12-001201RU Premier Group Insurance Company vs. Office Of Insurance Regulation And The Financial Services Commission Status: Closed DOAH Final Order on Thursday, July 5, 2012.

Summary: Petitioner demonstrated that Office's policy of not allowing federal income tax as an expense for excess profits filings meets the definition a rule that has not been deopted pursuant to Section 120.54.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

PREMIER GROUP )

INSURANCE COMPANY , )

)

Petitioner , )

)

vs. ) Case No. 12 - 1201RU

)

OFFICE OF INSURANCE )

REGULATION AND THE FINANCIAL )

SERVICES COMMISSION , )

)

Respondents . )

)

FINAL ORDER

On May 22 and 23, 2012, a duly - noticed hearing was conducted

in Tallahassee, Florida, before Administrative Law Judge Lisa

Shearer Nelson, an administrative law judge assigned by the

Division of Administrative Hearings.

APPEARANCES

For Petitioner: James A. McKee, Esquire

Wes Strickland, Esquire

Foley & Lardner, LLP

106 East College Avenue, Suite 900

Tallahassee, Florida 32301

For Respondent: Kenneth Tinkham, Esquire

Timothy Gray, Esquire

Office of Insurance Regulation

Legal Services Office

200 East Gaines Street

Tallahassee, Florida 32399

STATEM ENT OF THE ISSUE S

At issue in this case is whether Respondent s , the Office of

Insurance Regulation ( " OIR " or " the Office " ) or the Financial

Services Commission ("the Commission") have developed agency

statements of general applicability meeting the definition of a

rule in section 120.52(10), Florida Statutes (201 1 ), governing

its review, evaluation, recalculation, and disposition of

excessive profits filings submitted pursuant to section 627.215,

Florida Statutes (2011) . If so, it must be determined whether

those statements have been adopted as rules pursuant to the

rulemaking process in section 120.54(1).

PRELIMINARY STATEMENT

On March 19, 2010, the Office issued a Notice of Intent to

Issue Order to Return Excess Profits to Petitioner, Premier Group

Insurance Company ( " Premier " or " PGIC " ). Premier challenged the

intended agency action, and eventually, on January 13, 2012,

filed an Amended Petition for Administrative Hearing Involving

Disputed Issues of Fact with OIR. The Office referred the case

to the Division of Administrative Hearings the same day, and the

case was docketed as DOAH Case No. 12 - 0439 (hereinafter referred

to as "the merits case"). A pivotal issue contested by the

parties in the merits case is the Office's treatment of federal

inco me taxes when determining the amount , if any, of excess

profits pursuant to section 627.215.

The merits case was scheduled for hearing April 10 - 11, 2012.

However, at the request of the parties, the matter was continued

because the parties advised that a P etition Challenging Agency

Statements Defined as Rules had been filed with the office and

was going to be referred to DOAH, and that the cases should be

consolidated for hearing. Accordingly, the merits case was

rescheduled for hearing on May 22 - 23, 2012.

On April 5, 2012, the Petition Challenging Agency Statements

Defined as Rules was filed with the Division, and docketed as

Case No. 12 - 1201RU (referred to herein as the unadopted rules

case) , which is the subject of this Final Order . On April 10,

2012, t he cases were consolidated for hearing. The Order of

Consolidation stated that the case would be heard May 22 - 23, as

previously noticed in the merits case, unless the parties

requested earlier dates.

The hearing on both cases began as scheduled. However, at

the beginning of the hearing, the undersigned was notified that

Petitioner ha d discovered a statute not previously contemplated

by either party dealing with the allocation of federal income

taxes for insurance companies. Because the potential applicat ion

of this allocation method would materially affect the

presentation of the merits case, it was agreed that the merits

case would be continued and the unadopted rules case would

proceed.

Prior to hearing, the parties submitted a Joint Prehearing

Stipulat ion containing stipulated facts that, to the extent that

they are relevant to the unadopted rules case, are incorporated

into the Findings of Fact below. At hearing, Petitioner

presented the testimony of Robert Prentiss, Esquire, James

Watford, Raymond Ne ff, and Donnie Hunter. Respondent presented

the testimony of Donnie Hunter and James Watford. Joint Exhibits

1 through 21 were admitted into evidence, as were Petitioner's

Exhibits 1 - 5, 10, 12, 14, 20 - 41 , and Respondent's Exhibits 1 - 2,

4, 10 - 12, 15 - 18, 2 0 - 23, 25, 34, 37 - 38.

After the hearing, the cases were severed so that a final

order could be issued in the unadopted rule challenge, and the

merits case was continued until after the issuance of the final

order in this case. A two - volume Transcript was f iled with the

Division on June 4, 2012. Both parties timely filed Proposed

Recommended Orders that were carefully considered in the

preparation of this Final Order. Both the Transcript and the

Exhibits submitted in this case will be retained and included in

the record for Case No. 12 - 0439

FINDING S OF FACT

1. Premier is a foreign insurer authorized to write

workers' compensation insurance in the State of Florida. As a

workers' compens ation insurer, Premier is subject to the

jurisdiction of the Office. Premier began writing workers'

compensation insurance coverage in Florida on January 1, 2005.

2. The Office is a subdivision of the Financial Services

Commission responsible for the adm inistration of the Insurance

Code, including section 627.215.

3 . Section 627.215(1)(a) requires that insurer groups

writing workers' compensation insurance file with the Office on a

form prescribed by the Commission , the calendar - year earned

premium; accident - year incurred losses and loss adjustment

expenses; the administrative and selling expenses incurred in

Florida or allocated to Florida for the calendar year; and

policyholder dividends applicable to the calendar year. Insurer

groups writing other types of insurance are also governed by the

provisions of this section. The purpose of section 627.215 is to

determine whether insurers have realized an excessive profit and

if so, to provide a mechanism for determining the profit and

ordering its return to consumers.

4 . Insurer groups are also required to file a schedule of

Florida loss and loss adjustment experience for each of the three

years prior to the most recent accident year. Section 627.215(2)

provides that "[t]he incurred losses and loss adju stment expenses

shall be valued as of December 31 of the first year following the

latest accident year to be reported, developed to an ultimate

basis, and at two 12 - month intervals thereafter, each developed

to an ultimate basis, so that a total of three e valuations will

be prov ided for each accident year."

5 . Section 627.215 contains definitions that are critical

to understanding the method for determining excess profits.

Those definitions are as follows:

a. "Underwriting gain or loss" is computed as fo llows "the

sum of the accident - year incurred losses and loss adjustment

expenses as of December 31 of the year, developed to an ultimate

basis, plus the administrative and selling expenses incurred in

the calendar year, plus policyholder dividends applicab le to the

calendar year, shall be subtracted from the calendar - year earned

premium." § 627.215(4).

b. " Anticipated underwriting profit" means "the sum of the

dollar amounts obtained by multiplying, for each rate filing of

the insurer group in effect duri ng such period, the earned

premium applicable to such rate filing during such period by the

percentage factor included in such rate filing for profit and

contingencies, such percentage factor having been determined with

due recognition to investment income from funds generated by

Florida business, except that the anticipated underwriting profit

. . . shall be calculated using a profit and contingencies fact or

that is not less than zero." § 627.215(8).

6 . Section 627 . 215 requires that the underwriting gain or

loss be compared to the anticipated underwriting profit , which,

as previously stated, is tied to the applicable rate filing for

the insurer. Rate filings represent a forecast of expected

results, while the excess profits filing is based on actual

expe nses for the same timeframe.

7 . The actual calculation for determining whether an

insurer has reaped excess profits is included in section

627.215(7)(a):

Beginning with the July 1, 1991, report for

workers' compensation insurance, employer's

liability insurance, and commercial casualty

insurance, an excessive profit has been

realized if the net aggregate underwriting

gain for all these lines combined is gre ater

than the net aggregate anticipated

underwriting profit for these lines plus 5

percent of earned premiums for the 3 most

recent calendar years for which data is

filed under this section. . .

8 . Should the Office determine, using this calculation, that

an excess profit has been realized, the Office is required to

order a return of those exc ess profits after affording the insurer

group an opportunity for hearing pursuant to chapter 120.

9. OIR B1 - 15 (Form F) is a form that the Office has adopted

i n Florida Administrative Code Rule 69O - 189.007, which was

promulgated pursuant to the authority in section 627.215.

10. The information submitted by an insurer group on Form F

is used by the Office to calculate the amount of excessive

profits , if any, th at a company has realized for the three

calendar - accident years reported.

11. The terms "loss adjustment expenses," and

"administrative and selling expenses," are not defined by statute.

Nor are they defined in rule 69O - 189.007 or the instructions for

F orm F.

12. On or about June 30, 2009, Premier filed its original

Form F Filing with the Office pursuant to section 627.215 and rule

69O - 189.007. Rule 69O - 189.007 requires that a Form F be filed

each year on or before July 1.

13. The first page of Form F includes section four, under

which calendar year administrative and selling expenses are

listed. Section four includes five subparts: A) commissions and

brokerage expenses; B) other acquisition, field supervision and

collection expense; C) general exp enses incurred; D) taxes,

licenses and fees incurred; and E) other expenses not included

above.

14. Premier subsequently filed three amendments to its Form

F filing on December 11, 2009; on June 21, 2010; and on

January 13, 2012. In each of its amended filings, Premier

included the federal income tax expense attributable to

underwriting profit it earned during the 2005 - 2007 period. These

expenses were included under section four(E).

15. No guidance is provided in section 627.215, in rule 60O -

189.007, or in the instructions for Form F, to identify what

expenses may properly be included in the Form F filing. There is

no indication in any of these three sources, or in any other

document identified by the Office, that identifies whether federal

income tax es are to be included or excluded from expenses to be

reported in a Form F filing. While the form clearly references

taxes, licenses and fees incurred under section 4(D), the

instructions do not delineate what types of taxes, licenses and

fees should be i ncluded. The instructions simply state: "for

each of the expenses in item 4, please provide an explanation of

the methodology used in deriving the expenses, including

supporting data."

16. The Office takes the position that federal income taxes

should not be reported as an expense for the purpose of

determining excess profits. It position, as characterized by

Petitioner, is that "in determining what expenses may be deducted

in calculating whether and to what extent excessive profits have

been realized during the reporting period, the Office shall

disallow any deduction for federal income tax or the net effect of

federal income tax accrued or paid during the reporting period."

According to James Watford, a Department actuary who reviews the

excess profits reports, this position has not changed at any time

in the last ten years.

17. In August 2009, a petition was filed against the Office

challenging the statement stated above as an unadopted rule. FFVA

Mutual Insurance Co. v. Office of Insurance R egulation , DOAH Case

No. 09 - 4193RU .

18. The proceeding in the FFVA case was placed in abeyance

based upon the Office's agreement to initiate rulemaking. A

Notice of Development of Rulemaking was published and a workshop

was conducted on February 22, 2 010.

19. On or about June 17, 2010, James Watford circulated

proposed changes to rule 69O - 189.007, which included changes to

the instructions to Form F. Among those proposed changes was the

addition of the following statement: "[f]ederal income tax i s not

to be included as an expense because the ' anticipated underwriting

profit ' is based on a pre - Federal income tax profit and

contingencies factor." This language would have placed the

position consistently taken by the Office in the materials

incorpor ated into the rule.

20. On No v ember 17, 2010, a second rule development workshop

was held on the proposed changes to rule 69O - 189.007. However, no

further action toward adopting the proposed revisions took place.

At some point, the FFVA challenge was d ismissed based upon a

settlement between the parties , and the Office never sought

approval from the Commission to notice the proposed changes for

rulemaking. No further action has been taken to adopt the

Office's position through the chapter 120 rulemakin g process , and

no credible explanation was provided to explain why the O ffice did

not present the proposed changes to the Commission to obtain

permission to notice the proposed rules.

21. Although Mr. Watford testified that the Office has

"clearly enunciated [its] position on federal income tax," he

acknowledged that it has not been adopted through the rulemaking

process. He stated, "before that ever came into existence, we had

discus sions with companies about the appropriateness of including

that the fact that it is already included in the profit factor . .

. . It was not published in a rule, because it is -- we thought it

was pretty commonly understood by most parties."

22. The Offi ce insists that it is not feasible to consider

federal income taxes in the excess profits calculation. It

pointed to no real impediment to adopting its position of not

considering federal income taxes through the rulemaking process.

23. On January 4, 20 11, Governor Scott issued Executive

Order 11 - 1, which temporarily suspended rulemaking for executive

branch agencies reporting to the Governor. Executive Order 11 - 1

was issued 11 months after the Office published its first Notice

of Rule Development i n Fe bruary 2010, and did not apply to either

the Office or the Commission.

24. The Office also points to publications published by

other entities, such as the Actuarial Standards Board and the

National Association of Insurance Commissioners ("NAIC"), to

supp ort its position that federal income taxes may not be

considered in determining excess profits. However, section

627.215 does not reference any of these publications, and they are

not incorporated by reference in the Office's rule regarding

excessive prof its. Nor do these publications expressly reference

what can be considered for excess profits calculations.

25. During the 2012 legislative session, section 627.215 was

amended to delete the excess profits filing requirement for

workers ' compensation ins urance. § 7, ch. 2012 - 213, Laws of Fla.

Section 627.213 had not been amended prior to this year since

2003. However, the Office continues to assert its position with

respect to the exclusion federal income taxes as an expense to

those filings remaining in the "pipeline." Section 627.215

continues to apply to other types of insurance.

CONCLUSIONS OF LAW

26 . The Division of Administrative Hearings has

jurisdiction over the parties and the subject matter of this

proceeding pursuant to section s 120.56(4), 120.569 and 120.57(1),

Florida Statutes (2011).

27. Premier is subject to the jurisdiction and regulation

of the Office pursuant to the Florida Insurance Code, and is

subject to the provisions of section 627.215.

28. In order to demonstrate standing to challenge the

agency statement, Premier must prove that 1) the agency statement

of policy will result in a real or immediate injury in fact; and

2) that the alleged interest is within the zone of interest to be

prot ected or regulated. Jacoby v. Fla. Bd. of Medicine , 917 So.

2d 358 (Fla. 1st DCA 2005). Premier has standing to challenge

the applicability of the agency statement pursuant to section

120.56(4), as the Office has relied on the statement in

determining th e amount of excessive profits Premier is required

to refund, and application of the policy will result in a higher

refund amount.

29. The Legislature has determined that agencies must adopt

those policies meeting the definition of a rule as rules. As

s ection 120.54(1) provides,

(1)(a) Rulemaking is not a matter of agency

discretion. Each agency statement defined

as a rule by s. 120.52 shall be adopted by

the rulemaking procedure provided by this

section as soon as feasible and practicable.

1. Rulem aking shall be presumed feasible

unless the agency proves that:

a. The agency has not had sufficient time

to acquire the knowledge and experience

reasonably necessary to address a statement

by rulemaking; or

b. Related matters are not sufficiently

reso lved to enable the agency to address a

statement by rulemaking.

2. Rulemaking shall be presumed practicable

to the extent necessary to provide fair

notice to affected persons of relevant

agency procedures and applicable principles,

criteria, or standards for agency decisions

unless the agency proves that:

a. Detail or precision in the establishment

of principles, criteria, or standards for

agency decisions is not reasonable under the

circumstances; or

b. The particular questions addressed are

of such a narrow scope that more specific

resolution of the matter is impractical

outside of an adjudication to determine the

substantial interests of a party based on

individual circumstances.

(b) Whenever an act of the Legislature is

enacted which requires impl ementation of the

act by rules of any agency within the

executive branch of state government, such

rules shall be drafted and formally proposed

as provided in this section within 180 days

after the effective date of the act, unless

the act provides otherwi se.

. . . .

30. Section 120.56 (4) provides in pertinent part:

(4) CHALLENGING AGENCY STATEMENTS DEFINED AS

RULES; SPECIAL PROVISIONS. Ï

(a) Any person substantially affected by an

agency statement may seek an administrative

determination that the state ment violates s.

120.54(1)(a). The petition shall include the

text of the statement or a description of the

statement and shall state with particularity

facts sufficient to show that the statement

constitutes a rule under s. 120.52 and that the

agency has not adopted the statement by the

rulemaking procedure provided by s. 120.54.

(b) . . . If a hearing is held and the petitioner

proves the allegations of the petition, the

agency shall have the burden of proving that

rulemaking is not feasible or not practicable

under s. 120.54(1)(a).

(c) The administrative law judge may determine

whether all or part of a statement violates s.

120.54(1)(a). The decision of the administrative

law judge shall constitute a final order. . . .

(d) If an administrative law judge enters a final

order that all o r part of an agency statement

violates s. 120.54(1)(a), the agency must

immediately discontinue all reliance upon the

statement or any substantially similar statement

as a basis for agency action.

(e) If proposed rules addressing the challenged

statement are determined to be an invalid

exercise of delegated legislative authority as

defined in s. 120.52(8)(b) - (f), the agency must

immediately discontinue reliance on the statement

and any substantially similar statement until

rules addressing the subject are properly

adopted, and the administrative law judge shall

enter a final order to that effect.

(f) All proceedings to determine a violation of

s. 120.54(1)(a) shall be brought pursuant to this

subsection. A proceeding pursuant to this

subsection may be con solidated with a proceeding

under subsection (3) or under any other section

of this chapter. This paragraph does not prevent

a party whose substantial interests have been

determined by an agency action from bringing a

proceeding pursuant to s. 120.57(1)(e ).

3 1 . Section 120.52( 16) defines a rule as "each agency

statement of general applicability that implements, interprets,

or prescribes law or policy or describes the procedure or

practice requirements of any agency and includes any form which

imposes any requirement or solicits any information not

specifically required by statute or by an existing rule." An

"unadopted rule" is defined as an agency statement that meets the

definition of the term rule, but that has not been adopted

pursuant to the requirem ents of section 120.54. § 120.52(20),

Fla. Stat.

3 2 . In this proceeding, Premier has the burden of

demonstrating by a preponderance of the evidence that the

Office's statement regarding the exclusion of federal income

taxes as an expense in excess profits filings meets the

definition of a rule and that the a gency has not adopted the

statement by rulemaking procedures. S.W. Fla. Water Mgmt. Dist.

v. Charlotte Cnty , 774 So. 2d 903, 908 (Fla. 2d DCA 2001);

§ 120.56(4)(a) &(b), Fla. Stat.

33. Premier originally identified three agency statements

of general ap plicability in its Petition. At hearing, however,

Premier indicated its intention to litigate only one statement of

those originally identified. Therefore, this Final Order

addresses only the statement that, in determining what expenses

may be deducted i n calculating whether and to what extent

excessive profits have been realized during the reporting period,

the Office will disallow any deduction for federal income tax or

the net effect of federal income tax accrued or paid during the

reporting period.

34 . Premier has met its burden with respect to the above -

recited agency statement. A statement is considered to be

"generally applicable" if it is intended by its own effect to

create rights, to require compliance, or to otherwise have the

direct and consi stent effect of law. State Bd. of Admin. v.

Huberty , 46 So. 3d 1144, 1147 (Fla. 1st DCA 2010) (use of

telephone hotline to allow employees to make a switch in their

pension plan did not meet definition of a rule; simply provided a

means of exercising an e lection consistent with the statute);

Coventry First, LLC v. Off. Of Ins. Reg. , 38 So. 3d 200, 204 - 205

(Fla. 1st DCA 2010) (statements not unadopted rules because

discretionary in their application); Ag. for Health Care Admin v.

Custom Mobility, Inc. , 995 So. 2d 984, 986 (Fla. 1st DCA

2008)(sampling formula just one of several permitted under

statute, and therefore does not have the direct and consistent

effect of law); and Dep't of Rev. v. Vanjaria Enter., Inc. , 675

So. 2d 252, 255 (Fla. 5th DCA 1996 ) (tax assessment procedures in

DOR training manuals not simply a direct application of statute;

procedures afford no discretion to auditors and creates DOR's

entitlement to taxes while adversely affecting property owners).

35. In this case, the agency st atement regarding the

exclusion of federal income tax as an expense for excess profits

filings has, like the audit procedures in Vanjaria , the direct

and consistent effect of law.

36. The undisputed testimony at hearing was that the Office

has taken th e position that federal income tax cannot be

considered as an expense in excess profits filings for at least

the last ten years. There is no discretion afforded actuaries on

this issue in reviewing the filings. However, it cannot be said

to be a simple a pplication of the law to the information provided

in the filing, because neither section 627.215 nor rule 69O -

189.007 make s any mention of federal income taxes or how they are

to be treated.

37. Much of the Office's evidence at hearing focused on the

wisd om of not permitting federal income taxes as an expense, and

whether its position was consistent with actuarial standards or

publications by the NAIC. The Office misses the point. First,

the wisdom of the Office's position is not at issue here. What

is at issue is the need to adopt the agency statement as a rule

so that all those substantially affected by the agency policy

have the opportunity for public input and participation in the

rulemaking process. Second, in order to rely on other

publications, t hose publications would have to be incorporated by

reference. See § 120.54(1)(i) (a rule may only incorporate by

reference materials that exist on the day the rule is adopted) ;

Abbott Lab . v. Mylan Pharm . , 15 So. 3d 642 (Fla. 1st DCA 2009)

(statutes incorporating materials by reference must follow the

same standard). Here, nothing in section 627.215 or rule 69O -

189.007 incorporates standards adopted by NAIC or the Board of

Actuarial Standards and requires their application to excess

profits reporting. The overwhelming evidence at hearing

demonstrated that the Office takes the position that federal

income taxes are not allowed as expenses for the purposes of

determining excess profits for workers' compensation insurers;

that this policy has been applied consistently over at least the

last ten years; and that there is no discretion in applying this

policy .

38. The Office may avoid a finding that the agency policy

is an unadopted rule in violation of section 120.56(4) if it can

demonstrate t hat rulemaking was neither feasible nor practicable.

The statutory definitions for these terms are provided in

paragraph 29, above. In terms of feasibility , the Office clearly

had sufficient time to acquire the knowledge and experience

reasonably necessa ry to address the statement by rulemaking. I t

has been applying the policy consistently for at least ten years.

The same policy was challenged in August of 2009, at which time

the Office agreed to engage in rulemaking, but abandoned its

attempt when the unadopted rule challenge was settled. Draft

language incorporating the OfficeÓs position was prepared by June

of 2010.

3 9 . While Respondents point to Executive Order 11 - 1 as an

impediment to rulemaking, the Order (which did not by its terms

apply to the Commission) did not issue until January 4, 2011. By

this time, the Office had been on notice via the FFVA challenge

for 17 months that there was an allegation that the agency policy

was an unadopted rule ; the propo sed language to amend the

instructions to Form F had been distributed within the Office for

more t han six months; and two rule development workshops had been

conducted.

40 . Judge Watkins determined in Strong v. Department of

Children and Families , DOAH Case No. 11 - 535RU (DOAH Mar. 22,

2011), that Executive Order 11 - 1 was not among the justifications

circumscribed by section 120.54(1)(a). Moreover, s ince the

issuance of Order 11 - 1, an additional 18 months has passed.

Section 120.54(1)(b ) directs that ru les should be adopted within

180 days of the enactment of the statute being implemented. By

any calendar, the Office did not act within that period, and it

was feasible to do so.

41 . Likewise, the Office has not demonstrated that it was

not practicable t o engage in rulemaking. The Office has

consistently maintained its position regarding the exclusion of

federal income taxes and applied it across the board. The policy

is not of such a narrow scope that the Office could not address

it. Indeed, the draft language clearly shows that the policy was

simple to articulate.

42 . The most troubling aspect of this case at this point in

time is the effect of the amendment to section 627.215 during the

2012 session. As of July 1, there will be no more excess profi ts

filings with respect to workers' compensation insurance groups.

However, the Office represented at hearing that its policy would

continue to apply to filings that are "in the pipeline" at this

point. The Office will not be able to engage in rulemaking , as

they will no longer have statutory authority to do so with

respect to workers' compensation excess profits filings.

43 . However, this dilemma is one of the Office's own

making. Had it proceeded with rulemaking in 2010, any issues

related to the policy would have been resolved long before the

amendment to section 627.215. Having failed to act in accordance

with section 120 .54(1), Respondents cannot benefit from a dilemma

they have created.

44 . The statement regarding the exclusion of federal income

taxes from expenses reported for excess profits filings is a

statement of general applicability meeting the definition of a

rule that has not been adopted pursuant to section 120.54(1)(a).

45 . Petitioner seeks attorneys' fees and costs pursuant to

section 120.595(4)(a) for bringing this proceeding. Section

120.54(4)(a) provides that if an appellate court or an

administrative law judge determines that all o r part of any

agency statement violates section 120.54(1)(a), a judgment or

order shall be entered against the agency for reasonable costs

and reasonabl e attorney's fees, unless the agency demonstrates

that the statement is r equired by the Federal Government to

implement or retain a delegated or approved program or to meet a

condition to receipt of federal funds. No assertion has been

made by the Office regarding federal programs.

46 . Because the statement violates section 120.54(1)(a),

Premier is entitled to recover fees and costs in this action

pursuant to section 120.595(4)(a).

ORDER

Based on the foregoing Findings of Fact and Conclusions of

Law, it is ORDERED that the Office's statement that federal

income taxes may not be included as an expense which may be

deducted on Form F for purposes of calculating excess profits

under section 627.215 is a statement meeting the definition of a

rule that has not been adopted pursuant to section 120.54(1), and

the Office must immediat ely discontinue all reliance upon the

statement or any substantially similar statement as a basis for

agency action.

Jurisdiction is retain ed for the purpose of determining, if

necessary, the amount of reasonable attorneys' fees and costs.

Should the parties be unable to resolve the amount of the fees

and costs to be awarded, Premier shall file with the Division of

Administrative Hearings a wr itten request for hearing on the

issue of the amount of fees. Any such request for hearing must

be filed no later than 60 days after the date of this Final

Order.

DONE AND ORDERED this 5th day of July , 2012 , in Tallahassee,

Leon County, Florida.

S

LISA SHEARER NELSON

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 5th day of July , 2012 .

COPIES FURNISHED:

Kenneth Tinkham, Esquire

Timothy Gray, Esquire

Office of Insurance Regulation

Legal Services Office

200 East Gaines Street

Tallahassee, Florida 32399

James A. McKee, Esquire

Foley and Lardner, LLP

Suite 900

106 East College Avenue

Tallahassee, Florida 32301

[e-mail]

Belinda H. Miller, General Counsel

Office of Insurance Regulation

Suite 612K

200 East Gaines Street

Tallahassee, Florida 32399 - 4206

[e-mail]

Kevin M. McCarty, Commissioner

Office of Insurance Regulation

200 East Gaines Street

Tallahassee, Florida 32399 - 0305

Liz Cloud, Program Adm inistrator

Administrative Code

Department of State

R.A. Gray Building, Ste. 101

Tallahassee, Florida 32399

Mr. Ken Plante, Coordinator

Joint Admin istrative Proced ures Committee

Room 680, Pepper Building

111 West Madison Street

Tallahassee, Florida 32399 - 1400

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is ad versely affected by this Final Order 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 administrative appeal with the agency clerk of the

Division of Administrative Hearings within 30 days of rendition

of the order to be reviewed, and a copy of the notice,

accompanied by any filing fees prescribed by law, with the clerk

of the District Cour t of Appeal in the appellate district where

the agency maintains its headquarters or where a party resides or

as otherwise provided by law.