07-002127PL Department Of Financial Services vs. Katherine Ann Fitzgerald Status: Closed Recommended Order on Friday, January 18, 2008.

Summary: The testimony of consumers that they did not recall what licensee said during sale of auto insurance is less than clear and convincing evidence that licensee did not orally explain that ancillary products were optional and entailed additional costs.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, )

)

Petitioner, )

)

vs. ) Case No. 0 7 - 21 27 PL

)

KATHERINE ANN FITZGERALD, )

)

Respondent. )

)

RECOMMENDED ORDER

Administrative Law Judge (ALJ) Daniel Man ry conducted the

final h earing in this proceeding for the Division of

Administrative Hearings (DOAH) on August 23 and September 24 ,

2007 , in Orlando , Florida .

APPEARANCES

For Petitioner: Thomas A. David , Esquire

Department of Financial Services

200 East Gaines Street

6 12 Larson Building

Tallahassee, Florida 32399 - 0333

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

Galloway, Brennan & Billmeir

240 East 5th Avenue

T allahassee , Florida 32 303

Michael Roth s child, Esquire

Law Offices of Larry S. Davis, P.A.

1926 Harrison Street

Hollywood, Florida 33020

STATEMENT OF THE ISSUES

Th e issues are whether the sale of ancillary products to

two purchasers of automobile insurance involved sliding, as that

term is defined in Subsection 626.9541 (1)(z), Florida Statutes

(2005) 1 ; whether the alleged acts violated Subsections 626.611(7)

and (9) , 626.621(6) , and 626.9521(1), which respectively

prohibit a lack of fitness or trustworthiness t o engage in the

business of insurance, fraudulent or dishonest practices, and

unfair trade practices; an d, if so, what penalty should be

imposed against Respond ent's insurance license.

PRELIMINARY STATEMENT

Petitioner filed a 12 - count Administrative Complaint

agai nst Respondent on April 19, 2007 . Respondent timely

requested an administrative hearing.

At the hearing, Petitione r presented the testimony of th ree

witnesses and submitted nine exhibits for admission into

evidence. Respondent testi fied and identified 13 exhibits but

did not submit them for admission into evidence. The identity

of the witn esses and exhibits, and the rulings regarding each,

are se t forth in the three - volume Transcript filed on

September 27 and November 2, 2007 .

The ALJ reserved ruling on Respondent's objections to the

admission of Petitioner's Exhibits 6 and 7. The two exhibits

are admitted into evidence over objection.

Petit ioner dismissed six of the 12 counts in the

Administrative Complaint. Peti tioner dismissed Counts IV, V,

VI, X, XI, and XII. The remaining counts involve the t wo

separate transactions at issue in this proceeding .

The ALJ granted a joint request to file p roposed

recommended orders (PROs) on December 3, 2007. On that date,

the parties timely filed their respective PRO s .

FINDINGS OF FACT

1. Petitioner is the state agency responsible for

regulating insurance and insurance - related activities in Florida

purs uant to Chapters 626 and 627 . Re spondent is licensed as a

life, including variable annuity, general lines insurance agent

pursuant to li cense number A 085250 .

2. From October 22, 2003, through September 2, 2005,

Respondent was employed as an insurance ag ent by Direct General

Insurance Agency, Inc. (Direct). Direct is a Tennessee

corporation doing business in Florida as Cash Register Insurance

(Cash Register).

3. Cash Register employed Respondent in a n office located

at 6325 North Orange Blossom Trail , Orlando, Florida, which

conducts business as Friendly Auto Insurance Company (Friendly) .

Friendly - Cash Register paid Respondent a salary and c ommissions.

Friendly - Cash Register paid commissions on the sale of ancillary

products such as travel protecti on, accident medical protection,

and term life insurance . Comm issions comprised 18 percent of

the compensation paid to Respondent .

4. The two transactions at issue in this proceeding

occurred on July 11 and August 29 , 2005 . In each transaction,

Respond ent sold automobile insurance and three ancillary

products to Ms. Heather Dickinson and Ms. Carmen Phillips ,

respectively . Ms. Dickinson subsequently married and testified

at the hearing as Ms. Heather Mason.

5 . When Ms. Mason and Ms. Phillips entered t he Friendly -

Cash Register office, each consumer requested the minimum

automobile insurance coverage needed to be "legal and on the

road." Neither customer left the office understanding she had

purchased ancillary products.

6 . Ms. Mason purchased automob ile insurance for a

1995 Jeep Cherokee 4 x 4 at an annual premium of $1,175 . 00.

Friendly - Cash Register charged Ms. Mason a total sales price

(total price) of $ 1,609.24. Ms. Mason agreed to pay $194 .00 as

a down payment and the balance in 12 installments o f $117.94 at

an annual percentage rate of 25.27 percent.

7 . Ms. Mason purchased three ancillary products at a total

cost of $278. 00. Ms. Mason paid $60 .00 for travel protection ,

$110 .00 for accident medical protection, and $98 .00 for term

life insuran ce . A finance charge of $151.69 and a charge of

$ 4.55 for Florida documentary stamp taxes comprised other

charges that a re not at issue in this proceeding .

8 . Ms. Phillips purchased automobile insur ance for a

1992 Chevrolet Blazer 4x 4 at an annual prem ium of $779 . 00.

Friendly - Cash Register charged Ms. Phillips a total price of

$1,271.64 . Ms. Phillips agreed to pay $129 .00 as a do wn payment

and the balance in 10 installments of $114.26 at an annual

percentage rate of 25.06 percent.

9 . Ms. Phillips pu rchased three ancillary products at a

total cost of $368 . 00. Ms. Phillips paid $60 .00 for travel

protection , $200 .00 for accident medical protection , and $108 .00

for term life insurance . A finance charge of $1 20.7 9 and a

documentary stamp charge of $3.8 5 comprised other charges that

are not at issue .

10 . Both Ms. Mason and Ms. Phillips signed Friendly - Cash

Register forms which disclose that the anc illary products they

purchased are optional and entail additional costs . Each

customer signed a package of documents numbering approximately

19 pages. 2 Page 1 of each package discloses the annual p rice for

automobile insurance . The optional ancillary produc ts and

separate charges are disclosed i n several additional pages.

11 . The package of documents tha t Ms. Mason signed

discl oses the annual cost for travel protection on pages 000006

and 000014 through 000016 (hereinafter pages 6, 14, 15, etc.).

Pages 8, 9, and 14 through 16 disclose the cost of the accident

medical protection . Pages 10 and 12 t hrough 16 each disclose

the cost for term life insurance. Pages 7, 9, 14, and 15

expressly provide that the an cillary products are optional.

Page 16, the Premium Finance Agreement, separates the charges

for mandatory automobile insurance from the optional ancil lar y

products and the other charges. Ms. Mason signed or initialed

pages 3 through 11, pages 14 through 17, and page 19.

12 . The package that Ms. Phi llips signed includes

disclosures similar to those in the package signed by

Ms. Mason . Ms. Phillips signed or initialed relevant pages in

the same manner as Ms. Mason.

13 . Ms. Mason and Ms. Phillips had adequate time to review

the documents they signed or initialed, but neither customer

read the documents. Each consumer is a literate adult with no

di sability or infirmity that would impede her capa city to

understand the transaction .

14. The factual dispute s are whether Respondent orally

expl ained the ancillary products that the two customers

purchased , and, if so, whether the oral explanation was

ad equate. For reasons discussed in the Conclusions of Law,

Responden t is not required to prove she did explain the

ancillary products and that the explanation was adequate.

Rat her, Petitioner must prove Respondent did not explain the

ancill ary products or that the explanation was inadequate.

15 . Respondent does not recall the specific transactions

at issue in this proceeding because she sold as many as

10 insurance policies each day at Friendly - Cash Register for

almost two years. However, Respondent do es recall that she

followed the identical procedure with each customer and that the

procedure she followed was carefully scripted by Friendly - Cash

Reg ister as a condition of employment.

16 . Respondent orally explained each disputed transaction

in this pr oceeding in a manner that was adequate for each

consumer to understand the transaction. Respondent orally

explain ed that the ancillary products were optional . Respondent

circled the optional items in the documents and explained that

each ancillary produc t entailed an additional cost.

17 . The sixth document that Respondent reviewed with each

customer is the "Explanation of Policies, Coverages, and Cost

Breakdown." That page appears as page 14 in the e xhibits, but

page 14 is not organized in the exhibi ts in the same order that

Respon dent presented it to customers. Respondent orally

explained pages pertaining to specific ancillary product s after

Respondent explained the page entitled "Explanation of Policies,

Coverages, and Cost Breakdown. "

18 . The pr ocedure scripted by Friendly - Cash Register

required Respondent to first interview Ms. Mason and

Ms. Phillips to gather information neede d for input into a

computer which print ed the 19 - page forms utilized by Friendly -

Cash Register . The interview included questions regarding life

insurance beneficiaries and questions pertaining to the medical

condition of each customer.

19 . After interviewing Ms. Mason and Ms. Phillips,

Respondent entered the information into a computer and printed

the 19 - page packages. Respondent placed each package in front

of the respective customer and discussed each page. Respondent

circl ed the word "optional" when it appeared on a page , obtained

the signature or initials of each customer , turned the page

over, and proceeded to the next page.

20 . The trier of fact finds the testimony of Respondent to

be credible and persuasive. As Respondent explained:

Q. Did you tell the customers that this

quote included those ancillary products?

A. Yes. I informed . . . them that they

ha d been quoted with the optional policies.

* * *

Q. How is page 14 labeled at the top?

A. It says "Explanation of Policies,

Coverages, and Cost Breakdown." . . . I

would circle the items that are circled on

here, and then I would present it to th e

insured. And I would say, you're purchasing

the mandatory personal injury protection,

bodily injury, [or] there's no property

damage, there's no bodily injury. You also

have the optional policies for the travel

protection plan, accidental medical plan,

life insurance, these are the costs, sign

here.

Q. [A]re you pointing at your circles?

A. Yes. I point to each circle and I kind

of run my finger down the cost to draw

attention to it.

Q. You point to the cost?

A. Yes.

* * *

Q. Okay. W hat do you go over next?

A. The next page is the second page of the

travel protection plan.

Q. This is page 7 of Exhibit 2?

A. Correct.

Q. How is that labeled at the top?

A. "Optional Travel Protection Plan." It

says, "American Bankers Insurance Company."

I'd point out that there's bail bond

cove rage, collision of loss of use [sic] ,

personal effects loss from auto rented.

Q. Do you make those circles that we see on

that page? . . . .

A. Yes. I circle them when they're sitting

there and t hen I hand it -- hand the paper to

them, and I would say, "This is optional

coverage, please sign here. "

* * *

Q. Okay. After she signed that, what did

you go over with her next?

A. Next one would be the accidental medical

protection plan.

Q. Page 8 of Exhibit 2?

A. Yes.

Q. Okay. . . . [A]fter she signed that

page, what did you do?

A. Page 9.

Q. Page 9 of Exhibit 2?

A. Your cost is $110 . The annual benefit

is $45,625 . . . . Please sign here.

Q. Did you make those circles on a piece of

paper?

A. Yes. Before I handed it to her, I

circled the items that are circled on it and

drew the line.

* * *

Q. [A]fter she signed this page, what would

you do next?

A. Okay. The next page is page 10 , which

is the life insurance policy.

Q. This is page 10 of Exhibit 2?

A. Yes.

Q. Okay. How would you explain this page

to a customer?

A. This 10,000 [ sic ] term policy. The

premium is $108. It's not replacing any

other previous life insurance policy.

Q. Did you make those circles?

A. Yes, I did. . . .

* * *

Q. This is page 13 of Exhibit 2?

A. Yes. It's a statement of policy cost

and benefit information that I would just

run my finger down and just say, "These are

your benefits and the cost, please sign

here."

Transcript (TR ) at 251 - 270.

21 . Petitioner proposed in its PRO a finding that

Respondent did not orally explai n the ancillary products to the

two consumers . However, Ms. Mason and Ms. Phillips did not

remember what Respondent said to them . Testimony that a witness

does not remember what Respondent said is less than clear and

convincing evidence that Respondent did not explain the

ancillary products adequately . The testimony of Ms. Mason

during cross examination is illustrative .

Q. Would you say that what you were really

paying attention to when you conducted this

transaction was how much it was going to

cost you?

A. Yeah. Yes.

Q. Cause you . . . you talk ed . . . [on

direct] about you r recollection about these

th ings. And it was interesting th at some

things yo u were able to say you don't

recall, but [counsel for Petitioner] was

able to get you to commit to certain things

that you absolutely said would not have

happened. Such as, you know that if . . .

the word "optional" had been used that you

would not have a ccepted the product,

correct?

A. If it would have cost more, then I would

not have accepted it.

Q. Okay. But you don't specifically recall

what was discussed in the course of your

meeting with Ms. Fitzgerald, correct?

A. No.

Q. And you acknowl edged that at least when

confronted with some of the paperwork,

things like a beneficiary on the $10,000

benefit for the life insurance policy, that

was certainly discussed with you, right?

A. I -- yes, I guess. I don't -- like I said,

I feel so stupid beca use I don't -- I know I

said my brother's name and he's down for a

beneficiary, but I don't reme m ber why I

would have -- I don't understand why I did

that. . . .

* * *

Q. You thought that the questions that were

being asked to you about the life insur ance

poli cy -- you thought that they were actually

part of car insurance?

A. I don't remember being asked questions

about life insurance.

Q. Do you remember being given a series of

questions asking you about your health and

about treatment --

A. Yes.

* * *

Q. So when . . . I ask you the question

about whether or not you were told what your

lump sum was going to be and you say, "I

don't remember," that doesn't mean you

weren't told?

A. Correct.

Q. It just means you don't remember?

A. Correct .

* * *

Q. Turn to page 14. . . . Do you recall

what explanation was given about this

particular page?

A. No.

* * *

Q. If you turn to page 15, please. . . .

Fair to say that you don't recall what was

said about this page?

A. Yes.

TR at 156 - 170.

22 . The oral explanation that Respondent provide d to

Ms. Mason and Ms. Phillips did not include a statement that each

customer could have saved 17.27 and 28.94 percent of the total

price , respectively, by decli ning the ancillary products. Nor

did the oral explanation incl ude a suggestion that either

customer use the money to buy automobile insurance with a

smaller deducti ble or more complete insurance. 3

23 . T he omissions discussed in the preceding paragraph are

not alleged in the Administra tive Complaint as g rounds for the

statutory violations charged in the Complaint (the un - alleged

omissions) . Rather, the Complaint limits the alleged grounds to

a failure to " inform " Ms. Mason and Ms. Phillips that the

ancillary products were:

. . . separ ate from and not a part of the

automobile insurance she had requested, was

not required by law or a lien holder, was

optional, or that there was an additional

charge for this product. . . .

Administrative Complaint , paragraphs 7, 11, 15, 32, 36, 41 ,

and 45 .

24 . The un - alleged omissi ons did not involve the exercise

of discretion by Respondent and were not willful . While it is

clear that Respondent was the office manager, i t is less than

clear and convincin g that Respondent was in charge of scripting

th e oral explanation for Friendly - Cash Register. 4 Rather,

Friendly - Cash Register required the omissions as a condition of

Respondent's employment. As Respondent explained in her

testimony:

Q. . . . I don't see where [this script]

asks the consumer if the y actu ally want the

optional policies . . . . So how would you

know to quote the ancillary products if they

had not asked for it yet?

A. We were required to offer them to

everybody.

Q. And the method that Direct General

instructed you to use was to jus t . . .

include them in the quote; is that correct?

A. State that they were optional, yes, and

include them in the quote.

* * *

A. I would have preferred not to quote with

them on the poli cy --

Q. Why?

A. . . . I just preferred it that way, yo u

know. . . . I didn't like it.

Q. Do you feel like the way Direct General

had you quote these consumers . . . may have

led consumers possibly buying policies

without full informed consent?

A. No.

TR at 280 and 295.

25 . On September 2 , 2005, Respo ndent voluntarily left the

employment of Friendly - Cash Register . Respondent is now

employed by Car Insurance.com.

26 . Petitioner argu es in paragraph 47 of its PRO that the

Friendly - Cash Register forms are "vague or ambiguous and make it

difficult to dec ipher (document - deficiency) ." The

Administrative Complaint does not allege document - deficiency as

a ground for the charged violations. The alleged grou nds are

limited , in paragraphs 7, 11, 15, 32, 36, 41, and 45, to the

"failure to inform" the consumers that they were purchasing

ancillary products. Moreover, Petitioner acknowledges in

paragraph 43 of its PRO that the " optional natur e of the

ancillary products is evident" from a review of the documents.

27 . If it were found that an allegation of documen t -

deficiency is implied in the Administrative Complaint, the trier

of fact finds that the ancillary products purchased by

Ms. Mason and Ms. Phillips were not mis - labeled or illusory .

They provided benefit s to each purchaser.

28. Travel protection pri marily provided daily rental

reimbursement of $25 .00 up to 10 days during repairs for

collision damage and up to five days during travel interruption.

The accident medical protection plan provided medical expense

reimbursement up to $1,000 .00 and daily ho spital coverage of

$125 .00 up to 365 days. The term life insurance provided a

death benefit of $10,000. 00. Even if the relevant forms were

found to be deficient, any deficiency is rendered moot because

each consumer testified that she did not read or rel y on the

content of the Friendly - Cash Register forms .

CONCLUSIONS OF LAW

29 . DOAH has jurisdiction over the subject matter of this

proceeding and the parties. DOAH provided t he parties with

adequate notice of the final hearing. §§ 120.569 and 120.57,

Fla. Stat. (2007).

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

show by clear and convincing evidence that Respondent committed

the acts alleged in the Administrative Complaint and the

appropriateness of any proposed penalty. Department of Banking

and Finance, Division of Securities and Investor Protection v.

Osborne Stern and Company , 670 So. 2d 932, 935 (Fla. 1996);

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

31 . The Administrative Complaint alleges, in relevant

part, that the sa le of ancillary products to Ms. Mason and

Ms. Phillips is an unfair trade practice , within the meaning of

Subsection s 626.621(6) and 626.9521(1) , which is defined in

Subsect ion 626.9541(1) to include sliding. Subsection

626.9541(1)(z) defines sliding as 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 [ 5 ] ;

2. Representing to the applicant th at a

specific ancillary coverage or product is

included in the policy applied for without

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 c overage

applied for, without the informed consent of

the applicant.

32 . The Administrative Complaint further a lleges that the

transactions dem onstrate a lack of fitness or trustworthiness to

engage in the business of insurance and constitute fraudulent o r

dishonest practices in the conduct of business within the

meaning of Subsections 62 6.611(7) and (9), respectively. The

Administrative Complaint seeks penalties authorized in

Sections 626.611 and 626.621 and in Subsection 626. 9521(2 ).

33 . The rele vant Friendly - Cash Register documents do not

satisfy the definition of sliding in Su bsection 626.9541(1)(z).

However, j udicial decisions interpret the statutory definition

of sliding to mean that a licensee may not rely on the content

of documents . The l icensee must provide an oral explanation to

the customers . Mack v. Department of Financial Services , 914

So. 2d 986, 987 (Fla. 1st DCA 2005); Thomas v. Department of

Insurance and Treasurer , 559 So. 2d 419, 421 (Fla. 2d DCA 1990).

34 . In Thomas , the li c ensees relied on forms signed by the

consumer s and provided no oral explanation of ancillary

products. See Thomas , 559 So. 2d at 421 (licensees did not

orally explain ancillary products) . Unlike the facts in Thomas ,

Respondent provided an oral explanatio n to the consumers.

35 . Petitioner argu es in its PRO that the outcome of this

proceeding is controlled by the agency's final order in

Department of Insurance v. L eigh , Case Number 02 - 2115 (DOAH

December 4, 2002) , pursuant to the doctrine of administrativ e

stare decisis . See Gessler v. Department of Business and

Professional Regulation , 627 So. 2d 501, 504 ( Fla. 4th DCA 1993)

(applying judicial doctrine of stare decisis to administrative

proceedings). However, the facts i n Leigh are distinguishable

from those in this proceeding. In Leigh , neither the agent nor

any other employee of the agency provided an ora l explanation to

the consumer.

36 . Petitioner argues in paragraphs 48 and 70 of its PRO

that the consumers requested the minimum coverage necessary to

be "legal and on the road," and it is "logical" for the

consumers to "trust" the licensee to provide only that coverage.

The ALJ agrees, but the statut e does not define sliding as t he

sale of ancillary products when none are requested. The statute

de fines sliding as the sale of ancillary products without

adequate repr esentations and information. One may question the

wisdom of the statute, but the ter ms of the statute are clear. 6

37 . Statutory terms in a penal statute must be construed

strictly i n favor of the licensee and against the imposition of

discipline. State ex. rel. Jordan v. Pattishall , 99 Fla. 296,

126 So. 147 (1930); Ocampo v. Department of Health , 806 So. 2d

633 ( Fla. 1st DCA 2002); Equity Corp. Holdings, Inc. v.

Department of Bankin g and Finance, Division of Finance , 772 So.

2d 588, 590 (Fla. 1st DCA 2000); Jonas v. Florida Department of

Business and Professional Regulation , 746 So. 2d 1261 (Fla. 3d

DCA 2000); Loeffler v. Florida Department of Business and

Professional Regulation , 73 9 So. 2d 150 (Fla. 1st DCA 1999);

Elmariah v. Department of Professional Regulation, Board of

Medicine , 574 So. 2d 164 (Fla. 1st DCA 1990); Rush v. Department

of Professional Regulation , 448 So. 2d 26 (Fla. 1st DCA 1984);

Ferdego Discount Center v. Departm ent of Professional

Regulation , 452 So. 2d 1063 (Fla. 3d DCA 1984); Bowling v.

Department of Insurance , 394 So. 2d 165 (Fla. 1st DCA 1981);

Lester v. Dept. of Professional and Occupational Regulations ,

348 So. 2d 923 (Fla. 1st DCA 1977). T he Legislature m ay

authorize an administrative agency to interpret a statute , and

an agency's interpretation may be entitled to deference when the

interpretation is within the agency's expertise , but the

authority to interpret a statute does not include the authority

to a lter a statute . Fla. Const. , Art. II, § 3; § 120.52(8),

Fla. Stat. (2007); Chiles v. Children A, B, C, D, E, and F , 589

So. 2d 260, 264 - 265 (Fla. 1991); Mack , 914 So. 2d at 989; Carver

v. State of Florida, Division of Retirement , 848 So. 2d 1203,

1206 (Fl a. 1st DCA 2003) ; Whitaker v. Department of Insurance ,

680 So. 2d 528 , 531 (Fla. 1st DCA 1996) .

38 . Petitioner argues in paragraphs 48, 59, and 97 of its

PRO that the oral explanation from Respondent was inadequate

because th e consumers left the Friend ly - Cash Register office

without understanding they had purc hased ancillary products.

The argument measure s the adequacy of a licensee's oral

explanation subjectively by the state of mind of a consumer.

S ubs ection s 626. 9541(1)(z)1. and 2. measure the adeq uacy of an

oral explanation by the licensee's representati ons , and

Subsection 626.9541(1)(z)3 . focuses on the information provided

in the oral explanation. The L egislature may authorize

administrative agencies to interpret, but never to alter

statutes. F la. Const. , Art. II, § 3; § 120.52(8), Fla. Stat.

(2007); Chiles v. Children A, B, C, D, E, and F , 589 So. 2d 260,

264 - 265 (Fla. 1991); Mack , 914 So. 2d at 989; Carver v. State of

Florida, Division of Retirement , 848 So. 2d 1203, 1206 (Fla. 1st

DCA 2003) ( citing Cortez v. State Board of Regents , 655 So. 2d

132, 136 (Fla. 1st DCA 1995)).

39 . In Mack , the licensee orally explained the ancillary

product to the consumer, but the explanation was inadequate.

The administrative complaint alleged that the oral explanation

was inadequate because it did not explain that the ancillary

product was "separate from the policy and entailed additional

cost." Mack , 914 So. 2d at 987. In this proceeding, t he oral

explanation by Respondent explained that the ancillary pr oducts

were optional and entailed additional cost.

40 . The ruling in Mack suggests that more is required for

an oral explanation to be adequate . T he court held that the

oral explanation was inadequate because it did not "satisfy the

requirements of Th omas ." Mack , 914 So. 2d at 989.

41 . The "requirements of Thomas " presumably refer to five

factors that could have been included in an oral explanation , if

the licensees had provided an oral explanation . By failing to

provide any oral explanation, the l icensees in Thomas did not

orally explain that: the ancillary product was optional , the

ancillary product was not part of the insurance coverage

requested by the customer , the customers could save roughly

40 percent of the total price by declining the an cillary

product; the ancillary product was not actually life or

automobile insurance , and the customer shoul d use the cost of

the product to buy auto insurance with a smaller deductible or

more complete coverage. Thomas , 559 So. 2d at 421.

42 . Unlike t he facts in Thomas , the ancillary pr oducts at

issue in this proceeding were properly labeled in the signed

documents, and the products conveyed the benefits they purported

to convey. See Thomas , 559 So. 2d at 421 (document mis - labeled

touring membership a s "auto accidental death coverage," and

agent did not inform customer that touring club membership was

not actually life insurance). T he relevant requirement of

Thomas is inapplicable to the facts in this proceeding.

43 . Although Respondent does not have the burden of

proving that she orally explained the ancillary products to the

consumers and that the explanation was adequate, t he trier of

fact found Respondent 's narration of the oral explanation to be

credible and persuasive . The fact - finder is the so le arbiter of

credibility. Stinson v. Winn , 938 So. 2d 554, 555 (Fla. 1st DCA

2006); Bejarano v. State, Department of Education, Division of

Vocational Rehabilitation , 901 So. 2d 891, 892 (Fla. 4th DCA

2005); Hoover, M.D. v. Agency for Health Care Adminis tration ,

676 So. 2d 1380, 1384 (Fla. 3d DCA 1996); Goss v. District

School Board of St. Johns County , 601 So. 2d 1232, 1234 (Fla.

5th DCA 1992).

44 . The fact - finder must resolve conflicts in the

testimony of witnesses. Werner v. State, Department of

Insu rance and Treasurer , 689 So. 2d 1211, 1213 (Fla. 1st DCA

1997) (citing Osborne Stern , 670 So. 2d at 933). The fact -

finder must decide factual issues one way or the other. Dunham

v. Highlands County School Board , 652 So. 2d 894, 896 (Fla. 2d

DCA 1995); He ifetz v. Department of Business Regulation,

Division of Alcoholic Beverages & Tobacco , 475 So. 2d 1277, 1281

(Fla. 1st DCA 1985); Department of Professional Regulation v.

Wagner , 405 So. 2d 471, 473 (Fla. 1st DCA 1981).

45 . Petitioner argues repeatedly in its PRO that the

testimony of its witnesses was credible and persuasive.

However, credible and persuasive testimony is not necessarily

clear and convincing.

46 . The clear and convincing standard is an intermediate

standard of proof . It requires Peti tioner to prov e factual

allegations in the Administrative Complaint by more than a

preponderance of the evidence, but the proof need not be beyond

and to the exclusion of a reasonable doubt. Inquiry Concerning

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

v. Sunbelt Equities, II, Limited Partnership , 619 So. 2d 996,

1006 n. 13 (Fla. 2d DCA 1993).

47 . The Florida Supreme Court has addressed the clear a nd

convincing standard with attention to detail. In relevant part,

the court stated:

T his intermediate level of proof entails

both a qualitative and quantitative

standard. The evidence must be credible;

the memories of witnesses must be clear and

without confusion; and the sum total of the

evidence must be of sufficient weight to

convince the trier of fact without

hesitancy. . . . [T]he facts to which

witnesses testify must be distinctly

remembered; the testimony must be precise

and explicit and the witness must be lacking

in confusion as to the facts in issue. The

evidence must be of suc h weight that it

produces in the mind of the trier of fact a

firm belief or conviction, without

hesitancy, as to the truth of the

allegations sought to be established.

Inquiry Concerning a Judge , 645 So. 2d at 404 (quoting from

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

48 . In order to satisfy the qualitative standard for clear

and convincing evidence, incriminating evidence must be

credible, material facts must be "distinctly remembered," and

testimony must be "precise" and "expli cit." The qualitative

sta ndard has been adopted by each district court of a ppeal in

the state. E.F. v. State , 889 So. 2d 135, 139 (Fla. 3d DCA

2004); K - Mart Corporation v. Collins , 707 So. 2d 753, 757 n.3

(Fla. 2d DCA 1998); McKesson Drug Co. v. Williams , 706 So. 2d

352, 353 (Fla. 1st DCA 1998); Kingsley v. Kingsley , 623 So. 2d

780, 786 - 787 (Fla. 5th DCA 1993); Slomowitz v. Walker , 429 So.

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

49 . The testimony of Ms. Mason and Ms. Phillips i s

concluso ry. Each witness test ified she trusted Respondent to

sell her what she requested and would not have purchased

an cillary products if she had known the products w ere optional

and increased her costs. However, neither witness listened to

the o ral explanation from Respondent. N e ither of the witness es

distinctly remembered the oral explanation provided by

Respondent; and neither of the witness es testified precisely and

explicitly as to what Respondent told her . Conclusory

testimony, unsu bstantiated by other evidence , is insuffici ent to

satisfy the qualitative standard for clear and convincing

evidence. Boller v. State , 775 So. 2d 408, 410 (Fla. 1st DCA

2000). See also E.F. , 889 So. 2d at 139 (delusion that patient

is a free man lacks evidence to support a finding that delusion

p oses a real and present threat of escape). Compare Inquiry

Concerning a Judge , 645 So. 2d at 404 (testimony as to when

various meetings took place and what transpired during the

meetings was direct, unequivocal, and consistent) , with Inquiry

Concerning a Judge , 645 So. 2d at 405 (testimony that lacks

specific recollection or exhibits doubt or confusion is not

clear and convincing).

50 . The c onclusory testimony of the consumers invades the

province of the trier of fact. It d eprives the fact - finder of

t he opportunity to review and evaluate the specific and precise

words uttered by each person who was present during the

transactions at issue . It also deprives the fact - finder of the

opportunity to independently decide the l egal significance of

words utter ed by the respective parties . Petitioner cited no

legal authority that requires the testimony of Respondent to be

clear and convincing.

51 . Petitioner argues throughout its PRO that a consumer

who requested minimal insurance coverage would not have

purc hased more coverage but for the inadequacy of the oral

explanation provided by Respondent . I nference and surmise do

not satisfy the clear and convincing standard. Tenbroeck v.

Castor , 640 So. 2d 164, 167 - 168 (Fla. 1st DCA 1994).

52 . In a " world ensna rled by false assumptions and hasty

judgments, " an agency's proof at the formal hearing must be as

serious - minded as the penalty. Bowling v. Department of

Insurance , 394 So. 2d 165, 172 (Fla. 1st DCA 1981). The trier

of fact weighed the proof against Res pondent at the formal

hearing and found it less than clear and convincing.

53 . If it were found that the disputed transactions

satisfied the s tatutory de finition of sliding, Petitioner admits

in paragraph 88 of its PRO that neither motive nor intent is a n

element of sliding. The absence of culpable motive or intent

deprives the ALJ of the evidential predicate necessary to find

that Respondent is unt rustworthy , engaged in fraudulent or

dishonest practices , or engaged in deceptive acts within the

meaning o f Subsections 626.611(7) and (9) and 626.621(6). See

Morris v. Department of Professional Regulation , 474 So. 2d 841,

843 (Fla. 5th DCA 1985) ; Hartnet v. Department of Insurance , 406

So. 2d 1180, 1184 (Fla. 1st DCA 1981).

54 . Like the facts in Thomas , t he oral explanation that

Respondent provided did not include a statement that Ms. Mason

and Ms. Phillips could have saved 17.27 and 28.94 percent from

the respective total price in each transaction by declining the

ancillary products. Nor did the oral exp lanation i nclude a

suggestion that the customer use the money to buy automobile

insurance with a smaller deductible or more complete insurance.

However, the Administrative Complaint does not allege the

foregoing omission s as ground s for the charged statut ory

violations . Id. Similarly, the Complaint does not allege

document - deficiency as a ground for the charged violations.

55 . The ALJ cannot find Respondent g uilty of a cha rged

violation based on evidence of grounds n ot specifically alleged

in the Admini strative C omplaint. Ghani v. Department of Health ,

714 So. 2d 1113 (Fla. 1st DCA 1998); Cotrill v. Department of

Insurance , 685 So. 2d 1371 (Fla. 1st DCA 1996).

Predicating disciplinary action against a

licensee on conduct never alleged in an

administra tive complaint . . . violates the

Administrative Procedure Act. To

countenance such a procedure would render

nugatory the right to a formal

administrative proceeding to contest the

allegations of an administrative complaint.

Cotrill , 685 So. 2d at 1372. See also Lusskin v. State of

Florida Agency for Health Care Administration, Board of

Medicine , 731 So. 2d 67, 68 (Fla. 4th DCA 1999) ; Arpayoglou v.

Department of Professional Regulation , 603 So. 2d 8 (Fla. 1st

DCA 1992); Sternberg v. Department of Profess ional Regulation,

Board of Medical Examiners , 465 So. 2d 1324, 1325 (Fla. 1st DCA

1985); Hunter v. Department of Professional Regulation , 458 So.

2d 842, 844 (Fla. 2d DCA 1984); Wray v. Department of

Professional Regulation, Board of Medical Examiners , 435 So. 2d

312, 315 (Fla. 1st DCA 1983).

56 . In Ghani , the agency charged a physician with

practicing m edicine below the applicable standard of care and

found the physician guilty, in relevant part, on the gro und that

the physician did not order ambulance transport to the hospital

for a female patient he treated in his office for

supraventricular tachycardia (SVT) . Rather, the physician

directed the patient's husband to drive her to the hospital (the

private - transport decision). The court reversed the ag ency 's

find ing and explained:

Although, a s the agency argues in its answer

brief, the private - transport decision could

be broadly characterized as one of the

purportedly substandard decisions that

Dr. Ghani made during the course of his

office treatment, the plain language of the

complaint addresses only his initial

decision to care for her at his office.

(emphasis not supplied)

Ghani , 714 So. 2d 1115.

57 . If it were found that Respondent violated the

statutory prohibition against sliding based on the u n - alleged

omissions and un - alleged document - deficiency , it is clear that

neither un - alleged ground was willful. The documents and the

scripted oral explanation were office procedure s required by

Friendly - Cash Register as a condition of employment . Compar e

findings in paragraph s 15 and 24 , supra , with Roche Surety and

Casualty Company , Inc. v. Department of Financial Services , 895

So. 2d 1139, 1141 ( Fla. 2d DCA 2005) (existence of court order

prevented willful violation) , an d Prysi v. Department of Health ,

823 So. 2d 823, 825 (Fla. 1st DCA 2002) ( nurses signatures on

written prescriptions were part of office p rocedure implemented

by physician's superior and beyond physician's contr ol ).

Willfulness is a question of fact to be determined by the trier

of fact . Roche , 895 So. 2d at 1141.

58 . The absence of willful ness deprives the ALJ of the

factual predicate necessary for a find ing that the un - alleged

grounds show Respondent is u ntrustwor thy , f raudulent or

dishonest , or deceptive . See §§ 6 26.611 (7)

(untr ustworthiness), 626.611 (9) (fraudulent or dishonest

practices) , and 626.6 21(6) and 626.952 1 (1 ) ( dishonest

practices) . Sta tutory terms in a penal statute must be

construed strictly in favor of the licensee and against the

imposition of discipline. Pattish all , 126 So. 147; Ocampo ,

806 So. 2d at 633; Equity Corp. , 772 So. 2d 590; Jonas , 746 So.

2d 1261 ; Loeffler , 739 So. 2d 150; Elmariah , 574 So. 2d 164;

Rush , 448 So. 2d 26; Ferdego , 452 So. 2d 1063; Bowling , 394 So.

2d 165; Lester , 348 S o. 2d 923.

59 . Un like untrustworthy conduct, fraud, dishonesty, and

deception, a lack of fitness to engag e in the business of

insurance, within the meaning of Subsection 626.611(7) , may

involve negligence or gross negligence , rather than willfulness

or culpable intent . Si milarly, willfulness may not be required

to find that the un - alleged grounds are unfair trade practices

within the meaning of Subsections 626.621(6) and 6 26.9541(1)(z).

However, Petitioner improperly calculates the proposed penalty

by considering both sta tutes to determine the highest penalty

authorized by rule.

60 . Petitioner argues in paragraphs 114 through 116 of its

PRO that the total penalty for violations of Sections 626.611

and 626.621 is properly based on th e highest penalty prescribed

in its rule s for a violation of either statute . Petitioner

interprets Florida Administrative Code Rule s 69B - 231.040,

69B - 231.160, and 69B - 231.180 to mean that the total penalty is a

suspension for 54 months and invokes the automatic revocation

provision in its rule for a suspension in excess of 24 months.

61 . The highest pe nalty for violation s of both Sections

626.611 and 626.621 is limited to the highest penalty authorized

in Section 626.611 . The penalties prescribed for a violation of

Section 626.621 are statu torily authorized only if guilt is

based on grounds for which "denial, suspension, revocation, or

refusal is not mandatory under s. 626.611." § 626.621, Fla.

Stat. (2005); Dyer v. Department of Insurance and Treasures ,

585 So. 2d 1009, 1013 (Fla. 1st DCA 1991). 7

62 . An administrative agency such as DOAH cannot interpret

a rule in a manner tha t amends or enlarges the relevant

statutes . See § 120.52( 8), Fla. Stat. (2007); Greenburg v.

Cardiology Surgical Association and Claims Center - Lakeland ,

855 So. 2 d 234, 238 (Fla. 1st DCA 2003) (rule cannot enlarge,

modify or contravene statute). If the terms of a rule conflict

with a statute, the statute takes precedence over the rule. One

Beacon Insurance v. Agency for Health Care Administration , 958

So. 2d 1127 , 1129 (Fla. 1st DCA 2007); Zimmerman v. Florida

Windstorm Underwriting Association , 873 So. 2d 411, 415 (Fla.

1st DCA 2004); Broward Children's Center, Inc. v. Hall , 859 So.

2d 623, 627 (Fla. 1st DCA 2003); Department of Children and

Families v. R.H. , 819 So. 2d 858, 860 (Fla. 5th DCA 2002);

Department of Children and Family Services v. L.G. , 801 So. 2d

1047, 1053 (Fla. 1st DCA 2001); Willette v. Air Products and

Bassett and Department of Labor and Employment Security,

Division of Workers' Compensation , 70 0 So. 2d 397, 399 (Fla. 1st

DCA 1997).

63 . In Willette , the court explained:

Executive branch rulemaking is authorized in

furtherance of, not in opposition to,

legislative policy. Just as a court cannot

give effect to a statute (or administrative

rule) in a manner repugnant to a

constitutional provision, so a duly

promulgated rule, although "presumptively

valid until invalidated in a section 120.56

rule challenge [citations omitted], " must

give way in judicial proceedings to any

contradictory statute tha t applies.

(emphasis supplied)

Willette , 700 So. 2d at 399.

64 . After the decision in Willette , the court explained :

While an administrative law judge presiding

in a section 120.57 proceeding will deem

controlling duly promulgated administrative

rules ne ver challenged under section 120.56,

it is open to a reviewing court to

adjudicate an administrative rule at odds

with the statute it purports to implement,

even when there is no administrative rule

challenge proceeding below. (citations

omitted)

Clemons v. State Risk Management Trust Fund , 870 So. 2d 881,

884 (Fla. 1st DCA 2004).

65 . The decisions in Willette and Clemons interpret

Article V, Section 4(b)(2) of the Florida Constitution , to mean

that the absence of a rule challenge in an administrative

he aring does not preclude a reviewing court from interpret ing a

rule to conform with a statute. See Clemons , 870 So. 2d at 884;

Willette , 700 So. 2d at 398. Neither of the decision s

interpret s the separation of powers doctrine in Article II,

Section 3 of t he Florida Constitution, to mean that an

adm inis trative agency may interpret a rule to amend, enlarge, or

modify a statute merely because the party who requested a

hearing pursuant to Subsection 120.57(1), Florida Statutes

(2007) (a 120.57 proceeding) , did not file a rule challenge

pursuant to Section 120.56, Florida Statutes (2007) (a 120.56

rule challenge) .

66 . The separation of powers doctrine encompasses two

prohibitions. N o branch of government may encroach upon the

powers of another , and no branch m ay delegate its constitutional

power to another . Fla. Const. , Art. II, § 3. The second

prohibition is the non - delegation doctrine. Chiles , 5 89 So. 2d

at 264 - 265.

67 . The non - delegation doctrine prohibits the L egislature

from delegating legislative auth ority to an agency of the

executive bran ch. Chiles , 589 So. 2d at 266. The

administration of legislative programs by executive agencies

must be pursuant to minimal standards and guidelines that are

ascertainable by reference to statutory terms enacted by the

L egislature and implemented in the agency's rules. Id.

68 . The L egislature may authorize administrative agencies

to interpret, but never to alter statutes. Carver , 848 So. 2d

at 1206 (citing Cortez , 655 So. 2d at 136 ) . R ules are entitled

to a pres umption of constitutional validity. R.H. , 819 So. 2d

at 860. The validity of r ules should be preserved by

in terpreting them consistently with the statutes they implement .

69 . When the literal terms of a promulgated rule conflict

with a statute in a 12 0.57 p roceeding , t he absence of a

120.56 rule challenge does not negate the non - delegation

doctrine . The ALJ , who sits in place of the head of an

executive agency , 8 must interpret the rule in a m anner that is

consistent with the statute. A substantially affected party in

a 120.57 proceeding is not required to file a duplicative

120.56 rule challenge if the interpretation of a rule is

ade quately addressed in the 120.57 proceeding. St. Joe Paper

Company v. Florida Department of Natural Resources , 536 So. 2d

1119, 1122 (Fla. 1st DCA 1989); Department of General Services

v. Willis , 344 So. 2d 580, 592 (Fla. 1st DCA 1977).

70 . The absence of a 120.56 rule challenge i n a 120.57

proceeding may preclude the ALJ from invalidating the rule , but

the non - del egatio n doctrine limits the ALJ to an interpret ation

of the rule that does not modify, enlarge, or contravene the

statute. By analogy , an ALJ without authority to declare a

statute unconstitutional must interpret the statute in a manner

that is con sistent with the constitution.

71 . If it were found that the s un - alleged grounds

demons trated a lack of fitness to engage in the business of

insurance and constituted unfair method s of competition, within

the meaning of Su bsections 626.611(7) and 626.621(6), the total

penalty must be based on the highest penalty prescribed by rule

for a violation of Subsection 626.611 (7) . Dyer , 585 So. 2d

at 1013. The highest penalty per count for each violation of

Subsection 626.611(7) is suspension for six months . The two un -

alle ged vi olations for two customers amount s to four violation s .

The total suspension does not exceed 24 months and is

insufficient to invoke automatic revocation. The un - willful

nature of the un - alleged violations limit s the maximum fines

that are auth orize d in Subsection 626.9521(2) in addition to

other appli cable penalties to $2,500.00 for each violation.

72 . The un - willful nature of th e un - alleged grounds is

relevant to the aggravating and mitigating factors described in

Florida Administrative Code Rule 69B - 231.160. Rule 69B - 231.040

authorizes Petitioner to consider such factors in determining

whether to convert the total penalty for the un - alleged ground s

to an administrative fine and probation.

73 . Two aggravating factors are present. Re spondent

enjo yed financial gain and has not made restituti on for any harm

caused by the un - alleged violations.

7 4 . Several mitigating factors are present. The un -

alleged grounds were not willful. The consumers had the

opportunity and capacity to read documents they signed and ask

questions during the oral explanation , but they chose to do

neither . There are no secondary violations, no resulting

criminal charges, and no previous discipline. Respondent

volunta rily dis eng aged from the un - alleged ground s when she left

the employment of Friendly - Cash Register .

75 . If the un - alleged ground s were found to violate the

statutory prohibition against sl iding , the aggravati ng and

mitigating factors would support a reduced penalty. O n balance,

the aggra va ting and mitigating f actors would support conversion

of the total penalty to a $1,000 .00 fine and six - month

probation .

RECOMMENDATION

Ba sed upon the foregoing Findings of Fact and Conclusions

of L aw, it is

RECOMMENDED that Petitioner enter a final o rder finding

Respondent no t guilty of the allegations in the Administrative

Complaint.

DONE AND ENTERED this 1 8 th day of January, 2008, in

Tallahassee, Leon County, Florida.

S

DANIEL MANRY

Administrative Law Judge

Division of Administrative Heari ngs

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675 SUNCOM 278 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 1 8 th day of January, 2008.

ENDNOTES

1/ R eferences to subsections, sections, and chapters are to

Florida Statutes (2005), unless stated otherwise.

2/ The packages signed by the consumers are identified as

Exhibits 2 and 4. The first page of each exhibit is a cover

page and wa s not part of the packages signed by the consumers.

The first page of each signed package is numbered by Bates stamp

number 000002, and the last page is numbered 000020.

3/ This finding pertains to disclosures discussed in Thomas v.

Department of Insura nce and Treasurer , 559 So. 2d 419, 421 (Fla.

2d DCA 1990).

4/ In Thomas , each of the two respondents was the agent in

charge. Thomas , 559 So. 2d at 420.

5 / The relevant counts in the Administrative Complaint do not

charge that Respondent committed sli ding defined in Subsection

626.9541(1)(z)1. Count III alleges, in relevant part, that

Respondent violated Section 626.9521, as more fully set forth in

Count I, but Count I limits the charged violation to Subsections

626.9521(1)(z)2. and 3.

6/ Petitioner reasons in paragraph 53 of its PRO that a customer

who "enters a restaurant and orders grouper" is justified in

trusting her server to bring her grouper. The ALJ agrees, but

if the server brings tuna or salmon and says she explained it is

optional and wi ll cost more and the customer does not pay

attention to what the server is saying or cannot recall under

oath what the server said , the customer cannot demonstrate by

clear and convincing evidence that the server did not make the

representations required i n Subsection 626.9521(1)(z)2. and did

not provide the information required in Subsection

626.9521(1)(z)3.

7 / The statutory language interpreted in Dyer involved the 1987

statutes, but the relevant language remains unchanged .

8 / See McDonald v. Depart ment of Banking and Finance , 346 So. 2d

569, 581 - 584 (Fla. 1st DCA 1977) (hearing officer sits in the

place of the agency head and, unlike a judge whose duty is

limited to findings of facts and conclusions of law, has the

additional duty of critiquing agen cy policy).

COPIES FURNISHED :

L. Michael Billmeier, Jr., Esquire

Galloway, Brennan & Billmeier

240 East 5th Avenue

Tallahassee, Florida 32303

Michael Rothschild, Esquire

Law Offices of Larry S. Davis, P.A.

1926 Harrison Street

Hollywood, Florida 3302 0

Thomas A. David, Esquire

Department of Financial Services

200 East Gaines Street

612 Larson Building

Tallahassee, Florida 32399

Honorable Alex Sink

Chief Financial Officer

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Flori da 32399 - 0300

Daniel Sumner, General Counsel

Department of Financial 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 fro m the date of this Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.