06-003262PL Department Of Financial Services vs. Paula Evelyn Beckett Status: Closed Recommended Order on Thursday, December 28, 2006.

Summary: Recommend a 60-day suspension of Respondent`s insurance customer representative license.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES , )

)

Petitioner , )

)

vs. ) Case No. 06 - 3262PL

)

PAULA EVELYN BECKETT , )

)

Respondent . )

)

RECOMMENDED ORDER

Pur suant to notice, a final hearing was conducted in this

case on November 7, 2006, in St. Petersburg, F lorida , before

Administrative Law Judge R. Bruce McKibben of the Division of

Administrative Hearings.

APPEARANCES

For Petitioner: Greg S. Marr, Esquire

William Gautier Kitchen, Esquire

Department of Financial Services

Division of Legal Services

200 East Gaines Street

Tallahassee, Florida 323 99 - 0333

For Respondent: L. Michael Billmeier, Jr., Esquire

Clyde W. Gallowa y, Jr., Esquire

Galloway, Brennan & Billmeier

240 East Fif th Avenue

Tallahassee, Florida 32303

STATEMENT OF THE ISSUE S

The issue s in this case are whether Respondent violated

Subsections 624.11(1) ; 626.611(4), (7), (9) , and (13) ;

626.21 (2), (3) , and (6) ; and 626.9541(1)(z) , Florida Statutes

(2005) , 1 and , if so, what discipline should be imposed.

PRELIMINARY STATEMENT

Petitioner filed an Administrative Complaint on or about

August 3, 2006, alleging certain violations against Respondent,

a licensed customer representative. Respondent filed a petition

seeking a formal administrative hearing to contest the

allegations set forth in the Administrative Complaint.

The Administrative Complaint contained four

counts, alleging as follows:

Co unt I – Respondent sold Amber Battle an

Accidental Medical Protection Plan without

Battle’s informed consent.

Count II – Respondent sold Colleen Bailey an

Accidental Medical Protection Plan without

Bailey’s informed consent.

Count III – Respondent sol d Noweta Sanchez

an Accidental Medical Protection Plan

without Sanchez’ informed consent.

Count IV – Respondent sold Noweta Sanchez a

Travel Protection Plan without Sanchez’

informed consent.

At the final hearing held on November 7 , 2006, the parties

s tipulated to seven pre - marked exhibits, all of which were

accepted into evidence as joint exhibits. P etitioner presented

the testimony of three witnesses in its case in chief, recalling

one of those witnesses and one new witness in rebuttal .

Respondent c alled one witness at final hearing .

At the close of the evidentiary portion of the final

hearing, the parties requested and were allowed 10 days from the

filing of the hearing transcript within which to file their

respective proposed recommended orders. T he one - volume

Transcript of the hearing was filed on November 22 , 2006. B oth

parties filed Proposed Recommended Orders containing proposed

findings of fact and conclusions of law on December 14 , 2006 .

The parties' proposals have been carefully considered during the

preparation of this Recommended Order.

FINDINGS OF FACT

1. Petitioner is the state agency responsible for

investigating possible violations of the Florida Insurance Code.

2. Respondent , at all times relevant to this case , was

licensed as a customer representative (license number A306050)

by the Department of Financial Services. Respondent has been

employed by Direct General Insurance Agency, Inc. (hereinafter

"Direct") , a Tennessee corporation doing business in Florida as

Florida No Fault I nsurance, for over 20 years.

3. Respondent's duties include meeting with potential

customers, writing policies, taking payments, doing renewals,

changing policies , and endorsements, etc. She generally meets

with between six and eight customers each day, on average. Most

customers presenting themselves to Respondent want only the

basic coverage necessary to lawfully operate their vehicles. In

the industry, t his is commonly called "tag insurance . "

4. The normal pattern followed by Respondent when meet ing

with customers is to obtain general information from the

customer, put that information into her computer, ask the person

what kind of coverage they want, and then print out a quote and

the insurance documents.

5. Whether the customer asks for it or not, Respondent

generally provides a quote for tag insurance plus some other

ancillary coverage, e.g. , Travel Protection Plan (which is

called "rental insurance"), Accident Medical Protection Plan

(called "hospital insurance"), and others. She also gener ally

provides customers an opportunity to obtain a pre - paid Visa card

through the agency.

6. After printing out the insurance documents, Respondent

would normally go over the documents with the customer. The

review would be somewhat superficial , and sh e would not explain

each section unless the customer asked her questions. She

admits that sometimes insurance forms are confusing and that

most customers would not have the necessary background or

knowledge to formulate questions about the coverage.

7. Respondent is under pressure from her employer to offer

and sell as many ancillary insurance products as possible. She

does not receive a commission on various products she sells, but

failure to sell such products is deemed unacceptable by her

employer. While she has no direct financial incentive to sell

additional coverages to customers, she knows her employer

expects her to offer those coverages.

8. In February 2005 Respondent sold insurance to Noweta

Sanchez. Sanchez had previously purchased insu rance from

Direct. Sanchez told Respondent she wanted the minimal

insurance necessary to legally operate her newly purchased

automobile. Respondent , in turn , provided a quote for tag

insurance, but also included hospital and rental insurance in

the quote .

9. Sanchez looked at the insurance forms , but did not read

them; she was in a hurry and relied on Respondent to provide

only what she asked for. Respondent did not prevent Sanchez

from reading the forms, but did not offer any unsolicited

explanations about them either. Sanchez signed or initialed the

documents in 26 separate places. Respondent says she then went

over a handwritten summary of the coverage (the "pen sheet")

with Sanchez. Sanchez has no recollection of seeing the pen

sheet even though her signature appears at the bottom of the

page.

10. At the time she met with Respondent, Sanchez was

unable to afford anything but tag insurance. That is all

Sanchez believed she had purchased until she was contacted by an

agent of Petitioner . S anch ez then attempted to have her policy

cancelled and her money refunded, but was told that her window

of opportunity for cancellation had closed. Sanchez’ testimony

was credible as to her interaction with Respondent.

11. In December 2004, Respondent sold i nsurance to Amber

Battle. Battle was approximately 19 years old at the time , and

had chosen Respondent after making inquiries from several

agencies and getting the best quote from Respondent’s agency via

telephone. Battle told Respondent’s agency that sh e wanted tag

insurance only.

12. When Battle met personally with Respondent, the

written insurance quote she received was higher than what she

had been quoted on the telephone. She did not read (and

probably would not have understood) the insurance do cuments that

she signed. She simply signed and initialed each page where

Respondent indicated. Battle signed or initialed the documents

in 29 separate places. Battle trusted Respondent to provide

only the insurance she requested.

13. After printing t he insurance documents, Respondent

went over the pen sheet with Battle. However, Battle has no

recollection of seeing the pen sheet even though she signed it

at the bottom. The Battle pen sheet includes a phrase which has

an asterisk, and is circled and underlined. It says "FLA. TAG

INS. ONLY." Also, under her signature there is another asterisk

and the phrase "NO Bodily Injury."

14. At the time she obtained insurance coverage from

Respondent, Battle was employed and had health insurance

coverage. Battle had no need for hospital coverage along with

her tag insurance. Battle's testimony was credible as to her

interaction with Respondent.

15. In January 2005, Respondent sold insurance to Colleen

Bailey, a married woman. Bailey came to Respondent seeking

insurance on two cars, a Durango and a Grand Am. The Durango

was used primarily by her husband as a work vehicle. She sought

full coverage on the Durango and tag insurance on the Grand Am.

16. The Baileys self - insure themselves for medical ca re.

They opt not to purchase health insurance , but rather pay cash

whenever health care is necessary. It was not Bailey's

intention to purchase hospital coverage along with her auto

insurance.

17. After providing background information to Respondent,

Bailey was presented the insurance documents for signing.

Bailey was not prevented from reviewing them, but did not

understand "this insurance stuff" so reading them wouldn't have

helped her. Bailey sign ed or initial ed the documents in 25

separate places . Bailey simply relied on Respondent to provide

only what she asked for.

18. Respondent prepared a pen sheet for Bailey which

summarizes the purchased insurance. Bailey has no recollection

of seeing the pen sheet even though her signature appears on i t.

Her testimony was credible as to her interaction with

Respondent.

19. Respondent has a general routine she goes through with

each client, but she deviates from the routine at times. Part

and parcel to the routine is the offering of ancillary insura nce

products. Such products are generally included in every quote

she gives a customer even when the customer specifically

requests only the minimum coverage.

20. Respondent is aware that most of her customers do not

fully understand insurance matters . She knows that most

customers do not fully review the written insurance documents.

She is cognizant that the purchase of insurance is confusing to

many of her customers. Thus, she is at an advantage when

dealing with her customers.

21. The documen ts relating to Optional Travel Protection

and Accident Medical Protection plans are clearly labeled. A

person of normal intelligence would be able to read the labels

and probably ascertain that such plans were optional coverages.

However, such person wou ld need to be able to distinguish and

differentiate between the minimal insurance coverage

documentation and the documents addressing additional coverage.

Moreover, such person would probably need to anticipate the

inclusion of ancillary products in order to parse them out of

the confusing and overwhelming insurance documents.

22. While she never prohibits the customer from fully

reviewing the written documents, she does not encourage them to

do so either. Likewise, while she will respond to all questio ns

asked by a customer, she does not offer unsolicited information

that might help the customer understand better what they are

receiving.

23. It is unlikely the three customers who appeared in

this matter took the time or made the effort to read all the

documents they signed in order to determine exactly what

coverage to which they were agreeing. Rather, they seemed to

rely on Respondent to give them what they asked for.

Respondent, however, intentionally provided them more than they

asked for, leaving it to them to distinguish the coverages.

CONCLUSIONS OF LAW

24. The Division of Administrative Hearings has

jurisdiction over the parties to and the subject matter of this

proceeding pursuant to Section 120.569 and Subsection 120.57(1),

Florida Statute s (200 6 ) .

25. This is a disciplinary case , therefore Petitioner has

the burden to prove allegations in the Administrative Complaint

by clear and convincing evidence. See Department of Banking and

Finance, Division of Investor Protection v. Osborne Stern and

Company , 670 So. 2d 932 (Fla. 1996); Ferris v. Turlington , 510

So. 2d 292 (Fla. 1987); and Pou v. Department of Insurance and

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

26. The following provisions of the Florida Statutes are

relevant to this mat ter:

Subsection 624.11(1) - - No person shall

transact insurance in this state, or

relative to a subject of insurance resident,

located, or to be performed in this state,

without complying with the applicable

provisions of this code.

Subsection 626.611 - - The department shall

deny an application for, suspend, revoke, or

refuse to renew or continue the license or

appointment of any applicant, agent , title

agency, adjust er , customer representative,

service representative, or managing general

agent, and it s hall suspend or revoke the

eligibility to hold a license or appointment

of any such person, if it finds that as to

the applicant, licensee, or appointee any

one or more of the following applicable

grounds exist:

* * *

(4) If the license or appointm ent is

willfully used, or to be used, to circumvent

any of the requirements or prohibitions of

this code.

* * *

(7) Demonstrated lack of fitness or

trustworthiness to engage in the business of

insurance.

* * *

(9) Fraudulent or dishonest prac tices in

the conduct of business under the license or

appointment.

* * *

(13) Willful failure to comply with, or

willful violation of, any proper order or

rule of the department or willful violation

of any provision of this code.

Subsection 626.2 1 -- The department may, in

its discretion, deny an application for,

suspend, revoke, or refuse to renew or

continue the license or appointment of any

applicant, agent, adjuster, customer

representative, service representative, or

managing general agent, a nd it may suspend

or revoke the eligibility to hold a license

or appointment of any such person, if it

finds that as to the applicant, licensee, or

appointee any one or more of the following

applicable grounds exist under circumstances

for which such denia l, suspension,

revocation, or refusal is not mandatory

under s. 626.611:

* * *

(2) Violation of any provision of this code

or of any other law applicable to the

business of insurance in the course of

dealing under the license or appointment.

(3) V iolation of any lawful order or rule

of the department, commission, or office.

* * *

(6) In the conduct of business under the

license or appointment, engaging in unfair

methods of competition or in unfair or

deceptive acts or practices, as prohibit ed

under part IX of this chapter, or having

otherwise shown himself or herself to be a

source of injury or loss to the public.

Subsection 626.9541(1) -- The following are

defined as unfair methods of competition and

unfair or deceptive acts or practices:

* * *

(z) Sliding. Sliding is the act or practice

of:

1. Representing to the applicant that a

specific ancillary coverage or product is

required by law in conjunction with the

purchase of insurance when such coverage or

product is not required.

2. Representing to the applicant that a

specific ancillary coverage or product is

included in the policy applied for without

an additional charge when such charge is

required; or

3. Charging an applicant for a specific

ancillary coverage or product, in addition

to the cost of the insurance coverage

applied for, without the informed consent of

the applicant.

27. The evidence is less than clear and convincing that

Respondent violated the provisions of Subsection 626.611,

Florida Statutes, and there is no basis for a compulsory

suspension or revocation of Respondent's license.

28. The question is whether Respondent added ancillary

products to the three aggrieved customers' orders without their

informed consent. Clearly each customer had the oppor tunity to

review the insurance documents, but none of them professed the

ability to understand what they would have read.

29. Thomas v. State of Florida, Department of Insurance

and Treasurer , 559 So. 2d 419 (Fla. 2d DCA), rev. denied , 570

So. 2d 1307 ( Fla. 1990), is cited by both parties. The case

stands for the general proposition that an insurance agent’s

failure to orally explain that additional products were optional

was a violation of the insurance code. In the instant case, the

issue is whether the oral explanation provided by Respondent was

sufficient. That is, was Respondent’s explanation of coverage

enough to constitute informed consent by her customers?

30. Respondent had a fiduciary responsibility to her

customers. Natelson v. Departmen t of Insurance , 454 So. 2d 31

(Fla. 1st DCA 1984). She should have honored their request for

a quote containing tag insurance only. Failing that, she should

have clearly explained that ancillary products had been included

in the quote. Her actions are s omewhat mitigated by the fact

that her employer encouraged and expected her to offer

additional products to each and every customer. She was a long -

time employee and felt pressure to comply with her employer's

directives.

31. Based upon the evidence p resented and the credibility

of the witnesses, it is clear none of the customers in this case

were fully made aware of the additional products they purchased.

Although Respondent did not fraudulently misrepresent the quotes

she provided to each customer, she did not effectively inform

them as to ancillary products contained in the insurance

documents. There is clear and convincing evidence to support

the charge of sliding.

32. Petitioner met its burden of proving the allegations

in the Administrative C omplaint concerning unfair or deceptive

acts performed by Respondent.

33. The fact that each of the customers failed to

recognize the pen sheet containing their signatures even though

each of them verified the signatures contained thereon, raises

some q uestion concerning the validity of the pen sheets.

However, there was no clear and convincing evidence presented to

support a finding that the pen sheets were fraudulent or

otherwise improper.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that a final order be entered by the Department

of Financial Services suspending the license of Respondent for a

period of 60 days.

DONE AND ENTER ED this 28th day of December , 2006 , in

Tallahassee, Leon County, Fl orida.

S

R. BRUCE MCKIBBEN

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 - 684 7

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 28th day of December , 2006 .

ENDNOTE

1/ All references to Florida Statutes are to Florida Statutes

(200 5 ), unless otherwise indicated.

COPIES FURNISHED :

Greg S. Marr, Esquire

William Gautier Kitchen, Esquire

Department of Financial Services

Division of Legal Services

200 East Gaines Street

Tallahassee, Florida 32399 - 0333

L. Michael Billmeier, Esquire

Clyde W. Galloway, Jr., Esquire

Galloway, Brennan & Bill meier

240 East Fif th Avenue

Tallahassee, Florida 32303

Honorable Tom Gallagher

Chief Financial Officer

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0300

Carlos G . Muñiz , General Counsel

Department of Financia l Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0300

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

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

to this Recommen ded Order should be filed with the agency that

will issue the Final Order in this case.