06-004202PL Department Of Financial Services vs. Jack Alexander, Jr. Status: Closed Recommended Order on Friday, June 22, 2007.

Summary: Clear and convincing evidence was shown on one of three counts against Respondent for failing to inform an insurance customer as to problems associated with her application for homeowner insurance in which she mistakenly thought her home was insured.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES , )

)

Petitioner , )

)

vs. ) Case No. 06 - 4202PL

)

JACK ALEXANDER, JR. , )

)

Respondent . )

)

RECOMMENDED ORDER

A f ormal evidentiary hearing was conducted on March 28,

2007, in Port Charlotte, Florida, before Bram D.E. Canter, an

Administrative Law Judge of the Division of Administrative

Hearings (DOAH).

APPEARANCES

For Petitioner: David J. Busch, Esquire

Department of Financial Services

Division of Legal Services

612 Larson Building

200 East Gaines Street

Tallahassee, Florida 32399 - 0333

For Respondent: Jed Berman, Esquir e

Infantino and Berman

P ost O ffice Box 30

Winter Park, Florida 32790 - 0030

STATEMENT OF THE ISSUES

The issues in this case are whether Respondent is guilty of

violating provisions of the Florida Insurance Code as charge d in

Petitioner's Amended Administrative Complaint , and, if so, what

penalty should be imposed.

PRELIMINARY STATEMENT

On September 27, 2006, Petitioner issued a three - count

Administrative Complaint against Respondent, a licensed

insurance agent, charging Respondent with mishandling and

misappropriating the insurance premiums of three customers.

Respondent disputed the factual allegations of the

Administrative Complaint , and the matter was referred to DOAH to

conduct a formal hearing. Petitioner was subse quently granted

leave to amend its complaint and the Amended Administrative

Complaint was filed with DOAH on January 23, 2007.

At the final hearing, Petitioner presented the testimony of

Anthony Wiley, Annette Wiley, Cecilia Hembree, Vicki Ruggiano,

and H oward Johnston , Jr . Petitioner's Exhibits 5 through 9, 13

through 17, 21, 23, 36, and 37 were admitted into evidence. 1

The undersigned excluded page 31 of Petitioner's Exhibit 15

on the misunderstanding that page 31 was a cost estimate for

certain repair work, rather than evidence of actual costs paid

by one of the insurance customers. In preparing this

Recommended Order, the undersigned discovered that page 31

indicates that the costs described were paid (which is further

supported by testimony) and the document should have been

admitted along with the other evidence of actual costs paid.

Therefore, page 31 has now been admitted into evidence.

Respondent testified on his own behalf and presented the

testimony of Robert Schmidt and Jack Alexander, Sr. Respondent

offered no exhibits into evidence.

The Transcript of the final hearing was filed with DOAH.

The parties filed Proposed Recommended Orders which have been

carefully considered in the preparation of this Recommended

Order.

FINDINGS OF FACT

1. P etitioner is the state agency with the statutory

authority and duty to license and regulate insurance agents.

2. Respondent holds L icense No. A003228 as a General Lines

(Property & Casualty 2 - 20) insurance agent in Florida. He first

received the license in 1998.

3. Respondent's license has not previously been the

subject of disciplinary action by Petitioner.

4. Since receiving his license, Respondent has

continuously worked as an insurance agent and as a salaried

employee of Insurance Depot of Charlotte County (Insurance

Depot), which is located in Port Charlotte, Florida.

5. Insurance Depot is solely owned and operated by

Respondent's father, Jack Alexander, Sr. Respondent is n ot a

co - owner , officer , or director of Insurance Depot.

6. Among the types of insurance sold by Respondent at

Insurance Depot is homeowners insurance. The normal procedure

followed by Respondent when selling homeowners insurance i s to

first obtain some basic information from the customer about his

or her home, either over the t elephone or in person; determine

what insurance company or companies represented by Insurance

Depot were likely to have the lowest rates for the particular

type of home; check the rate schedules of the selected

companies; and give the customer a rate quote .

7. If the quoted rate is acceptable to the customer, an

application form i s either filled out by hand or, for some

insurance companies that provided software application forms,

the application form i s word - processed on a computer and then

printed out. The application form is then s igned by Respondent

and the customer.

8. The insurance companies represented by Insurance Depot

require a premium payment , as well as certain additional

documentation , in order to issue a homeowners ' insurance policy.

The in surance companies involved in this case require

photographs of the home to be insured.

9. The agents at Insurance Depot ask customers to provide

the photographs, and Insurance Depot has two or three Polaroid

cameras to lend to customer s who do not have ca meras .

Petitioner elicited testimony from two insurance company

representatives that they prefer the photographs to be taken by

the agents, rather than by the homeowners. Despite this

preference, the insurance companies routinely accept photographs

taken by homeowners.

10. Respondent testified that he always tells the

prospective customers when he is preparing the insurance

application form that photographs are needed. That testimony

was disputed by three witnesses who said they were not asked to

provid e photographs when t hey met with Respondent at Insurance

Depot to apply for insurance. Respondent's testimony is more

persuasive , because it is unlikely that he would fail to ask for

photographs when they are always needed.

11. Respondent testified that i f a customer applied for

insurance and paid a premium, it was his usual practice to turn

the customer's file over to the clerks in the office for further

processing, which would include sending the signed application

form, other documentation, and the pre mium payment to the

insurance company. In the case of customers who had not yet

provided photographs or other required information, the

application was sometimes held until the information was

submitted by the customer so that the application was complete

when it was sent to the insurance company . The clerks would

follow up with the customers to make sure the photographs or

other information w as submitted. Respondent is not the

supervisor of the clerks .

12. How soon coverage is "bound" depends on the

re quirements or policies of the various insurance companies. In

some cases, coverage is bound immediately, but will be cancelled

by the insurance company if it does not receive all of the

information it requires within a specified time period, such as

30 da ys. When the insurance is cancelled because the

application is incomplete , it is sometimes "flat cancelled,"

which means the insurance company does not recognize coverage to

ever have been bound.

Annette and Anthony Wiley 2

13. The Wileys live in Arcadia. They went to Insurance

Depot on February 6, 2004, to obtain automobile insurance.

While they were there, they inquired about insuring their mobile

home and were directed to Respondent for assistance.

14. The Wileys asked Respondent for a rate quote to insure

their mobile home for $42,000. The Wileys were satisfied with

the rate Respondent quoted for American Reliable Insurance

Company (American Reliable). The Wileys gave Respondent $189 as

a down payment on the annual premium of $533 , and Respondent a nd

Anthony Wiley signed a contract to finance the balance with

Duval Premium Budget, Inc. Insurance Depot acts as a gent for

the financing company.

15. Counsel for Respondent points out that no insurance

application form for the Wileys was offered into ev idence, but

Respondent testified that there "absolutely" was an application

prepared for the Wileys , and they did not dispute that there was

an application.

16. When the contract with the financing company was

signed, Respondent created a document which c ontained a check

("draft") in the amount of $533 made out to American Reliable

and Irvin B. Green & Associates (I.B. Green) . I.B. Green is the

managing agent for a number of insurance companies, including

American Reliable. The document indicates that th e policy

number is "Pending." The document is perforated so that it can

be divided into three parts: the check and two identical

receipts, one for Insurance Depot and the other for the Wileys,

showing the draft number, down payment, and policy premium

ba lance. The document was never divided. The draft was never

sent to American Reliable or I.B. Green.

1 7 . Respondent told the Wileys he needed photographs of

their home to send to the insurance company. Respondent

testified that when the Wileys left his office, he put their

file "in the pending status on my dad's desk" to await the

photographs.

1 8 . The re is a "Producer Agreement" between I.B. Green and

Insurance Depot , which includes a statement that Insurance Depot

will "transmit promptly to [I.B. Green ] complete applications

and binders for all insurance made along with all premiums,

taxes, and applicable expenses or fees required." Petitioner

alleged in its Amended Administrative Complaint that Respondent

did not forward the Wileys' application and pr emium to I.B.

Green in accordance with the Producer Agreement. However,

Petitioner 's witness, Howard Johnston, Jr., the executive vice

president of I.B. Green, was not asked whether he believed

Insurance Depot had violated the requirement in the Producer

Agreement for prompt transmission of the complete application in

the matter of the Wileys. Mr. Johnston might have considered it

to be acceptable under the Producer Agreement for the agents at

Insurance Depot to wait until applications were complete befor e

transmitting them to I.B. Green.

19 . Mr. Johnston testified that I.B. Green never received

the insurance application or other paperwork for the Wileys.

2 0 . The Wileys thought their mobile home was insured when

they left Insurance Depot on February 6, 2004. They continued

to believe they were insured , even though months went by without

the ir ever receiving an insurance policy in the mail or a coupon

book to make monthly payments to the financing company. They

never made another premium payment afte r their down payment.

2 1 . Mr. Wiley testified that the Wileys did not make

another premium payment because "they said not to make a payment

right now." 3

2 2 . Mr. Wiley hand - delivered his car insurance payments to

Insurance Depot each month, but when doing so, he never inquired

about the status of his home insurance policy.

2 3 . Mr. Wiley testified that some time in July 2004, five

months after the Wileys applied for homeowner insurance, a woman

called to ask for photographs of the Wileys' home. A reasonab le

inference from the record evidence is that the person who called

was one of the clerks at Insurance D epot. 4

2 4 . The Wileys testified that they took photographs of

their home soon after the telephone call , and they took the

photographs to Insurance Depo t. Mrs. Riley said Respondent was

not in , and she gave the photographs to Robert Schmidt, another

insurance agent employed by Insurance Depot, who placed the

photographs on Respondent's desk. Mr. Schmidt does not remember

seeing Ms. Riley or accepting ph otographs from anyone to give to

Respondent.

2 5 . Hurricane Charley hit Florida on August 13, 2004. It

destroyed the Wileys' mobile home. Mr. Wiley testified that

they still owed about $45,000 on the mobile home that was

destroyed.

2 6 . After the hurrica ne, the Wileys' went to Insurance

Depot to make a claim for the loss of their mobile home. They

were informed by Jack Alexander, Sr., that they had no insurance

coverage. They did not speak to Respondent.

2 7 . A Federal Emergency Management Agency (FEMA)

representative advised the Wileys to get a written statement

from Insurance Depot about their lack of insurance coverage ,

which FEMA would use to determine whether the Wileys qualified

for federal disaster assistance. Mr. Wiley received a written

stateme nt from Jack Alexander, Sr., that states in part:

Due to a mix up or miss communication [sic]

due to the insurance company never receiving

pictures of her home the policy was never

bound by the company.

2 8 . The Wileys received a FEMA grant of $19,000 , w hich

they used as a down payment to purchase a new mobile home.

29 . Jack Alexander, Sr., repaid the Wileys the $189

premium down payment they had given Respondent in February 2004.

Cecilia Hembree

3 0 . Cecilia Hembree resides in Port Charlotte and owns her

single - family residence.

3 1 . Ms. Hembree testified that she visited Insurance Depot

in December 2003 , and Respondent assisted her in applying for

homeowners insurance. Before she left Insurance Depot that day,

she paid the annual premium in full wit h a check in the amount

of $728.

3 2 . Ms. Hembree testified that sometime in January 2004,

she became concerned when she had not received an insurance

policy for her home. She testified that she spoke to

Respondent , and he informed her that the policy ha d been mailed

to her, but he would mail it again. She never got a copy of the

policy in the mail. Respondent was not questioned about the

alleged January 2004 conversation with Ms. Hembree.

3 3 . Neither Respondent nor Ms. Hembree was asked to

explain ho w a Federated National Insurance Company (Federated)

application form signed by Respondent and Ms. Hembree on

February 10, 2004 (Petitioner' Exhibit 23), came into existence.

No earlier application was presented. Without an explanation in

the record, it is found that Ms. Hembree was mistaken about the

date she applied for insurance. She did not apply in December

2003, but on February 10, 2004. Similarly, it is found that

Ms. Hembree was mistaken about calling Respondent in January

2004 to inquire about her policy. If she made such an inquiry,

it must have been after February 10, 2004.

3 4 . Ms. Hembree testified that Respondent did not ask for

photographs of her home on the day she applied for insurance,

but she got a call from Respondent "a couple of d ays later" in

which he told her that he needed photographs "by the end of the

week." Respondent testified that it is his regular practice to

ask customers for photographs when he first meets with them ,

because photographs are always required by the insura nce

companies and that he asked Ms. Hembree for photographs on the

first day he met with her. To the extent that it is material,

it is found that Respondent asked for photographs at their first

meeting.

3 5 . Ms. Hembree testified that she went to Insuran ce Depot

the same day she was asked for the photographs and gave the

photographs to Respondent after waiting for him to finish with

another customer. Respondent testified that he remembered

Ms. Hembree coming into Insurance Depot, waiting for a while,

and then leaving without seeing him. He claims she never gave

him photographs.

3 6 . Respondent's testimony on this point is problematic

because he saw and recognized Ms. Hembree and should have

understood that she was there to give him the photographs he ha d

requested. Yet, he did not describe any effort on his part to

get the photographs from Ms. Hembree before she left.

Furthermore, it is difficult to believe that Ms. Hembree made a

trip to Insurance Depot to give Respondent the photographs, but

left wit hout giving the photographs to Respondent or asking

someone in the office to give them to Respondent or ever

returning thereafter with the photographs. Finally, Respondent

did not mention the issue of missing photographs in his

subsequent discussions with Ms. Hembree that are discussed

below. Therefore, it is found that Ms. Hembree provided

photographs to Respondent, probably in February 2004.

3 7 . Unlike American Reliable, Federated had an internet

website that its authorized agents could use to prepare

applications and generate a declaration page showing the basic

terms of coverage. Insurance coverage was bound for Ms. Hembree

on February 10, 2004, subject to later cancellation by

Federated.

3 8 . Federated never received the signed application form

or Ms. Hembree's check for $728.

39 . Ms. Hembree did not reconcile her bank statements

during this period and did not notice that the check had never

come to her bank for payment , and the amount was not deducted

from her checking account.

4 0 . Vicki Ruggi ano, an underwriting supervisor at

Federated, testified that when the webpage interface with

Federated is used by an agent to generate an application and

declaration page, the software system automatically triggers a

cancellation notice in 30 days if all r equired documentation has

not been received by Federated. Federated issued a Notice of

Cancellation of Ms. Hembree's policy on March 9, 2004. The

notice indicated "No application/premium received."

4 1 . Respondent testified that he was never informed ab out

Federated's cancellation of Ms. Hembree's policy.

4 2 . Ms. Hembree testified that on or about March 23, 2004,

she noticed that her bank had made a large withdrawal from her

checking account to purchase insurance coverage. Ms. Hembree

inquired about t he withdrawal , and she was told that the bank

purchased insurance for her home because they had no evidence

that she had obtained insurance coverage. 5

4 3 . Ms. Hembree then called Respondent to tell him what

the bank told her , and Respondent said he had m ailed the bank

proof of coverage, but he would do it again. Ms. Hembree told

Respondent she had never received an insurance policy and asked

Respondent to "fax" proof of insurance to her and to the bank.

Respondent sent her the declaration page for Ms. H embree's

Federated policy that he downloaded from the Federated website.

4 4 . On the same date, Respondent told Ms. Hembree she

would have to sign a "no loss statement." Respondent provided

Ms. Hembree with a no loss statement form on Insurance Depot

l etterhead, which contained a Federated policy number, and the

following statement:

I, [space provided for insured's name], as a

condition precedent to the reinstatement of

my policy, state that no losses have

occurred for which coverage might be claimed

un der my policy between the date of [space

provided for a date] and the date and time

indicated above.

4 5 . The no loss statement signed by Ms. Hembree was dated

March 23, 2004. However, there was no beginning date filled in

on the form. Without a beginni ng date, the no loss statement

would seem to be meaningless, unless the absence of a date would

be deemed by Federated to cover all possible dates.

4 6 . When asked why he requested that Ms. Hembree sign a no

loss statement, Respondent testified that Feder ated would

reinstate a policy if the customer stated that no losses had

occurred in the interim. That testimony contradicts

Respondent's testimony that on March 23, 2004, he thought

Ms. Hembree's policy was still "pending" for lack of

photographs. He did not explain why a pending policy would need

to be reinstated or why the need for reinstatement was not an

indication that the policy had been cancelled. He did not

describe any effort he made to inform Ms. Hembree about the

continued need for photographs or to solve that alleged problem.

4 7 . After Hurricane Charley hit on August 13, 2004,

Ms. Hembree went to Insurance Depot to ask for an insurance

adjuster to view the damage to her home. Ms. Hembree said she

talked to a female employee who, after looki ng at Ms. Hembree's

file, told Ms. Hembree her insurance company was Federated and

gave Ms. Hembree Federated's telephone number. When Ms. Hembree

called Federated, she was told she had no insurance coverage.

4 8 . In August or September 2004, Ms. Hembree called

Insurance Depot and spoke to Jack Alexander, Sr. On

September 24, 2004, Mr. Alexander prepared an application for

Ms. Hembree for coverage by Universal Property and Casualty

Insurance Company (Universal). The application indicates that

the annual premium was $1,149. Mr. Alexander paid the premium,

although it was about $400 more than the premium Ms. Hembree ha d

paid for the Federated policy. 6

49 . Neither Mr. Alexander nor Ms. Hembree said whether

Ms. Hembree had to provide new photographs of he r home to send

to Universal.

50. Mr. Alexander testified that when he was confronted by

Ms. Hembree about her Federated insurance, he discussed it with

Respondent , who told Mr. Alexander that "it was taken care of

and should have been in force." Respon dent testified that he

was unaware of his father's conversations with Ms. Hembree and

that his father had purchased a Universal policy for her.

51. Ms. Hembree presented invoices showing that she paid

$9,576 to repair damage to her home she claimed was c aused by

Hurricane Charley.

The Palmers

52. William and Terese Palmer went to Insurance Depot on

February 23, 2004, to purchase homeowner insurance for their

residence in Port Charlotte. They were assisted at Insurance

Depot by Respondent.

53. Most in surance companies charge a higher premium for

insurance on a seasonal residence , because the risk of loss is

greater. Mr. Palmer testified that the Port Charlotte residence

is now his primary residence, but when he applied for insurance

in 2004, he was li ving in McHenry, Illinois, and he told

Respondent that the Port Charlotte property was for seasonal

use. Respondent denies that he was told that the Port Charlotte

residence was only used seasonally by the Palmers. The

Federated application form prepared by Respondent and signed by

Terese Palmer and Respondent indicates that the insurance was

for a primary residence.

5 4 . One of the documents provided to Respondent at the

time the Palmers were applying for insurance was a settlement

statement used in con junction with the Palmer's loan from the

U.S. Department of Housing and Urban Development to purchase the

Port Charlotte residence. It shows the address of Mr. Palmer,

the "borrower," as McHenry, Illinois. Petitioner argues that

this is proof that Respon dent knew that the Palmers' primary

residence was in Illinois and the Port Charlotte residence had

to be seasonal. However, the address on the loan form was also

consistent with Respondent's belief that the Palmers had

purchased the Port Charlotte residen ce to make it their primary

residence.

5 5 . There was no motive for Respondent to falsify the

application form by indicating the Palmer s ' residence was

primary, rather than seasonal. The application form was signed

by M r s. Palmer, attesting to the accura cy of the information on

the form. It is found that Respondent either was not told by

the Palmers or did not hear them say that the Port Charlotte

residence was seasonal.

5 6 . On the same day they met with Respondent, February 23,

2004, the Palmers paid the premium of $1,014 by credit card.

Admitted into evidence was an Insurance Depot check to

Federated, signed by Respondent and dated February 24, 2004, in

the amount of $1,014. The Palmer s ' next credit card statement

showed the premium was paid.

5 7 . On March 29, 2004, Federated issued a notice of

cancellation of the Palmers' insurance policy. The notice

showed the reason for cancellation as "No application/premium

received."

5 8 . Mr. Palmer said he received Federated's notice of

cancellation in the mail. He called and informed Respondent,

who told Mr. Palmer that "it occasionally happens" and

Respondent would "reapply" and the problem would be corrected.

The record evidence shows that Federated received a check for

the Palmers' insurance premium fro m Insurance Depot by mail on

April 5, 2004, but Federated did not accept the payment because

the policy had been cancelled. The Palmers were not informed

that Federated had not reinstated their insurance policy.

59 . Subsequently, Mr. Palmer visited Insu rance Depot to

inquire about occupational insurance and asked about the

deductible provision on his homeowner policy while he was there.

The woman he spoke to informed him that she could not find a

file on him.

6 0 . Mr. Palmer then complained to Petition er about the

handling of his insurance by Respondent. Following his

complaint, Mr. Palmer got a postcard from Insurance Depot

requesting that he come in to discuss the problem. When Mr.

Palmer went in, Respondent gave him a check to reimburse him for

the unused premium payment .

CONCLUSIONS OF LAW

6 1 . DOAH has jurisdiction over the subject matter pursuant

to Section 120.569 and Subsection 120.57(1), Florida Statutes . 7

6 2 . Petitioner must prove the factual allegations in the

Amended Administrative Complai nt by clear and convincing

evidence. Department of Banking and Finance v. Osborne Stern

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

Turlington , 510 So. 2d 292 (Fla. 1987).

6 3 . The "clear and convincing" evidence standard has been

described a s follows:

[C]lear and convincing evidence requires

that the evidence must be found to be

credible; the facts to which the witnesses

testify must be distinctly remembered; the

testimony must be precise and explicit and

the witnesses must be lacking in conf usion

as to the facts in issue. The evidence must

be of such weight that it produces in the

mind of the trier of fact the firm belief or

conviction, without hesitancy, as to the

truth of the allegations sought to be

established.

Slomowitz v. Walker , 429 So. 2d 797, 800 (Fla. 4th DCA 1983).

The First District Court of Appeal has commented that

"[a]lthough this standard of proof may be met where the evidence

is in conflict, . . . it seems to preclude evidence that is

ambiguous." Westinghouse Electric Corp ., Inc. v. Shuler

Brothers, Inc. , 590 So. 2d 986, 988 (Fla. 1st DCA 1991).

6 4 . The Amended Administrative Complaint charged

Respondent with mishandling and misappropriating the insurance

premiums of the Wileys, Cecilia Hembree, and the Palmers. In

all t hree counts, Petitioner asserts that the alleged acts of

Respondent violate Subsections 626.561(1) , 626.611(7) and (10) ,

and 626.621(4) and (6), Florida Statutes.

6 5 . The cited statutes provide as follows:

§ 626.561(1)

All premiums, return premiums, or other

funds belonging to insurers or others

received by an agent . . . are trust funds

received by the licensee in a fiduciary

capacity. An agent . . . shall keep the

funds . . . in a separate account so as to

allow the department or office to properly

au dit such funds.

* * *

§ 626.611

The department shall deny an application

for, suspend, revoke, or refuse to renew or

continue the license or appointment of

any . . . agent . . . if it finds that . . .

any one or more of the applicable grounds

exist:

* * *

(7) Demonstrated lack of fitness or

trustworthiness to engage in the business of

insurance.

* * *

(10) Misappropriation, conversion, or

unlawful withholding of moneys belonging to

insurers or insureds or beneficiaries or to

others and received in conduct of business

under the license or appointment.

* * *

§ 626.621

The department may, in its discretion, deny

an application for, suspend, revoke, or

refuse to renew or continue the license or

appointment of any . . . agent . . . if it

finds that . . . any one or more of the

following applicable circumstances for which

denial, suspension, revocation, or refusal

is not mandatory under s. 626.611:

* * *

(4) Failure or refusal, upon demand, to pay

over to any insurer he or she r epresents or

has represented any money coming into his or

her hands belonging to the insurer.

* * *

(6) In the conduct of business under the

license or appointment, engaging in unfair

methods of competition oi in unfair or

deceptive acts or practice s, as prohibited

under part IX of this chapter, or having

otherwise shown himself or herself to be a

source of injury or loss to the public.

The Wileys

6 6 . Petitioner claims that Respondent violated Subsection

626.561(1), Florida Statutes, by holding on to the Wileys'

premium down payment for over six months, during which period

the Wileys reasonably believed their mobile home was insured.

6 7 . In Copeland In s. Agency v. Home Ins. Co. , 502 So. 2d

93, 95 (Fla. 5th DCA 1987), the court stated:

We do not a gree that an intent to

misappropriate is a necessary element to

prove a violation of section 626.561(1).

Liability arises upon a showing that a

person has direct supervision and control

over an agency and its employees, and that

insurance premiums are col lected by the

agency, but not accounted for or turned over

to the insurance company for whom the agency

is acting.

6 8 . Petitioner presented no evidence that the $189 premium

down payment the Wileys gave to Respondent was misused by him or

not kept in a separate account. Respondent did not manage,

supervise, or have control of the accounts at Insurance Depot.

Only Jack Alexander, Sr., exercised such authority at Insurance

Depot. Petitioner did not establish that Respondent personally

held up the Wiley paperwork or that he was even aware of the

delay associated with the Wileys' application.

69 . Petitioner repeatedly made references to a statement

by Jack Alexander, Sr., that once an agent of Insurance Depot

starts with a customer, "it's basically their responsibility to

finish up with a customer." Petitioner argues that this

statement is proof that Respondent had responsibility to obtain

any missing documentation that was needed to make the

application complete and to keep informed about the status of

the application until a policy was issued. However, this single

statement by Mr. Alexander is not clear and convincing evidence

of the knowledge and willfulness required to prove a violation

of Subsection 626.561(1), Florida Statutes . There was evidence

to support Respondent's testimony that a common practice of

Insurance Depot was to divide tasks between the agents and other

employees and that employees other than Respondent were

routinely tasked to follow up to obtain missing documentation,

to mail appl ications and premiums to the insurance companies,

and to deal with cancellation notices. Petitioner cited no

statutes, rules, or court decisions that indicate such a

practice is unlawful.

7 0 . With regard to Subsection s 621.611(7) (lack of fitness

or tru stworthiness) and 621.611(10) (unlawful withh holding of

money), Florida Statutes, Petitioner makes a general argument,

applicable to all three counts that:

The totality of the evidence suggests not so

much simple ignorance or ineptitude, but

rather a disho nest practice in the conduct

of Respondent's insurance business during

2004 so as to lie regarding insurance

application statements and withhold premium

payments from either a company or a

customer.

7 1 . Petitioner did not prove that Respondent lied abou t

the Wileys' insurance application.

7 2 . Willfulness is a necessary element to prove a

violation of Subsection 626.611(10), Florida Statutes. Bowling

v. Department of Insurance , 394 So. 2d 165, 170 (Fla. 1st DCA

1981). Petitioner's evidence fell short of clear and convincing

evidence that Respondent willfully withheld the Wileys' premium

down payment.

7 3 . Neither party presented the testimony of the clerk at

Insurance Depot who called Mr. Wiley and asked for photographs.

That testimony would likely have helped to clarify the internal

processing of the Wiley application. The evidence in the record

only established that Respondent considered the Wiley

application incomplete because of the lack of photographs and

that he passed the paperwork he had pr epared and the Wileys'

premium down payment of $189 to other employees of Insurance

Depot for further processing. It would have been commendable if

Respondent had kept himself informed about the status of the

Wiley application until he ascertained that a policy was issued

to them, but his failure to do so does not catapult his actions

to proof that he lied to the Wileys or unlawfully withheld their

premium. Petitioner failed to prove by clear and convincing

evidence the facts necessary to show Respondent violated

Subsection 626.611(7) or Subsection 626.611(10), Florida

Statutes, with regard to the Wileys.

7 4 . With regard to Petitioner's claim that Respondent

violated Subsection 621.621(4), Florida Statutes, for failing to

pay, upon demand by an insurer, money belonging to the insurer,

Petitioner failed to prove there was a demand for payment by

I.B. Green for the Wileys' premium and a refusal to pay by

Respondent. Petitioner argues that the requirement of the

Producer Agreement that complete agreements a nd premiums be

promptly transmitted to I.B. Green is sufficient to establish

the necessary demand. The argument that the Producer Agreement

created a continuous "demand" for purposes of establishing a

violation of Subsection 621.621(4) , Florida Statutes, is

rejected. 8 Furthermore, Petitioner did not establish that I.B.

Green would not accept Respondent's practice to trans mit the

premium when the application was complete (including

photographs) , as compliant with the Producer Agreement.

7 5 . With regard t o Petitioner's claim that Respondent

violated Subsection 621.621(6), Florida Statutes, Petitioner

argues that Respondent has shown himself to be a source of

injury or loss to the public because the Wileys suffered losses

from Hurricane Charley that were no t insured. The record

evidence established that the Wiley matter was mishandled by

Insurance Depot because the photograph issue was not resolved

and the premium down payment was not returned in a reasonable

amount of time. 9 However, the evidence was insu fficient to show

clearly and convincingly that Respondent was personally

responsible for the mishandling.

7 6 . Mr. Wiley admits that he was told, probably by

Respondent, not to make a premium payment , from which it is

reasonable to infer that he was told the reason why. Therefore,

it is less than clear and convincing that Respondent failed to

inform the Wileys that the insurance coverage would not begin

until photographs were provided.

Cecilia Hembree

77 . Petitioner claims that Respondent violated Su bsection

626.561(1), Florida Statutes, by holding on to Ms. Hembree's

premium for months, during which period Ms. Hembree reasonably

believed her home was insured.

78 . Petitioner presented no evidence that Ms. Hembree's

$728 premium payment was misused b y Respondent or not kept in a

separate account. Respondent did not manage, supervise, or have

control of the accounts at Insurance Depot. Only Jack

Alexander, Sr., exercised such authority at Insurance Depot.

Petitioner did not prove by clear and convin cing evidence that

Respondent personally held up Ms. Hembree's paperwork or

withheld her premium payment from Federated in violation of

Subsection 626.526(1), Florida Statutes.

79 . With regard to Subsection 621.611(7), Florida Statutes

(lack of fitness or trustworthiness) , Petitioner claims that

Respondent lied about Ms. Hembree's insurance coverage.

Petitioner proved by clear and convincing evidence that

Respondent lied to or misled Ms. Hembree about the status of her

insurance coverage during their c onversations in March 2004 when

she was asking for proof of coverage. The evidence shows

clearly that, even under Respondent's version of events, he knew

that her coverage had already been cancelled or would be

cancelled by Federated , and he failed to inf orm her. He misled

her to believe that there was no problem with her coverage when

he knew there was a problem. Furthermore, he did not make

reasonable efforts to rectify the problem . Respondent failed to

act as a fiduciary in his relationship to Ms. He mbree. These

actions are a violation of Subsection 626.611(7), Florida

Statutes. 10

8 0 . With regard to Subsection 621.611(10), Florida

Statutes (unlawful with holding of money), Petitioner claims that

Respondent unlawfully withheld Ms. Hembree's premium p ayment

from her or from Federated. Although the evidence shows that

Respondent knew in March 2004 that Ms. Hembree's insurance

coverage was cancelled or in jeopardy of being cancelled , it

appears that he believed her coverage would be reinstated by

Federa ted. Petitioner did not prove by clear and convincing

evidence that Respondent knew Federated had not received

Ms. Wileys' premium and that he willfully withheld the premium

in violation of Subsection 626.611(10), Florida Statutes.

8 1 . With regard to Pe titioner's claim that Respondent

violated Subsection 621.621(4), Florida Statutes, for failing to

pay, upon demand by an insurer, money belonging to the insurer,

Petitioner failed to prove there was a demand for payment by

Federated for Ms. Hembree's $728 premium payment and a refusal

to pay by Respondent. Petitioner argues that the provision in

Federated's Homeowners Manual Underwriting Guidelines for

applications and documentation to be submitted within five

business days is sufficient to establish the n ecessary demand.

The argument that Federated's guidelines created a continuous

"demand" for purposes of establishing a violation of Subsection

626.621(4), Florida Statutes, is rejected .

8 2 . With regard to Petitioner's claim that Respondent

violated Sub section 626.621(6), Florida Statutes, Petitioner

argues that Respondent has shown himself to be a source of

injury or loss to the public , because Ms. Hembree suffered

losses from Hurricane Charley that were not insured. The record

evidence established tha t the Hembree matter was mishandled by

Insurance Depot because there was no reasonable explanation for

the delay in submitting the required documentation and premium

to Federated within 30 days or in not returning the premium to

Ms. Hembree. Unlike the si tuation with the Wileys, Respondent

was shown to have a personal role in the mishandling of the

Hembree matter. Respondent's failure to inform Ms. Hembree of

the problem with her coverage in March 2004 or to make

reasonable efforts to rectify the problem, was sufficient to

show clearly and convincingly that Respondent was a cause of her

losses.

The Palmers

8 3 . Petitioner claims that Respondent violated Subsection

626.561(1), Florida Statutes, by holding on to the Palmer's

premium payment for an unreasona ble period of time, during which

period the Palmers reasonably believed their home was insured.

However, Petitioner presented no evidence that the $1,014

premium payment was misused by him or not kept in a separate

account. Respondent did not manage, supe rvise, or have control

of the accounts at Insurance Depot. Only Jack Alexander, Sr.,

exercised such authority at Insurance Depot. Petitioner did not

establish that Respondent personally held up payment of the

Palmers' premium to Federated. The evidence shows that when

Mr. Palmer told Respondent on or about March 29, 2004, that the

insurance had been cancelled, Respondent sent documentation and

the premium payment to Federated within a few days. There is no

evidence that Respondent knew before March 29, 2004, that the

documents had not been sent to Federated and withheld them in

violation of Subsection 626.526(1), Florida Statutes.

8 4 . With regard to Subsection s 621.611(7) (lack of fitness

or trustworthiness) and 621.611(10) (unlawful with holding of

m oney), Florida Statutes, Petitioner claims that Respondent lied

regarding the Palmers' insurance application and withheld the

premium payment from either Federated or the Palmers. However,

Petitioner did not prove that Respondent lied about the Palmers'

i nsurance application and, as explained above, Petitioner did

not prove that Respondent willfully withheld the Palmers'

premium payment.

8 5 . With regard to Petitioner's claim that Respondent

violated Subsection 621.621(4), Florida Statutes, for failing to

pay, upon demand by an insurer, money belonging to the insurer,

Petitioner failed to prove there was a demand for payment by

Federated for the Palmers' $1,014 premium payment and a refusal

to pay by Respondent. The argument that the Federated's

guideline s created a continuous "demand" for purposes of

establishing a violation of Subsection 621.621(4), Florida

Statutes, is rejected.

8 6 . Petitioner's claim that Respondent violated Subsection

621.621(6), Florida Statutes, by showing himself to be a source

o f injury or loss to the public must fail because the Palmers

had no losses.

Summary of Conclusions on Petitioner's Claims

87 . Except for violat ions of Subsection s 626.211(7) and

626.621(6), Florida Statutes, with regard to the Hembree matter,

the evidence was insufficient to prove the unlawful acts of

Respondent claimed by Petitioner. Clear and convincing evidence

against Respondent requires more than clear evidence that

someone at Insurance Depot mishandled these insurance matters.

The evidence must sho w that it was Respondent. Petitioner's

evidence suggests that Respondent might be guilty of other

wrongdoing, but the evidence did not to meet the applicable

standard of proof on the other claims .

The Appropriate Penalt y

88 . Under the penalty guidelines set forth in Florida

Administrative Code Rule 69B - 231.080(7), the penalty for a

violation of Subsection 626.611(7), Florida Statutes (lack of

fitness or trustworthiness), is suspension of the agent's

license for six months.

89 . U nder the penalty guideline s set forth in Florida

Administrative Code Rule 69B - 231. 120 , the penalty for a willful

violation of Subsection 626.621(6), Florida Statutes (showing

oneself to be a source of injury or loss), is suspension of the

agent's license for six months. The penalt y for a non - willful

violation is a three - month suspension. Although Respondent

misled Ms. Hembree about the status of her insurance coverage,

it was not shown that Respondent intended, desired, or expected

Ms. Hembree to suffer a loss as a result. Theref ore, the

appropriate penalty on this record would be the three - month

suspension.

9 0 . Florida Administrative Code Rule 69B - 231.040(1)(a)

limits Petitioner to assessing a single highest penalty for a

single count of an administrative complaint , even if sev eral

provisions of Section 626.611 or Section 626.621, Florida

Statutes , have been violated. Only violations in Count II of

the Amended Administrative Complaint were determined by the

undersigned . Therefore, the highest penalty that is called for

is a si x - month suspension of Respondent's license.

9 1 . Florida Administrative Code Rule 69B - 231.160

identifies aggravating and mitigating factors to be considered

in assessing the appropriate penalty. Petitioner argues that

the aggravating factors of the willfu lness of the licensee's

conduct, degree of potential injury, and motivation (for

financial gain) are applicable in this case. Petitioner did not

establish a financial motive of Respondent for any of the

alleged violations. Because willfulness is already a necessary

element of the violation of Subsection 626.611(7) , Florida

Statutes ( and there was no unique willfulness shown by the

evidence ) , and willfulness was not proven in the case of

Subsection 626.621(6), Florida Statutes, this aggravating factor

shou ld not be applied . The degree of potential injury was high

because of Florida's regular experience with hurricanes.

Therefore, this aggravating factor should be applied . A

mitigating factor in the rule that is also applicable is

Respondent's previous di sciplinary orders or warnings, of which

there are none. The aggravating and mitigating factors off - set

one another.

9 2 . Taking into consideration the penalty guidelines and

related rules , the appropriate penalty is a six - month suspension

of Respondent's license.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that Petitioner enter a final order suspending

Respondent's license for six months .

DONE AND ENT ERED this 2 2nd day of June , 2007, in

Tallahassee, Leon County, Florida.

S

BRAM D. E. CANTER

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675 SUNCOM 278 - 9675

Fax Filin g (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 2 2nd day of June , 2007 .

ENDNOTES

1/ Because most of the exhibits were composite exhibits and

there were pages of some composite exhibits that we re not

admitted, clarification is warranted. The following pages of

Petitioner's e xhibits were admitted into evidence: 10 through

17, 17b through 17j, 18 through 20, 26 through 29, 31b through

31d, 32 through 35, 43 through 56, 58 through 60, 66, 67, all of

Exhibit 36, all pages of the deposition testimony in

Petitioner's Exhibit 37, plus pages 42 through 56 of the

documents attached to the deposition.

2/ The Transcript incorrectly shows the name "Wylie "

3/ Mr. Wiley said the statement was made by Re spondent or his

father.

4/ Mrs. Wiley stated that Mr. Wiley was told about the

photographs when he called Insurance Depot to find out why they

had not yet received an insurance policy, but that is contrary

to Mr. Wileys' testimony.

5/ It can reasonably be inferred that Ms. Hembree's bank (more

specifically, her credit union) was the mortgagee of her home ,

and the mortgage contract provided the bank with authority to

withdraw funds from her bank account to purchase insurance for

the mortgaged home.

6/ Mr. Alexander thinks he asked Ms. Hembree to reimburse him,

but that testimony was not credible.

7/ A ll citations to the Florida Statutes are to the 2006

codification.

8/ Petitioner argues that it would be "ludicrous" to expect I.B.

Green to demand sub mittal of the premium every time a customer

purchased insurance. However, the only relevant inquiry is

whether I.B. Green demanded the Wiley s' premium and Respondent

refused the demand.

9/ The Wileys, themselves, were not vigilant to protect their

own i nterests, but a insurance customer's lack of vigilance does

not excuse or diminish the duties imposed on insurance agents by

the Florida Insurance Code.

10/ The circumstances of the Wiley matter are different because

there w as not clear and convincing pr oof that Respondent w as

aware of a problem with the Wiley file.

COPIES FURNISHED :

Honorable Alex Sink

Chief Financial Officer

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0300

Daniel Sumner, General Counsel

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0307

David J. Busch, Esquire

Department of Financial Services

Division of Legal Services

612 Larson Building

200 East Gaines Street

Tallahassee, Florida 32399 - 0333

Jed Berman, Esquire

Infantino and Berman

Post Office Box 30

Winter Park, Florida 32790 - 0030

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 except ions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.