10-002805 Department Of Financial Services vs. Insurance Resources Of The Americas, Inc. Status: Closed Recommended Order on Monday, February 28, 2011.

Summary: Petititioner met its burden and demonstrated Respondents committed the violations in Count II of the Administrative Complaint by failing to remit premiums due to the insurer and wrongfully retaining them for their own use.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, )

)

Petitioner, )

)

vs. ) Case No. 10 - 2804PL

)

EDUARDO ENRIQUE MENDEZ, )

)

Respondent. )

_______________________________ )

DEPARTMENT OF FINANCIAL )

SERVICES, )

)

Petitioner, )

)

vs. ) Case No. 10 - 2805

)

INSURANCE RESOU RCES OF THE )

AMERICAS, INC., )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case

on November 5 , 20 10 , by video teleconference, with the parties

appearing in Miami , Florida, before June C. McKinney , a duly -

designated Administrative Law Judge of the Division of

Administrative Hearings, who presided in Tallahassee, Florida.

APPEARANCES

For Petit ioner: James B. Bossart, Esquire

Department of Financial Services

Room 612, Larson Building

200 E ast Gaines Street

Tallahassee, Florida 32399

For Respondent: Jed Berman, Esquire

Infantino and Berman

P . O . Drawer 30

Winter Park, Florida 32790

STATEMENT OF THE ISSUE

Whether Respondents committed the violations alleged in the

Administrative Compla int s , and, if so , what penalties should be

imposed on either or both of them .

PRELIMINARY STATEMENT

On Apr il 21, 2010, the Department of F inancial Services

("Petitioner"), issued a two - count Administrative Complaint

against Eduardo Enrique Mendez and a two - count Administrative

Complaint against Insurance Resources of the Americas, Inc.

("Respondents"), wherein it was alleged that Respondents had

violated various provisions of Chapter 626, Florida Statutes.

Respondents timely requested a formal hearing to c ontest these

allegations, and the matter was referred to the Division of

Administrative Hearings on May 24, 2010 .

The presiding administrative law judge consolidated the

cases for hearing and t he final hearing was set for November 5,

2010 . Both parties ap peared at the appointed place and time.

At hearing, Petitioner presented the testimony of three

witnesses: Cesar Sastre ; Roas Blanco; and Rafael Rondon .

Petitioner also offered Exhibits numbered 1 through 9 and 12 and

13 that were admitted into evidence. Respondent Mendez testified

on his own behalf, and Respondents presented the testimony of

Rafael Garcia. Respondents offered Exhibits numbered 1 through

10 , all of which were received in evidence.

The proceeding was recorded and transcribed , and the

transcript was filed at the Division of Administrative Hearings

on January 13, 2011 . The parties filed timely Proposed

Recommended Order s , which have been considered in the

preparation of this Recommended Order.

FINDINGS OF FACT

Based on the oral and doc umentary evidence presented at the

final hearing and on the entire record of this proceeding, the

following findings of fact are made:

1. Respondent, Eduardo E n rique Mendez ("Mendez"), at all

times material to this matter, was a licensed insurance agent

s ubject to the regulatory jurisdiction of the Petitioner.

Petitioner issued Mendez license number A176292.

2. Mendez is licensed as a 2 - 18 life and health agent and

a 2 - 20 general lines agent for the sale of property and

casualty.

3. Mendez first star ted in the insurance business in 1969

while in Panam á . He came to the United States in 1988. In

South Florida, he has been known as " Mr. Panama " in the

insurance industry for approximately 20 years.

4. Respondent, Insurance Resources of the Americas, I nc.

("Insurance Resources"), is and was, at all times material in

this matter, a corporation registered as a Florida insurance

agent subject to the regulatory juri sdiction of Petitioner,

having been issued license number R054007 . Mendez is the

corporation 's owner and president.

5. Insurance Resources typically handles all kinds of

property and casualty insurance , but for approximately the last

six years has specialized i n the used car dealer business by

providing bonds for the car dealers to open their op eration.

6. Bass Underwriters ("Bass") is a managing general agent

which works with insurance agents who purchase insurance for

their customers. Bass has no direct relationship with the

customers only with the retail agent who is responsible for

collect ing the premium.

7. On January 22, 2003, Insurance Resources, as producer,

and Bass signed a producer agreement which allowed Insurance

Resources to sell insurance through Bass or certain carriers

that Bass obtain s as a wholesaler. Insurance Resources r eceived

commission s as compensation under the agreement.

8. T he agreement contained a provision which guaranteed

the collection of additional premiums that might arise as a

result of an audit of the insurance customers. The provision

provided in relevan t part:

Producer shall be liable to Bass Underwriters, Inc.

for the full amount of premium, fees and applicable

sum taxes, less commission, including additional

and/or adjustable premiums developed under audits or

applicable rating plan on every insurance contract

placed by Producer through Bass Underwriters, Inc.

Producer shall remit Twenty Five Percent (25%) of the

premium upon binding. The full amount of premium,

fees and applicable state taxes, less commission is

due to Bass Underwriters, Inc. not lat er than the 15th

day of the first (1st) month after the effective date

of such contract, audit, rating plan, or other

adjustment.

9. During the term of the producer agreement, three

policies were issued that Bass determined additional premiums

were owed by Insurance Resources.

10. On June 29, 2005, Bass notified Insurance Resources by

invoice that an additional premium was owed for the insured ,

L. Boulevard Café, in the amount of $6,955.00. L. Boulevard

Cafe, a restaurant, obtained a Century Surety po licy through

Insurance Resources effective November 15, 2004. In making the

application , the restaurant declared a certain amount of

projected sales. The premium was based upon the total sales

recorded by the customer.

11. Century Surety did a self aud it and determined that

the amount of sales was significantly more than the coverage.

Subsequently, the carrier went back and assessed additional

premiums to make up the difference between the amount of

coverage represented and the self reported amount, wh ich totaled

$6,955.00.

12. Around August 2005 , after receiving the Bass invoice

with the additional premiums , Insurance Resources notified

L. Boulevard Café about the invoice and explained that the

additional insurance premium of $6,955.00 was o wed because of

the difference in the amount calculated from the audit.

13. Mendez notified Rafael Garcia, prior owner of L.

Boulevard Café, about the additional insurance premium but L.

Boulevard Cafe was having financial problems . L . Boulevard Café

nev er made the additional premium payment.

14. On July 1, 2005, Bass notified Insurance Resources by

invoice that an additional premium was owed for the insured ,

Winner's Circle, in the amount of $418.00. Winner's Circle

obtained a XL Specialty Insurance C ompany policy through

Insurance Resources effective May 23, 2005. An inspection was

performed after the policy quote was bound and issu ed. T he

subsequent inspection concluded that the construction code of

the building was different from the construction code

represented on the application. The difference triggered a

premium increase of $418.00.

15. When Insurance Resources found out about the

additional premium for Winner's Circle, Mendez sent an invoice

explaining the increase and requesting payment . Winner's Circle

refused to pay the amount because the policy was issued under a

lower premium.

16. Winner's Circle decided not to keep the policy when

Respondent requested that they make payment of the additional

premium amount and the balance of the prem ium on the policy.

Payment was never made . T he policy was cancelled. The account

was credited and the final total owed was $160.40, which Bass

became responsible for with the carrier.

17. On July 11, 2005, Bass notified Insurance Resources by

invoice that an additional premium was owed for the insured ,

Venecar, Inc. , in the amount of $1,298.00. Venecar , a small

used car dealership , obtained a Century Surety policy through

Insurance Resources effective July 18, 2004 . The insurance

inspectors did an in spection after the policy was issued and

determined that one more employee and driver than had been

represented in the application existed and that employee

generated a change in the rating for the premium, which Bass

ultimately decided was an additional p remium of $1,298.00 .

18. After Insurance Resources learned about the results of

the inspection, Mendez called Bass and told Ms. Rodriguez, the

accountant, that the premium increase of $ 1, 298 .00 was too high

and could not be the proper rate for one driver because one

driver should be around $400.00. Bass ignored Mendez 's

proposition.

19. Subsequently , Mendez told Venecar about the

outstanding premium amount owed and they refused to pay.

Insurance Resources followed up and contacted Venecar several

more t imes requesting the additional premium payment to no

avail . Soon thereafter , Venecar closed.

20. Mendez reported his efforts to Bass while he tried to

collect the three changed premium amounts. Insurance Resources

never collected the additional premium from L. Boulevard Café ,

Winner's Circle, or Vene car even though Mendez repeatedly sought

to get the outstanding premiums from all three insured

customers. Despite Respondents best effort s, they never

received any of the additional premiums that accrued. Bass

still expected Insurance Resources to pay the additional

premiums pursuant to the producer agreement.

21. On M ay 1, 2006, Bass sent Insurance Resources a

statement of account. The invoice statement informed Insurance

Resources that the premium due for the three different accounts

totaled $8,021.39 . The statement outlined the amount owed from

each insured .

22. After Bass made several demands for the three

accounts, Bass submitted the account to collections and the

matter ultimately ended in litiga tion.

23. On November 5, 2007, a final judgment was entered

against Insurance Resources in favor of Bass for the principal

of $8,021.39, costs of $275.00, and prejudgment interest of

$1,298.14 , for a total of $9,594.53. T he judgment remains

unsatisfied.

24. On February 15, 2008, Insurance Resources paid

$1,919.00 on the judgment. On February 29, 2008, Insurance

Resources paid $640.00 on the judgment. There is a balance owed

of $7 , 035.53.

25. Insurance Resources also had a relationship with

AAPCO, a p remium finance company that financed the balance of

what an insured could not pay. Respondent Insurance Resources

was a n authorized entity to accept premium finance contracts

utilizing AAPCO premium finance. Insurance Resources had the

authority to write check drafts on AAPCO's bank account for the

entire premium amount owed on a customer's insurance policy and

remit it to the insurer. Respondent would then submit the

policy application together with the premium down payment

received from the consumer to AAPCO, which would finance the

rest of the policy premium.

26. In 2009, Insurance Resources was having problems

financially. Mendez approached Mrs. Blanco, AAPCO's o ffice

manager, and told her Insurance Resources sales had dropped

fifty percent. Mende z , on behalf of Insurance Resources

requested to make a payment arrangement. 1 Blanco refused to make

any type of arrangements. She insisted that Insurance Resources

pay everything up front. Mendez approached her several more

times but she would not nego tiate. At one point, Mendez even

requested that AAPCO place the $4,000.00 in producers fees owed

to Insurance Resources against the monies owed and she refused

to pay Respondent the $4,000.00

27. In 2009 , Mendez submitted three checks to AAPCO 's as

down payments for insured s' accounts . Check number 1347 was for

$10,228.47. The check was from account number 2000034377804

Mr. Panama Inc.'s account. C heck number 1342 was from the same

account in the amount of $2,828.15 . However, check number 159

was for $ 3,3 68.44 from Insurance Resources account number

2000040742805 .

28. Checks 1347, 1342, and 159 totaled approximately

$16,425.00. The funds were intended to be premium down payments

on insurance policies purchased by Florida insurance consumers.

Insura nce policies were issued for each of the checks for down

payments for insured's accounts Insurance Resources submitted.

29. AAPCO deposited the three checks and they were

submitted to the bank for negotiation. Each check was returned

for insufficient fun ds. AAPCO attempted to collect the money

for the three checks that were returned for non - sufficient

funds. AAPCO demanded payment of the funds and even called

Mendez in an effort to collect the funds.

30. Mendez admitted at hearing that the three checks

bounced because he had used the funds for his business operating

account since the business was doing bad financially. Insurance

Resources had not yet repaid AAPCO their monies owed for the

three checks.

31. AAPCO has suffered a financial loss due to n onpayment.

After nonpayment , AAPCO turned the matter over to AAPCO's legal

department.

32. A fter an investigation , Petitioner charged Respondents

with numerous violations by separate Administrative Complaints

dated April 21, 2010.

The Charges:

33. In C o unt I of the Administrative complaint filed

against Mendez, Petitioner charges Mendez with violations of

s ections 626.561(1), 626.611(7), (9), (10), and 626.621(4),

Florida Statutes , for failing to remit all premiums due to Bass .

34. In C ount II , Petitio ner charges Mendez with violations

of s ection s 626.561(1),626.611(7), 626.611(9) and (10), and

626.621(4) for submitting the three checks to AAPCO in payment

of the policy down payment premiums that were returned for

insufficient funds and not repaid after demand .

35. In C ount I of the Administrative complaint filed

against Insurance Resources, Petitioner charges Insurance

Resources with violation of s ections

626.561(1),626.6251(5)(a) , (d), ( f),(j), and ( k) for failing to

remit all premiums due to Bass . 2

3 6. In C ount II Petitioner charges Insurance Resources

with violations of s ections 626.561(1), and 626.6251(5)(a) , (d),

( f),( j), and (k) for remitting three checks to AAPCO in payment

of the policy down payment premiums that were returned for

insufficient f unds and not repaid after demand.

CONCLUSIONS OF LAW

37. T he Division of Administrative Hearings has

jurisdiction over the subject matter of this proceeding and the

parties thereto pursuant to s ections 120.569 and 120.57(1),

Florida Statutes.

38. Chapt er 6 26 Florida Statutes, under which Respondents

have been charged, sets forth the acts for which the Petitioner

may impose discipline.

39. A proceeding , such as this one, to suspend, revoke, or

impose other discipline upon a professional license is pen al in

nature. State ex rel. Vining v. Fla . Real Estate Comm ' n , 281

So. 2d 487, 491 (Fla. 1973). Being penal in nature, Chapter

626 , Florida Statutes, "must be construed strictly, in favor of

the one against whom the penal ty would be imposed." Munch v.

D ep ' t of Prof ' l Regulation, Div. of Real Estate , 592 So. 2d

1136, 1143 (Fla. 1st DCA 1992).

40. Here, the Petitioner seeks to discipline Respondent's

license and/or to impose an administrative fine. Accordingly,

the Petitioner has the burden of proving th e allegations charged

in the Administrative Complaint s against the Respondents by

clear and convincing evidence. Dep ' t of Banking and Fin . , Div .

of Sec . and Investor Prot . v. Osborne Stern and Co., 670 S o. 2d

932 , 9 33 - 34 (Fla. 1996) (citing Ferris v. Turl ington , 510 So. 2d

292, 294 - 95 (Fla. 1987)); Nair v. De p' t of Bus . & Prof ' l

Regulation , 654 So. 2d 205, 207 (Fla. 1st DCA 1995).

41. Regarding the standard of proof, in Slomowitz v.

Walker , 429 So. 2d 797, 800 (Fla. 4th DCA 1983), the Court of

Appeal , Fourth District, canvassed the cases to develop a

"workable definition of clear and convincing evidence" and found

that of necessity such a definition would need to contain "both

qualitative and quantitative standards." The court held that:

clear and co nvincing 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 confusion as to

the facts in iss ue. The evidence must be of

such 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.

Id.

42. A licensee is charged with knowing the pra ctice act

that governs his/her license. Wallen v. Fla . Dep ' t of Prof ' l

Regulation, Div . of Real Estate , 568 So. 2d 975 (Fla. 3d DCA

1990).

43. In Petitioner's Proposed Recommended Order, Petitioner

did not address all the violations alleged in the Admin istrative

Complaints. Since s ections 62 6 .611(9), 626.6215(5)(j ) were not

addressed, the undersigned assumes such charges are dismissed .

Further Pet itioner alleges a violation of s ection 626.611(13) in

paragraph 6 of the Proposed Recommended Order. The u ndersigned

will not address the allegation in as m uch as Respondent s were not

initially charge d with this violation in either Administrative

Complaint and disciplinary action may only be based upon those

offenses specifically alleged in the Petition. See Co ttrill v .

Dep't of Ins . , 685 So. 2d 1371, 1372 (Fla. 1st DCA 1996); Delk

v. Dep ' t of Prof ' l Reg . , 595 So. 2d 966, 967 (Fla. 5th DCA

1992).

44. Section 626.611 provides in relevant part:

The department shall deny an application

for, suspend, revoke, or re fuse to renew or

continue the license or appointment of any

applicant, agent, title agency, adjuster,

customer representative, service

representative, or managing general agent,

and it shall suspend or revoke the

eligibility to hold a license or appointmen t

of any such person, if it finds that as to

the applicant, licensee, or appointee any

one or more of the following applicable

grounds exist:

* * *

(7) Demonstrated lack of fitness or

trustworthiness to engage in the business of

insurance.

* * *

(9) Fraudulent or dishonest practices in

the conduct of business under the license or

appointment.

(10) Misappropriation, conversion, or

unlawful withholding of moneys belonging to

insurers or insureds or beneficiaries or to

others and received in conduct o f business

under the license or appointment.

45. Section 626.621 provides in relevant part:

The department may, in its discretion, deny

an application for, suspend, revoke, or

refuse to renew or continue the license or

appointment of any applicant, agen t,

adjuster, customer representative, service

representative, or managing general agent,

and it may suspend or revoke the eligibility

to hold a license or appointment of any such

person, if it finds that as to the

applicant, licensee, or appointee any one or

more of the following applicable grounds

exist under circumstances for which such

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 represents or

has represented any money coming into his or

her hands belonging to the insurer.

46. Section 626.6 215 provides in relevant part:

(5) Committing any of the following acts

with such frequency as to have made the

operation of the agency hazardous to the

insurance - buying public or other persons:

(a) Misappropriation, conversion, or

unlawful withholding of moneys belonging to

insurers or insureds or beneficiaries or to

others and received in the conduct of

business under the lice nse.

* * *

(d) Violation of any provision of this code

or of any other law applicable to the

business of insurance in the c ourse of

dealing under the license.

* * *

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

over to any insurer he or she represents or

has represented any money coming into his or

her hands belonging to the insurer.

* * *

(k) Demonstrated lack of fitn ess or

trustworthiness to engage in the business of

insurance arising out of activities related

to insurance or the insurance agency.

47. Even though Insurance Resources breached the producer

agreement by fail ing to remit the additional premiums due to

Bass , Petitioner failed to prove Respondents violated s ections

626.561(1), 626.611(10) , 626.6215(5)(a), 626.621(4) , and

626.6215(5 ) in that Respondent s neither received the additional

premiums requested because the three insured s never paid them .

Addition ally, Petitioner failed to demonstrate Mendez lacked

fitness or trustworthiness to engage in the business of

insurance in violation of s ections 626.611(7) and 626.6215(5)( k)

for Count I . Instea d , the record shows Mendez made every effort

to try and collec t the additional premiums from failing

businesses .

48. As to counts II of the Administrative C omplain t s,

t here is no dispute that the three checks drawn on Respondent's

corporate bank account s to AAPCO totaling approximately

$16,425.00 were intended to b e the premium payments on insurance

policies purchased by Florida insurance consumers . Petitioner

met its burden and demonstrated that the checks were returned

for non - sufficient funds and at the time of the hearing AAPCO

had not received the monies . Pet itioner proved as stated in its

Proposed Recommended O rder that " Respondents failed to remit

premiums due to the insurer and wrongfully retained for their

own use and benefit." Respondent Mendez's admission shows that

the money went in the Insurance Resou rces business operating

account to keep the business afloat during a financial struggle .

49. Even though Insurances Resources is obligated to AAPCO

through their transactions, as a corporate officer Respondent

Mendez is responsible for the acts of the c orporation pursuant

to section 626.734. Therefore, Petitioner demonstrated by clear

and convincing evidence that each Respondent s' failure to keep

the trust funds received in a fiduciary capacity and the

Respondent s spen ding the monies for Insurance Resour ces business

violated section 626.561(1) . Such actions would also show a

lack of fitness for Respondents to engage in the business of

insurance in violation of sections 626.622(7) and

626.6215(5)(k) . Furthermore , by failing to deliver the monies

over to AAPCO upon demand , Respondents were unlawfully

withholding monies in violation of sections 626.611(10) and

626.6215(5)(a). The aforementioned violations also subject

Respondent Insurance Resources to a violation of section

626.6215(5)(d).

Disciplinary Gu idelines

50. Pursuant to Florida Administrative Code Rule 69B - 231 ,

Petitioner has established disciplinary guidelines establishing

the range of penalties that will be imposed on licensees guilty

of violating c hapter 626 . 3

51. The guidelines mandate th at the penalty per count

cannot exceed the highest penalty for any violation found under

the count pursuant to r ule 69B - 231.040(1)(a). Violation of

s ection 626.611(10 ) for Respondent Mendez is punishable by a

12 - month suspension and is the highest penalt y for any of the

violations in Count II . Such would be the highest penalty that

the undersigned can find for Mendez .

52. The undersigned finds that Mendez's actions of

informing AAPCO of Insurance Resources ' financial problems and

requesting payment arra ngements on several occasions

demonstrates that Respondent s did not willfully withhold the

monies from AAPCO but did not have the cash. The guidelines set

forth the range of punishment for Insurance Resources'

violations of s ections 626.6215(5)(a) ( d )( f), ( k) , and 626.561(1)

as a three - month suspension since Respondent's action were not

willful. Therefore, three months would be the highest penalty

for Respondent Insurance Resources for Count II.

53. In conclusion, the discipline to be imposed in this

case is Respondent Mendez' s license should be suspended for

twelve months with reinstatement conditioned upon paying AAPC O

back the monies owed and Respondent Insurance Resources license

should be suspended for three months with reinstatement

conditioned upon p aying AAPCO back the monies owed.

R ECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Department of Financial Services

enter a final order that: (a) finds Respondents not guilty as

charged in C ount I , of the Administrative Complaint s ; (b) finds

Respondent s guilty in Count II ; (c) suspends Respondent Mendez' s

license for 12 months with reinstatement conditioned upon

repayment to AAPCO ; and ( d ) suspends Respondent Insurance

Resources ' license for three months with reinstatement

conditioned upon repayment to AAPCO.

DONE AND EN TERED this 28th day of February , 201 1 , in

Tallahassee, Leon County, Florida.

S

___________________________________

JUNE C. MCKINNEY

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675 SUNCOM 278 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 28th day of February, 2011 .

ENDNOTES

1 Blanco denied ever having a conversation with Mende z regarding

a payment plan request. The undersigned finds Mendez's

testimony to the contrary more persuasive.

2 Petitioner inverts the statute's numbers in the Administrative

Complaint and lists the statute as 626.6251. The undersigned

finds the listin g to be a scrivener's error since the

Administrative Complaint details the correct language of Section

626.6215, Florida Statutes and adequately places Respondent on

notice as to the nature of the charges.

3 All references to Florida Administrative Code Rule 69B - 231 are

to the 2006 version that was in effect at the time of the

incidents charged.

COPIES FURNISHED:

Jed Berman, Esquire

Infantino and Berman

P.O. Drawer 30

Winter Park, Florida 32790

James A. Bossart, Esquire

Department of Financial Serv ices

612 Larson Building, Room 612

200 East Gaines Street

Tallahassee, Florida 32399 - 0333

Honorable Jeff Atwater, Chief Financial Officer

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0300

P. K. Jameson, Genera l Counsel

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0300

Julie Jones, CP,FRP, Agency Clerk

Department of Financial Services

Division of Legal Services

200 East Gaines Street

Tallahassee, Florida 32399 - 0390

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this recommended order. Any exceptions

to this recommended order should be filed with the agency that

will issue the final order in this case.