promise. The promise is not

3361conditioned on any discernable legal standard or any other

3370standard capable of objective measurement. Rather, the

3377applicable standard is a subjective stan dard to be interpreted

3387at the sole discretion of Mr. Crain.

339446. Mr. Crain willfully included the false refund promise

3403in the plan. As Mr. Crain explained:

3410[A] The right to get a refund? After five

3419days, they don't have a right to get a

3428refund.

3429[Q] Do you or have you, on behalf of the

3439company, given refunds to persons beyond the

3446five - day period?

3450[A] Yes.

3452[Q] Is that at your discretion?

3458[A] Yes.

3460[Q] Is there any particular policy or plan

3468regarding when and how to give a refund and

3477how much?

3479[A] No.

3481TR at 614.

348447. Mr. Crain is the sole arbiter of the entitlement to a

3496refund and the amount of the refund to be paid. For example,

3508Mr. Crain paid Ms. Muller 120 percent of her membership fee but

3520paid only a prorated amount to Ms. Clareus. 17

352948. The promise to refund 120 percent of the membership

3539fee is worthless. Mr. Crain willfully included the worthless

3548promise in the plan.

355249. The refund obligation is owed solely by Home Care, and

3563Home Care has not retained sufficient reserves to fund it s

3574contractual obligation. 18 Mr. Crain withdrew virtually all of

3583the $192,000 in membership fees to pay commissions, operating

3593costs, and similar expenses.

359750. On June 19, 2006, Home Care had $946 in its bank

3609account. The last refund obligation Home Ca re owes to the two

3621unpaid purchasers in this proceeding will not expire until

3630sometime in 2011. The corporate promise to refund 120 percent

3640of the membership fee is worthless because it is an unfunded

3651obligation to pay refunds from non - existent reserves.

366051. Mr. Carll did not exercise ordinary diligence, much

3669less the reasonable skill and diligence required of an insurance

3679agent, to examine the plan for misrepresentations and false

3688promises. Mr. Carll willfully failed to independently examine

3696the plan. As Mr. Carll explained during his testimony:

3705Jim was constantly on the phone interviewing

3712people, prospective caregivers, talking to

3717-- even to home health care agencies that

3725provide homemaker services, and it's my

3731understanding that he had compiled a lis t of

3740people who could be called in the event if

3749someone requested for [sic] service.

3754* * *

3757[Q] When you had meetings with Mr. Crain,

3765did you ask him questions?

3770[A] Yes.

3772[Q] What questions did you ask about the

3780plan?

3781[A] Oh, how does the elimin ation period

3789work. You know, when do services begin?

3796What do people have to do to get services?

3805Questions of that nature.

3809[Q] Anything else?

3812[A] Just questions about, you know, well

3819how to talk to these people and, you know,

3828what to look for when you walk into a house.

3838[Q] Did you ask Mr. Crain what ability he

3847had to ensure that these third party

3854contractors would provide their services for

3860the fees he guaranteed in the plan?

3867[A] Yes.

3869[Q] Okay. What did you ask him?

3876[A] I said, Well, how can we be sure that

3886these people will get the services that they

3894need when they ask for them?

3900[Q] And?

3902[A] He said that he had interviewed

3909numerous people. He had a list of people

3917that he could call . . . to provide

3926[discounted services]. . . .

3931[Q] Did you ask Mr. Crain what ability he

3940had to . . . enforce that representation

3948from them if, at some future time, he asked

3957them to provide that service, and they said

3965they no longer would?

3969[A] I didn't ask him that question.

3976[Q] So you didn't ask him if he had these

3986people under legal contract for the term of

3994the plan?

3996[A] No. . . . I have a lot of faith in Jim

4009Crain.

4010TR at 358 and 422 - 424.

401752. Mr. Carll knew, or should have known, that the plan he

4029sold included misrepresentations. Mr. Carll knew, or should

4037have known, from the language of the plan that the refund

4048promise is false.

405153. Each of the respondents is an insurance agent who

4061enjoyed a fiduciary relationship which arose from previous sales

4070of health insurance. Mr. Carll also enjoyed a f iduciary

4080relationship that arose during the previously discussed

4087consultative role he performed when he reviewed with plan

4096purchasers their existing insurance. As Mr. Carll explained

4104during his testimony:

4107[A] Well, a lot them, some of them were

4116referrals , some of them were people we

4123already knew.

4125[Q] How did you know them?

4131[A] That they had purchased insurance with

4138us before. You know, a lot of them called

4147the office.

4149[Q] For what purpose did they call?

4156[A] Well, they called the office looking

4163fo r the agent that sold them insurance.

4171TR at 360 - 361.

4176CONCLUSIONS OF LAW

417954. DOAH has jurisdiction over the subject matter and

4188parties in this proceeding. §§ 120.569 and 120.57(1), Fla.

4197Stat. (2006); §§ 626.611(7) and 626.839. DOAH provided the

4206parti es with adequate notice of the formal hearing.

421555. The burden of proof is on Petitioner. Petitioner must

4225show by clear and convincing evidence that: the respondents

4234committed the acts alleged in the administrative complaints; the

4243acts violated the statu tes charged in the complaints; and the

4254proposed penalty is reasonable. Department of Banking and

4262Finance, Division of Securities and Investor Protection v.

4270Osborne Stern and Company , 670 So. 2d 932 (Fla. 1996).

428056. The evidence is clear and convincin g that Mr. Crain

4291wrote the plan to: misrepresent the promised access to

4300caregivers; and to make false and worthless promises of either

4310access to caregivers or a refund equal to 120 percent of the

4322membership fee. It is equally clear that Mr. Carll knew, o r

4334should have known, the plan he sold included misrepresentations

4343and false promises. The evidence is of sufficient weight to

4353convince the fact - finder, without hesitancy, as to the truth of

4365the specific allegations against each respondent. Inquiry

4372Concer ning a Judge No. 93 - 62 , 645 So. 2d 398, 404 (Fla. 1994);

4387Lee County v. Sunbelt Equities, II, Limited Partnership , 619 So.

43972d 996, 1006 n. 13 (Fla. 2d DCA 1993); Slomowitz v. Walker , 429

4410So. 2d 797, 800 (Fla. 4th DCA 1983)).

441857. Insurance agents enjoy th e benefit of public trust and

4429stand in a fiduciary relationship with their customers.

4437Natelson v. Department of Insurance , 454 So. 2d 31, 32 (Fla. 1st

4449DCA 1984). A person acting in a fiduciary capacity generally

4459has a duty to make a full and fair disclos ure of material facts

4473to the person reposing confidence in the fiduciary. Federal

4482Deposit Insurance Corporation v. Martin, et al. , 801 F. Supp.

4492617, 620 (Fla. Mid. Dist. 1992) (citations omitted).

450058. It is clear and convincing to the trier of fact tha t

4513the acts committed by the respondents were willful. Willfulness

4522is an issue of fact to be determined by the trier of fact.

4535Roche Security and Casualty Company, Inc. v. Department of

4544Financial Services, Office of Insurance Regulation , 895 So. 2d

45531139, 1 141 (Fla. 2d DCA 2005).

456059. The fact - finder is not persuaded by testimony from

4571Mr. Carll that he had "a lot of faith" in the representations

4583and assurances he received from Mr. Crain. Mr. Carll, as an

4594insurance agent, is required to disclose to a purcha ser material

4605facts Mr. Carll knew or should have known concerning

4614misrepresentations and false promises in the plan. Cf . Forgione

4624v. Dennis Pirtle Agency, Inc. , 701 So. 2d 557, 560 (Fla. 1997)

4636(insurance agent is required to use reasonable skill and

4645dilig ence in obtaining appropriate insurance coverage),

4652distinguished on other grounds , Cowan Liebowitz & Latman, P.C.

4661v. Kaplan , 902 So. 2d 755, 762 (Fla. 2005) (qualifying ruling in

4673Forgione that claims for legal malpractice are not assignable);

4682Moss v. Appel , 718 So. 2d 199, 201 (Fla. 4th DCA 1998)

4694(fiduciary relationship of insurance broker arises from

4701consulting relationship, and broker has duty to disclose to

4710insured material facts concerning insurer); Randolph v.

4717Mitchell , 677 So. 2d 976, 978 (Fla. 5th DC A 1996) (insurance

4729agent has obligation to disclose to insured material facts known

4739to agent); State Farm Life Insurance Company v. Bass , 605 So. 2d

4751908, 910 (Fla. 3d DCA 1992)(reliance of putative insured on

4761insurance agent's undertaking is sufficient to trigger duty upon

4770agent to exercise reasonable skill and care to obtain

4779appropriate coverage).

478160. Mr. Carll did not use reasonable skill and diligence

4791to determine that the plan he sold included misrepresentations

4800and false promises. Nor did Mr. Carll exercise ordinary

4809diligence, which would have disclosed the misrepresentations and

4817false promises in the plan. Mr. Carll's testimony that he

4827trusted the representations made to him by Mr. Crain does not

4838satisfy the requirement for Mr. Carll to exercise or dinary

4848diligence. Cf . Ramel v. Chasebrook Construction Company, Inc. ,

4857135 So. 2d 876, 881 (Fla. 2d DCA 1961) (a "representee" is

4869charged with knowledge of those facts he could have discovered

4879through ordinary diligence).

488261. The disposition of this case does not depend on a

4893finding that Mr. Crain, as principal, is liable for alleged

4903misrepresentations of the plan by Mr. Carll, as agent. Rather,

4913each respondent individually made willful misrepresentations and

4920false or worthless promises by respectively w riting and selling

4930the plan.

493262. Once Petitioner shows the respondents misrepresented

4939material facts and made false or worthless promises, Petitioner

4948is entitled to interpret the relevant statute to mean that such

4959acts demonstrate a lack of fitness or tru stworthiness to engage

4970in the business of insurance. An agency's interpretation of a

4980statute it is charged with enforcing is entitled to great

4990deference. Mack v. Department of Financial Services , 914 So. 2d

5000986, 989 (Fla. 1st DCA 2005).

500663. Petitioner a rticulated technical reasons for deference

5014to agency expertise. Johnston, M.D. v. Department of

5022Professional Regulation, Board of Medical Examiners , 456 So. 2d

5031939, 943 - 944 (Fla. 1st DCA 1984). The plan written by Mr. Crain

5045and sold by Mr. Carll contains contractual provisions that have

5055a "public interest" insurance element. Protection of the public

5064from "schemes, deceptions, and insolvencies of third parties" is

5073a valid policy reason for the statutory interpretation adopted

5082by Petitioner. Cf. Liberty C are Plan , 710 So. 2d at 207

5094(approving the cited principle but reversing declaratory

5101statement that home care plan was health insurance).

510964. The plan Mr. Crain wrote is similar to a home care

5121plan that was judicially determined in an unrelated proceeding

5130to be insurance. However, home care plans do not satisfy the

5141statutory definition of health insurance and are not regulated

5150by the legislature. Liberty Care Plan , 710 So. 2d at 205 - 206.

516365. A determination that the plan does not satisfy the

5173statutory d efinition of insurance would not change the

5182disposition of this case. Courts have held that a licensee may

5193demonstrate a lack of fitness or trustworthiness to engage in

5203the business of insurance by acts unrelated to the insurance

5213business. Compare Paisle y v. Department of Insurance , 526 So.

52232d 167 (Fla. 1st DCA 1988), and Natelson , 454 So. 2d at 32 (lack

5237of fitness demonstrated by felony convictions unrelated to

5245insurance), with Mack , 914 So. 2d at 988 - 989, and Ganter v.

5258Department of Insurance , 620 So. 2 d 202 (Fla. 1st DCA 1993)

5270(sale of auto club memberships are ancillary products).

527866. The statutory penalty for a violation of Subsection

5287626.611(7), is mandatory suspension for a period prescribed in

5296Florida Administrative Code Rule 69B - 231.080(7). The Rule

5305prescribes a suspension of six months for each offense but does

5316not authorize revocation. Deviation from a valid, existing rule

5325is grounds for remand by a reviewing court. § 120.68(7)(e)2.,

5335Fla. Stat. (2006). Compare Dyer v. Department of Insurance and

5345Treasurer , 585 So. 2d 1009 (Fla. 1st DCA 1991) (agency cannot

5356impose penalty not authorized by statute), with Roche Surety and

5366Casualty Company, Inc. v. Department of Financial Services,

5374Office of Insurance Regulation , 895 So. 2d 1139 (Fla. 2d DCA

5385200 5), and Cottrill v. Department of Insurance , 685 So. 2d 1371

5397(Fla. 1st DCA 1996) (penal statutes are strictly construed).

540667. Each respondent committed four separate violations of

5414Subsection 626.611(7), punishable by a license suspension of six

5423months. Several mitigating and aggravating factors must be

5431considered. Mr. Crain repaid some membership fees received by

5440Home Care. However, the respondents traded on their fiduciary

5449relationships for financial gain, which was substantial, as was

5458the financial loss to three of the purchasers. Each purchaser

5468is elderly and vulnerable.

5472RECOMMENDATION

5473Based on the foregoing Findings of Fact and Conclusions of

5483Law, it is

5486RECOMMENDED that Petitioner enter a final order finding the

5495respondents guilty of violating Sub section 626.611(7), for the

5504reasons stated herein, and suspending their licenses for

551224 months from the date the proposed agency action becomes

5522final.

5523DONE AND ENTERED this 31st day of January, 2007, in

5533Tallahassee, Leon County, Florida.

5537S

5538DANIEL MANRY

5540Administrative Law Judge

5543Division of Administrative Hearings

5547The DeSoto Building

55501230 Apalachee Parkway

5553Tallahassee, Florida 32399 - 3060

5558(850) 488 - 9675 SUNCOM 278 - 9675

5566Fax Filing (850) 921 - 6847

5572www.doah.state.fl.us

5573Filed with the Clerk of the

5579Division of Administrative Hearings

5583this 31st day of January, 2007.

5589ENDNOTES

55901/ See Liberty Care Plan v. Department of Insurance , 710 So. 2d

5602202, 205 - 206 (Fla. 1st DCA 1998).

56102/ It is unclear to the trier of fact whether the 1 .5 and 2.5 -

5626year benefit periods begins to run from the date of the request

5638for services and, therefore, includes the elimination period, or

5647begins to run on the first day after the expiration of the

5659elimination period.

56613/ Paragraph 11 of the Plan identif ied in the record as

5673Respondent, Crain's Exhibit 1 (RN - 1).

56804/ The plan also offers a prescription discount benefit that is

5691not material to the disposition of this case.

56995/ Mr. Carll and another selling agent were both involved in

5710the sale to Ms. McClur kin. The relative involvement of each

5721agent is not material to the disposition of the allegations

5731against Mr. Carll.

57346/ Ms. McClurkin turned 95 on January 12, 2007.

57437/ Ms. Frakes turned 90 on October 16, 2006.

57528/ Ms. Clareus turned 97 on September 1 7, 2006.

57629/ Bowling v. Department of Insurance , 394 So. 2d 165, 172

5773(Fla. 1st DCA 1981).

577710/ For example, paragraphs 8 and 10 of the administrative

5787complaints against Mr. Carll and Mr. Crain respectively allege

5796that the respondents:

5799. . . led the el derly consumer to believe

5809that they would receive both discount

5815homemaker/companion services and home

5819medical care services. . . . However, upon

5827closer reading, the Home Care membership

5833plan, despite its cost, only purports to

5840provide access to discount h omemaker service

5847providers and does not provide the actual

5854homemaker or home medical care services.

586011/ The plan actually misrepresents that it is not insurance,

5870but the administrative complaints do not include that allegation

5879as a ground for discipline. Rather, the administrative

5887complaints allege, inter alia , that the respondents

5894misrepresented the plan as insurance for home care services or

5904home medical care and collected "premiums" even though the plan

5914was not insurance and merely provided access to discounted home

5924care services. The issue of whether the plan satisfied the

5934statutory definition of insurance is not material to the

5943disposition of this case.

594712/ The elements of fraud are not material to the disposition

5958of this case. For reasons stated hereinafter, the trier of fact

5969finds that insurance agents who make false and worthless

5978promises to purchasers demonstrate a lack of fitness and

5987trustworthiness to engage in the business of insurance, within

5996the meaning of Section 626.611(7), irrespective of whether such

6005actions satisfy the elements of fraud.

601113/ The relevant allegations against Mr. Crain appear in the

6021Administrative Complaint in paragraphs 25, 27, 32, 34, 40, 42,

603148, and 50. The pertinent allegations against Mr. Carll appear

6041in the Adm inistrative Complaint in paragraphs 23, 25, 30, 32,

605238, 40, 46, and 48.

605714/ Liberty Care Plan , 710 So. 2d at 205 - 206.

606815/ It is unnecessary to resolve the factual dispute concerning

6078the economic feasibility of the discounts promised in the plan.

608816/ The parties devoted a substantial amount of hearing time to

6099the efforts of one purchaser to obtain services after she broke

6110her arm. The details of the ordeal are not relevant to the

6122disposition of this case.

612617/ Home Care made refunds to approximately ten purchasers.

6135Home care refunded membership fees to Ms. McClurkin and

6144Ms. Calreus. The remaining refunds were limited to what

6153Mr. Crain testified were "premium" overpayments or

6160miscalculations. TR at 616 - 617.

616618/ The expiration dates for the unuse d portion of the

6177membership fees at issue in this proceeding range between

6186February 2009 and March 2011.

6191COPIES FURNISHED :

6194Philip M. Payne, Esquire

6198David J. Busch, Esquire

6202Division of Legal Services

6206Department of Financial Services

6210200 East Gaines Stree t

6215Tallahassee, Florida 32399

6218Marc S. Nurik, Esquire

6222Patsy Zimmerman, Esquire

6225Genovese, Joblove & Battista

6229200 East Broward Boulevard, Suite 1110

6235Ft. Lauderdale, Florida 33301

6239Joan H. Donnelly, Esquire

62431290 North Palm Avenue, Suite 107

6249Sarasota, Flori da 34236

6253Honorable Alex Sink

6256Chief Financial Officer

6259Department of Financial Services

6263The Capitol, Plaza Level 11

6268Tallahassee, Florida 32399 - 0300

6273Daniel Summer, General Counsel

6277Department of Financial Services

6281The Capitol, Plaza Level 11

6286Tallahassee, F lorida 32399 - 0307

6292NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

6298All parties have the right to submit written exceptions within

630815 days from the date of this Recommended Order. Any exceptions

6319to this Recommended Order should be filed with the agency that

6330will i ssue the Final Order in this case.

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Date
Proceedings
PDF:
Date: 05/03/2007
Proceedings: Final Order filed.
PDF:
Date: 05/01/2007
Proceedings: Agency Final Order
PDF:
Date: 03/05/2007
Proceedings: Respondent James W. Crain, Jr.`s Response to Petitioner`s Exception to Conclusion of Law and Recommendation in the Recommended Order Filed by the Administrative Law Judge filed.
PDF:
Date: 02/20/2007
Proceedings: Respondent James W. Crain, Jr.`s Exceptions to the Administrative Law Judge`s Recommended Order filed.
PDF:
Date: 02/15/2007
Proceedings: Petitioner`s Exception to Conclusion of Law and Recommendation in the Recommended Order filed by the Administrative Law Judge filed.
PDF:
Date: 02/08/2007
Proceedings: Letter to P. Payne from Judge Manry enclosing Department`s Exhibits numbered P-2, P-6, P-7, P-8, and P-14, which are being returned for your records.
PDF:
Date: 01/31/2007
Proceedings: Recommended Order
PDF:
Date: 01/31/2007
Proceedings: Recommended Order (hearing held October 10-12, 2006). CASE CLOSED.
PDF:
Date: 01/31/2007
Proceedings: Recommended Order cover letter identifying the hearing record referred to the Agency.
PDF:
Date: 12/27/2006
Proceedings: Proposed Recommended Order (filed in Case No. 06-002097PL).
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Date: 12/26/2006
Proceedings: Notice of Filing, Respondent`s Proposed Recommended Order.
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Date: 12/26/2006
Proceedings: Notice of Attorney Absence filed.
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Date: 12/26/2006
Proceedings: Petitioner`s Proposed Recommended Order filed.
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Date: 12/22/2006
Proceedings: Respondent`s Proposed Recommended Order filed.
Date: 11/27/2006
Proceedings: Reporter`s Transcript of Proceedings (Volumes 1-6) filed.
Date: 10/10/2006
Proceedings: CASE STATUS: Hearing Held.
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Date: 10/04/2006
Proceedings: Pre-hearing Stipulation filed.
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Date: 09/25/2006
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Date: 09/18/2006
Proceedings: Notice of Taking Deposition filed.
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Date: 09/15/2006
Proceedings: Re-notice of Taking Deposition filed.
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Date: 09/07/2006
Proceedings: Petitioner`s Application and Notice to use Deposition at Final Hearing filed.
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Date: 09/06/2006
Proceedings: Notice of Taking Deposition (M. Carll) filed.
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Date: 09/06/2006
Proceedings: Notice of Taking Deposition (J. Crain, Jr.) filed.
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Date: 09/05/2006
Proceedings: Re-notice of Taking Deposition filed.
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Date: 08/25/2006
Proceedings: Subpoena Duces Tecum (H. Hall) filed.
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Date: 08/24/2006
Proceedings: Notice of Taking Deposition (M. Carll) filed.
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Date: 08/24/2006
Proceedings: Notice of Taking Deposition (J. Crain, Jr.) filed.
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Date: 08/24/2006
Proceedings: Notice of Taking Deposition (C. Clareus, R. Frakes and E. Muller) filed.
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Date: 08/21/2006
Proceedings: Notice of Taking Deposition filed.
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Date: 08/03/2006
Proceedings: Notice of Filing Respondent`s Discovery Requests and Responses filed.
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Date: 08/01/2006
Proceedings: Order Granting Continuance and Re-scheduling Hearing (hearing set for October 10 through 13, 2006; 9:00 a.m.; Sarasota, FL).
PDF:
Date: 07/31/2006
Proceedings: Petitioner`s Notice of Filing Petitioner`s Response to Respondent Carll`s First Request for Production of Documents filed.
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Date: 07/31/2006
Proceedings: Petitioner`s Notice of Filing Petitioner`s Response to Respondent Carll`s First Set of Interrogatories filed.
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Date: 07/27/2006
Proceedings: Petitioner`s Notice of Filing Petitioner`s Response to Respondent Crain`s First Request for Production of Documents filed.
PDF:
Date: 07/27/2006
Proceedings: Petitioner`s Notice of Filing Petitioner`s Response to Respondent Crain`s First Set of Interrogatories filed.
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Date: 07/27/2006
Proceedings: Petitioner`s Response to Respondent Crain`s First Set of Requests for Admissions filed.
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Date: 07/21/2006
Proceedings: Joint Motion for Continuance filed.
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Date: 06/30/2006
Proceedings: Petitioner`s Notice of Filing First Request for Production of Documents filed.
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Date: 06/27/2006
Proceedings: Order of Pre-hearing Instructions.
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Date: 06/27/2006
Proceedings: Notice of Hearing (hearing set for August 8 and 9, 2006; 9:00 a.m.; Sarasota, FL).
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Date: 06/27/2006
Proceedings: Order of Consolidation (DOAH Case Nos. 06-2096PL and 06-2097PL).
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Date: 06/22/2006
Proceedings: Joint Response to Initial Order filed.
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Date: 06/15/2006
Proceedings: Administrative Complaint filed.
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Date: 06/15/2006
Proceedings: Petition for Formal Administrative Hearing Involving Disputed Issues of Material Fact filed.
PDF:
Date: 06/15/2006
Proceedings: Agency referral filed.
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Date: 06/15/2006
Proceedings: Initial Order.

Case Information

Judge:
DANIEL MANRY
Date Filed:
06/15/2006
Date Assignment:
10/02/2006
Last Docket Entry:
05/03/2007
Location:
Sarasota, Florida
District:
Middle
Agency:
ADOPTED IN PART OR MODIFIED
Suffix:
PL
 

Counsels

Related Florida Statute(s) (4):