10-002089RX Ameriloss Public Adjusting Corp. vs. Department Of Financial Services Status: Closed DOAH Final Order on Tuesday, June 29, 2010.

Summary: Rule challenge petition was dismissed where the challenged rule had been superceded by the statute.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

AMERILOSS PUBLIC ADJUSTING CORP. )

)

Petitioner, )

)

vs. ) Case No. 10-2089RX

)

DEPARTMENT OF FINANCIAL SERVICES, )

)

Respondent. )

_________________________________ )

FINAL ORDER OF DISMISSAL

The instant matter is before the undersigned on

Respondent's Motion to Dismiss Rule Challenge Petition.

Argument on the motion was heard by telephone conference call on

June 25, 2010.

APPEARANCES

For Petitioner: Patrick K. Wiggins, Esquire

Stephanie Alexander, Esquire

Tripp Scott, P.A.

200 West College Avenue, Suite 216

Tallahassee, Florida 32301

For Respondent: William W. Tharpe, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399-0333

STATEMENT OF THE ISSUE

Whether Petitioner's Petition Seeking an Administrative

Determination of the Invalidity of an Existing Rule (Petition)

should be dismissed on the ground that the "challenged rule in

this proceeding has been effectively repealed by the Florida

Legislature by Section 626.854(11), Florida Statutes, effective

October 1, 2008," as requested by Respondent.

PRELIMINARY STATEMENT

On April 16, 2010, Petitioner filed with the Division of

Administrative Hearings (DOAH) a "petition requesting a formal

administrative hearing seeking a final order determining that

Rule 69B-220.201(5)(d), Florida Administrative Code, of

Respondent, Department of Financial Services ("DFS"), regarding

a retroactive and perpetual fee cap of ten percent (10%) on

public adjuster contracts that relate to claims arising out of a

declared State of Emergency, is an invalid exercise of delegated

legislative authority within the meaning of § 120.52(8), Florida

Statutes."

On April 28, 2010, the undersigned issued a notice advising

Petitioner and Respondent that an evidentiary hearing on the

Petition would be held on May 28, 2010. The hearing was twice

continued at the joint request of the parties, and it is

currently scheduled for August 16, 2010.

On June 17, 2010, Respondent filed a Motion to Dismiss Rule

Challenge Petition, arguing that the Petition should be

dismissed because the "challenged rule in this proceeding has

been effectively repealed by the Florida Legislature by Section

626.854(11), Florida Statutes, effective October 1, 2008."

Petitioner filed a response opposing the motion on June 24,

2010. Argument on the motion was heard by telephone conference

call on June 25, 2010.

UNDISPUTED FACTS

Challenged Rule Provision

1. Florida Administrative Code Rule 69B-220.201 is a rule

adopted by Respondent.

2. The effective date of the version of Florida

Administrative Code Rule 69B-220.201 currently published in the

Florida Administrative Code was September 3, 2006.

3. Subsection (5) of the rule provides as follows:

Public Adjusters, Ethical Constraints During

State of Emergency. In addition to

considerations set forth above, the

following ethical considerations shall apply

to public adjusters in the event that the

Governor of the State of Florida issues an

Executive Order, by virtue of the authority

vested in Article IV, Section 1(a) of the

Florida Constitution and by the Florida

Emergency Management Act, as amended, and

all other applicable laws, declaring that a

state of emergency exists in the State of

Florida:

(a) No public adjuster shall require,

demand, charge or accept any fee, retainer,

compensation, commission, deposit, or other

thing of value, prior to receipt by the

insured or claimant of a payment on the

claim by the insurer.

(b) As to any one insured or claimant, no

public adjuster shall charge, agree to, or

accept as compensation or reimbursement any

payment, commission, fee, or other thing of

value equal to more than ten percent of the

amount of any insurance settlement or claim

payment.

(c) No public adjuster shall enter into any

contract, agreement or other arrangement

with any person, including an attorney,

building contractor, architect, appraiser or

repairman, by which the person would enter

into an agreement to assist a claimant or

insured on an insurance claim, utilize the

services of the adjuster to carry out the

agreement and pay the adjuster an amount

that would exceed the limitation of the

adjuster's compensation or reimbursement as

provided in paragraph (b) above.

(d) This subsection applies to all claims

that arise out of the events that created

the State of Emergency, whether or not the

adjusting contract was entered into while

the State of Emergency was in effect and

whether or not a claim is settled while the

State of Emergency is in effect.

4. The Petition challenges Subsection (5)(d)'s placing "a

retroactive and perpetual fee cap of ten percent (10%) on public

adjuster contracts that relate to claims arising out of a

declared State of Emergency" as "an invalid exercise of

delegated legislative authority within the meaning of §

120.52(8), Florida Statutes."

Section 626.854(11), Florida Statutes :

5. As Petitioner correctly observed in the Petition:

In June 2008, Senate Bill 2012 was enacted

by the Florida Legislature and signed into

law by Governor Crist (Florida Laws Ch.

2008-220). Section 10 of the Bill amended §

626.854 ("Public adjuster defined;

prohibitions"), by adding subsections (5)

through (12), with an effective date of

October 1, 2008. New subsection (11)

establishes, inter alia , that the ten

percent cap of the fees of a public adjuster

is limited to one year from the

[declaration] of the State of Emergency,

directly overriding and repudiating the

approach of Rule 69B-220.201. That

subsection provides as follows:

(a) If a public adjuster enters into a

contract with an insured or claimant to

reopen a claim or to file a supplemental

claim that seeks additional payments for

a claim that has been previously paid in

part or in full or settled by the

insurer, the public adjuster may not

charge, agree to, or accept any

compensation, payment, commission, fee,

or other thing of value based on a

previous settlement or previous claim

payments by the insurer for the same

cause of loss. The charge, compensation,

payment, commission, fee, or other thing

of value may be based only on the claim

payments or settlement obtained through

the work of the public adjuster after

entering into the contract with the

insured or claimant. The contracts

described in this paragraph are not

subject to the limitations in paragraph

(b).

(b) A public adjuster may not charge,

agree to, or accept any compensation,

payment, commission, fee, or other thing

of value in excess of:

1. Ten percent of the amount of

insurance claim payments by the insurer

for claims based on events that are the

subject of a declaration of a state of

emergency by the Governor. This

provision applies to claims made during

the period of 1 year after the

declaration of emergency.

2. Twenty percent of the amount of all

other insurance claim payments.

Respondent's Response to the Statutory Change

6. Notwithstanding that it recognizes that Section

626.854(11), Florida Statutes, "clearly superseded" Florida

Administrative Code 69B-220.201(5)(d), 1 Respondent has not yet

taken all of the steps required by Section 120.54, Florida

Statutes, to formally delete Subsection (5)(d) from the

published version of the rule (although it has begun rulemaking

in an effort to accomplish this objective).

CONCLUSIONS OF LAW

7. The instant challenge is being made pursuant to Section

120.56(3), Florida Statutes, which allows substantially affected

persons to administratively challenge an existing rule's facial

validity and, if successful, to obtain from a DOAH

Administrative Law Judge a declaration of the rule's invalidity

(which declaration has prospective effect only). See Fairfield

Communities v. Florida Land and Water Adjudicatory Commission ,

522 So. 2d 1012, 1014 (Fla. 1st DCA 1988)("At the outset, we

note that we are being asked [in this appeal of a final order in

a DOAH rule challenge proceeding] to determine the facial

validity of these two rules [being challenged], not to determine

their validity as applied to specific facts, or whether the

agency has placed an erroneous construction on them."); State

Board of Optometry v. Florida Society of Ophthalmology , No. 88-

142, 1989 Fla. App. LEXIS 1518 **6-7 (Fla. 1st DCA February 10,

1989)("It is apparent that the statutory scheme in chapter 120

for invalidating agency rules contemplates that once a

rule . . . has been issued and acted or relied upon by the

agency or members of the public in conducting the business of

the agency, the rule will be treated as presumptively valid, or

merely voidable, and must be given legal effect until

invalidated in a section 120.56 rule challenge

proceeding. . . . The statutory scheme is obviously intended to

avoid the chaotic uncertainty that would necessarily flow from

retroactively invalidating agency action taken in reliance on

the presumed validity of its rule prior to a proper rule

challenge proceeding holding the rule invalid. Applying the

theory underlying section 120.56(3)[ 2 ] to this case, we hold that

rule 21Q-10.001, which was held invalid by the hearing officer

and our opinion, will become void and ineffective as of the date

the decision of this court becomes final."); MDG Capital

Corporation v. Florida Housing Finance Corporation , No. 09-

5115RX, slip op. at 2 (Fla. DOAH October 6, 2009)(Final Order of

Dismissal)("[B]ecause rules can be invalidated only on a

prospective basis, Petitioner, in consequence of the Rule's

expiration, already enjoys the very relief that would be

available via a successful rule challenge, namely a status quo

in which the Rule is void and ineffective.")(citation omitted);

The Florida Retail Federation, Inc. v. Agency for Health Care

Administration , No. 04-1828RX, 2004 Fla. Div. Adm. Hear. LEXIS

2018 *26 (Fla. DOAH July 19, 2004)(Final Order), aff'd per

curiam , 903 So. 2d 939 (Fla. 1st DCA 2005)(table)("[A]n

administrative decision invalidating a rule cannot be applied

retroactively."); and Advantage Therapy and Nursing Center

(Beverly Health and Rehabilitative Services, Inc.) v. Agency for

Health Care Administration , No. 97-1625RX, 1997 Fla. Div. Adm.

Hear. LEXIS 5550 *17 (Fla. DOAH July 29, 1997)(Final

Order)("Additionally, in a rule challenge, the issue to be

determined is whether the rule, either proposed or adopted, is

valid on its face.").

8. Section 120.56(3), Florida Statutes, provides as

follows:

Challenging existing rules; special

provisions.

(a) A substantially affected person may

seek an administrative determination of the

invalidity of an existing rule at any time

during the existence of the rule. The

petitioner has a burden of proving by a

preponderance of the evidence that the

existing rule is an invalid exercise of

delegated legislative authority as to the

objections raised.

(b) The administrative law judge may

declare all or part of a rule invalid. The

rule or part thereof declared invalid shall

become void when the time for filing an

appeal expires. The agency whose rule has

been declared invalid in whole or part shall

give notice of the decision in the Florida

Administrative Weekly in the first available

issue after the rule has become void.

9. It is clear from a reading of Section 120.56(3),

Florida Statutes, that it "does not authorize a rule challenge

to a rule that is no longer in existence, and [that] therefore,

DOAH [would be] acting in excess of its jurisdiction" were it to

consider the merits of such a challenge. Department of Revenue

v. Sheraton Bal Harbour Association , 864 So. 2d 454 (Fla. 1st

DCA 2003).

10. "A rule that has no force or effect because it has

been . . . superseded by statute is, like a repealed rule, no

longer in existence in any meaningful sense." The Florida

Retail Federation, Inc. , 2004 Fla. Div. Adm. Hear. LEXIS 2018

*20; Yeoman v. Department of Business and Professional

Regulation, Construction Industry Licensing Board , No. 04-

2414RX, 2004 Fla. Div. Adm. Hear. LEXIS 2507 *17 (Fla. DOAH

December 3, 2004)(Final Order)(same); see also Nicholas v.

Wainwright , 152 So. 2d 458, 460 (Fla. 1963)("When such conflicts

[between statutes and agency rules] appear, the Act of the

Legislature must control."); Florida Department of Revenue v.

A. Duda & Sons , 608 So. 2d 881, 884 (Fla. 5th DCA 1992), rev .

denied , 621 So. 2d 431 (Fla. 1993)("A regulation is operative

and binding from its effective date 'until it is modified or

superseded by subsequent legislation . . . .'"); Hulmes v.

Division of Retirement, Department of Administration , 418 So. 2d

269, 270 (Fla. 1st DCA 1982), rev . denied , 426 So. 2d 26 (Fla.

1983)("An administrative rule or regulation is operative and

binding on those coming within its terms from its effective date

until it is modified or superseded by subsequent

legislation . . . ."); and MIC Development, LLC v. Department of

Transportation , No. 05-3815BID, 2006 Fla. Div. Adm. Hear. LEXIS

156 *17 (Fla. DOAH April 20, 2006)(Recommended Order)("When a

rule is superseded by legislation enacted after the rule's

effective date, the rule loses all force and effect immediately

upon such legislation's becoming law.").

11. Because Florida Administrative Code 69B-220.201(5)(d)

has been superseded by Section 626.854(11), Florida Statutes,

effective October 1, 2008, it is no longer in "existence" and

therefore not subject to challenge as an "existing rule"

pursuant to Section 120.56(3), Florida Statutes, notwithstanding

that this now defunct rule provision may still appear in the

Florida Administrative Code and that there may be pending or

potential litigation involving allegations that fees charged

under certain pre-October 1, 2008, public adjuster contracts

exceeded the amount then allowed by Florida Administrative Code

69B-220.201(5)(d). See Sheraton Bal Harbour Association , 864

So. 2d at 454; Pasco CWHIP Partners v. Florida Housing Finance

Corporation , No. 09-3330, slip op. at 43 n. 12 (Fla. DOAH

February 18, 2010)(Recommended Order)("This remedy [a rule

challenge pursuant to Section 120.56(3), Florida Statutes] was,

moreover, available only during the existence of the Emergency

Rules, which rules lasted just 180 days; then the remedy was

gone."); MDG Capital Corporation , slip op. at 2 ("Once the Rule

ceased to exist, the jurisdiction of the Division of

Administrative Hearings to entertain a challenge to the Rule

expired as well."); Indemnity Insurance Company of North America

v. Department of Financial Services , No. 08-1060RX, 2008 Fla.

Div. Adm. Hear. LEXIS 138 *4-5 (Fla. DOAH March 11, 2008)(Final

Order)(administrative law judge dismissed petition filed

pursuant to Section 120.56(3), Florida Statutes, challenging

rule provision that, as result of rule amendment, was no longer

in existence--notwithstanding that there was pending before

DOAH, at the time of the dismissal, a Section 120.57(1)

proceeding involving proposed agency action based upon the

challenged rule provision); The Florida Retail Federation, Inc. ,

2004 Fla. Div. Adm. Hear. LEXIS 2018 **18-19 ("[T]he general

principle announced in Sheraton --that rules no longer in

existence cannot be challenged--extends beyond Section 120.56

proceedings involving rules that have been formally repealed.

Sheraton , in short, cannot be dismissed as inapposite simply

because the Reimbursement Rule has not been repealed

administratively."); and Yeoman , 2004 Fla. Div. Adm. Hear. LEXIS

2507 **22-23 n.3 ("In the interest of clarity, it would probably

be in the best interest of all concerned for the Board to go

through the rule-making process to formally repeal Rule 61G4-

12.006, citing as grounds for the repeal that the Board no

longer possesses the statutory authority it had when the rule

was adopted. But with or without such formal action, the rule

has expired and no longer exists in any meaningful way."); but

see Service Insurance Company v. Office of Insurance Regulation

and Financial Services Commission , No. 09-3042RX, 2009 Fla. Div.

Adm. Hear. LEXIS 792 (Fla. DOAH October 22, 2009)(Final

Order)(held that repeal of statute implemented by challenged

rule did not act as jurisdictional bar to DOAH's hearing rule

challenge, where the rule "still appear[ed] as an existing Rule

in the Florida Administrative Code" and the Office was seeking

to take disciplinary action against the challenger "based upon

[the challenged] rule" and was "still operating under the

[r]ule").

ORDER

Based on the foregoing, it is

ORDERED that:

The Petition filed by Petitioner pursuant to Section

120.56(3), Florida Statutes, seeking an administrative

determination that Florida Administrative Code Rule 69B-

220.201(5)(d) is an invalid exercise of delegated legislative

authority is hereby DISMISSED.

DONE AND ORDERED this 29th day of June, 2010, in

Tallahassee, Leon County, Florida.

S

___________________________________

STUART M. LERNER

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 29th day of June, 2010.

ENDNOTES

1 On this issue, both Petitioner and Respondent agree.

2 Section 120.56(3), Florida Statutes, then provided, in

pertinent part, as follows:

The hearing officer may declare all or part

of a rule invalid. The rules or part

thereof declared invalid shall become void

when the time for filing an appeal expires

or at a later date specified in the

decision.

COPIES FURNISHED :

Julie Jones, CP, FRP, Agency Clerk

Department of Financial Services

Division of Legal Services

200 East Gaines Street

Tallahassee, Florida 32399-0390

Benjamin Diamond, General Counsel

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399-0307

Honorable Alex Sink, Chief Financial Officer

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399-0300

Scott Boyd, Executive Director

and General Counsel

Administrative Procedures Committee

Holland Building, Room 120

Tallahassee, Florida 32399-1300

Liz Cloud, Program Administrator

Administrative Code

Department of State

R. A. Gray Building, Suite 101

Tallahassee, Florida 32399

Patrick K. Wiggins, Esquire

Stephanie Alexander, Esquire

Tripp Scott, P.A.

200 West College Avenue, Suite 216

Tallahassee, Florida 32301

William W. Tharpe, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399-0333

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order of

Dismissal is entitled to judicial review pursuant to Section

120.68, Florida Statutes. Review proceedings are governed by

the Florida Rules of Appellate Procedure. Such proceedings are

commenced by filing the original Notice of Appeal with the

agency clerk of the Division of Administrative Hearings and a

copy, accompanied by filing fees prescribed by law, with the

District Court of Appeal, First District, or with the District

Court of Appeal in the Appellate District where the party

resides. The notice of appeal must be filed within 30 days of

rendition of the order to be reviewed.