12-003426PL Department Of Financial Services, Division Of Insurance Agents And Agency Services vs. Hamid Goodzari Status: Closed Recommended Order on Thursday, February 14, 2013.

Summary: Six-month suspension for failure of insurance agent to remit premiums to insurer or, in case of dishonored customer checks, to invoke statutory procedure to render committed coverage void ab initio and relieve insurer, agency, of further liability.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES , )

)

Petitioner , )

) Case No. 12 - 3426PL

vs. )

)

HAMID GOODARZI , )

)

Respondent . )

)

RECOMMENDED ORDER

On Decemb er 17, 2012, Robert E. Meale, Administrative Law

Judge of the Division of Administrative Hearings, conducted the

final hearing by videoconference in Tallahassee and Lauderdale

Lakes, Florida.

APPEARANCES

Petitioner: D avid J. Busch , Esquire

De partment of Financial Services

Division of Legal Services

612 Larson Building

200 East Gaines Street

Tallahassee, Florida 32399 - 0333

Respondent: Orrin R . Beilly, Esquire

Law Offices of Orr in R. Beilly

105 South Narcissus Avenue

Suite 705

West Palm Beach, Florida 33401

STATEMENT OF THE ISSUE S

The issues are whether Respondent is guilty of

demonstrating a lack of fitness or trustworthiness to engage in

the business of insurance and, if so, what penalty should be

imposed.

PRELIMINARY STATEMENT

By Administrative Complaint dated April 8, 2011, Petitioner

alleged that Respondent is licensed as a general lines (2 - 20)

insurance agent. At all material times, Respondent was

appointed to sell certain insurance products offered by United

Automobile Insurance Company (United Auto), and he was a

signatory on the Wachovia Bank account of Carol City Discount

Insurance (Carol City).

Count I alleges that, on December 2 7, 2008, Respondent

signed check number 2640 in the amount of $2233.82 and payable

to United Auto. The check was drawn on a Wachovia Bank account

in the name of Carol City. The memo line bore the name "Meo T

Van," and the check was issued to pay the prem ium on policy

number 2126792. On January 2, 2009, United Auto presented the

check for deposit, but, three days later, the bank returned the

check to United Auto due to insufficient funds.

Count I alleges that Respondent thus violated section

626.561(1), Florida Statutes, which provides that all premiums

belonging to insurers and received by an agent shall be trust

funds received by the agen c y in a fiduciary capacity, and the

agent shall account for and pay these funds to the insurer;

section 626.611(7), which prohibits any agent from demonstrating

a lack of fitness or trustworthiness to engage in the business

of insurance; section 626.611(9), which prohibits any agent from

exhibiting fraudulent or dishonest practices in the conduct of

insurance business; section 626.611(10), which prohibits any

agent from misappropriating, converting, or unlawfully

withholding money of insureds and received in the conduct of

insurance business; and section 626.621(2), which provides that

any violation of the Insurance Code in the conduct of insurance

business is a violation of law.

Count II alleges that, on December 28, 2008, Respondent

signed check number 2643 in the amount of $898.60 and payable to

United Premium Finance ( United Finance ), a n affiliate of United

Auto. The check was drawn on a Wachovia Bank account in the

name of Carol City. The memo line bore the language

"Transmittal (5 apps)," and the check was issued to pay the

premium on policy numbers 2127231, 2127155, 2127060, 2127232,

and 2126707. On January 6, 20 09, United Finance presented the

check for deposit, but, the next day, the bank returned the

check to United Finance due to insufficient funds.

Count I I alleges that Respondent thus violated section

626.561(1), Florida Statutes, which provides that all p remiums

belonging to insurers and received by an agent shall be trust

funds received by the agency in a fiduciary capacity, and the

agent shall account for and pay these funds to the insurer;

section 626.611(7), which prohibits any agent from demonstrating

a lack of fitness or trustworthiness to engage in the business

of insurance; section 626.611(9), which prohibits any agent from

exhibiting fraudulent or dishonest practices in the conduct of

insurance business; section 626.611(10), which prohibits any

age nt from misappropriating, converting, or unlawfully

withholding money of insureds and received in the conduct of

insurance business; and section 626.621(2), which provides that

any violation of the Insurance Code in the conduct of insurance

business is a v iolation of law.

Count III alleges that, on January 6, 2009, Respondent

signed check number 2650 in the amount of $658.04 and payable to

United Finance . The check was drawn on a Wachovia Bank account

in the name of Carol City. The memo line bore the lang uage

"Transmittal (5 apps)," and the check was issued to pay the

premium on policy numbers 2127558, 2127642, 2127557, 2127385,

and 2127910. On January 8, 2009, United Finance presented the

check for deposit, but, four days later, the bank returned the

che ck to United Finance due to insufficient funds.

Count III alleges that Respondent thus violated section

626.561(1), Florida Statutes, which provides that all premiums

belonging to insurers and received by an agent shall be trust

funds received by the age ncy in a fiduciary capacity, and the

agent shall account for and pay these funds to the insurer;

section 626.611(7), which prohibits any agent from demonstrating

a lack of fitness or trustworthiness to engage in the business

of insurance; section 626.611(9 ), which prohibits any agent from

exhibiting fraudulent or dishonest practices in the conduct of

insurance business; section 626.611(10), which prohibits any

agent from misappropriating, converting, or unlawfully

withholding money of insureds and received in the conduct of

insurance business; and section 626.621(2), which provides that

any violation of the Insurance Code in the conduct of insurance

business is a violation of law.

Count IV alleges that, on January 5, 2009, Respondent

signed check number 2648 in the amount of $151.90 and payable to

United Finance . The check was drawn on a Wachovia Bank account

in the name of Carol City. The memo line bore the language

"Joyce Jolly," and the check was issued to pay the premium on

policy number 2124852. On Ja nuary 8, 2009, United Finance

presented the check for deposit, but, four days later, the bank

returned the check to United Finance due to insufficient funds.

Count IV alleges that Respondent thus violated section

626.561(1), Florida Statutes, which provi des that all premiums

belonging to insurers and received by an agent shall be trust

funds received by the agency in a fiduciary capacity, and the

agent shall account for and pay these funds to the insurer;

section 626.611(7), which prohibits any agent from demonstrating

a lack of fitness or trustworthiness to engage in the business

of insurance; section 626.611(9), which prohibits any agent from

exhibiting fraudulent or dishonest practices in the conduct of

insurance business; section 626.611(10), which pro hibits any

agent from misappropriating, converting, or unlawfully

withholding money of insureds and received in the conduct of

insurance business; and section 626.621(2), which provides that

any violation of the Insurance Code in the conduct of insurance

b usiness is a violation of law.

Count V alleges that, on January 17, 2009, Respondent

signed check number 2660 in the amount of $1788.97 and payable

to United Finance . The check was drawn on a Wachovia Bank

account in the name of Carol City. The memo line bore the

language "Transmittal (6 apps)," and the check was issued to pay

the premium on policy numbers 2127986, 2128057, 2128322,

2122988, 2129323, and 2127990. On January 12, 2009, United

Finance presented the check for deposit, but, 10 days later, the

bank returned the check to United Finance due to insufficient

funds.

Count V alleges that Respondent thus violated section

626.561(1), Florida Statutes, which provides that all premiums

belonging to insurers and received by an agent shall be trust

funds received by the agency in a fiduciary capacity, and the

agent shall account for and pay these funds to the insurer;

section 626.611(7), which prohibits any agent from demonstrating

a lack of fitness or trustworthiness to engage in the business

of insuranc e; section 626.611(9), which prohibits any agent from

exhibiting fraudulent or dishonest practices in the conduct of

insurance business; section 626.611(10), which prohibits any

agent from misappropriating, converting, or unlawfully

withholding money of in sureds and received in the conduct of

insurance business; and section 626.621(2), which provides that

any violation of the Insurance Code in the conduct of insurance

business is a violation of law.

Count VI alleges that, on January 19, 2009, Respondent

sig ned check number 2659 in the amount of $2197.92 and payable

to United Auto. The check was drawn on a Wachovia Bank account

in the name of Carol City. The memo line bore the language

"Kanagarja Kandaswamy" and the check was issued to pay the

premium on po licy number 2127845. On January 22, 2009, United

Auto presented the check for deposit, but, the next day, the

bank returned the check to United Auto due to insufficient

funds.

Count VI alleges that Respondent thus violated section

626.561(1), Florida St atutes, which provides that all premiums

belonging to insurers and received by an agent shall be trust

funds received by the agency in a fiduciary capacity, and the

agent shall account for and pay these funds to the insurer;

section 626.611(7), which prohi bits any agent from demonstrating

a lack of fitness or trustworthiness to engage in the business

of insurance; section 626.611(9), which prohibits any agent from

exhibiting fraudulent or dishonest practices in the conduct of

insurance business; section 626 .611(10), which prohibits any

agent from misappropriating, converting, or unlawfully

withholding money of insureds and received in the conduct of

insurance business; and section 626.621(2), which provides that

any violation of the Insurance Code in the con duct of insurance

business is a violation of law.

Count VII alleges that, on January 20, 2009, Respondent

signed check number 2661 in the amount of $713.57 and payable to

United Finance . The check was drawn on a Wachovia Bank account

in the name of Carol City. The memo line bore the language

"Transmittal (5 apps)," and the check was issued to pay the

premium on policy numbers 2127989, 2128810, 2128433, 2128694,

and 2128056. On January 23, 2009, United Finance presented the

check for deposit, but, three d ays later, the bank returned the

check to United Finance due to insufficient funds.

Count VII alleges that Respondent thus violated section

626.561(1), Florida Statutes, which provides that all premiums

belonging to insurers and received by an agent shal l be trust

funds received by the agency in a fiduciary capacity, and the

agent shall account for and pay these funds to the insurer;

section 626.611(7), which prohibits any agent from demonstrating

a lack of fitness or trustworthiness to engage in the busi ness

of insurance; section 626.611(9), which prohibits any agent from

exhibiting fraudulent or dishonest practices in the conduct of

insurance business; section 626.611(10), which prohibits any

agent from misappropriating, converting, or unlawfully

withhol ding money of insureds and received in the conduct of

insurance business; and section 626.621(2), which provides that

any violation of the Insurance Code in the conduct of insurance

business is a violation of law.

Count VIII alleges that, on January 22, 20 09, Respondent

signed check number 2663 in the amount of $505.61 and payable to

United Finance . The check was drawn on a Wachovia Bank account

in the name of Carol City. The memo line bore the language

"Transmittal (4 apps)," and the check was issued to pay the

premium on policy numbers 2129191, 2129092, 2129302, and

2129290. On January 26, 2009, United Finance presented the

check for deposit, but, the next day, the bank returned the

check to United Finance due to insufficient funds.

Count VIII alleges that Respondent thus violated section

626.561(1), Florida Statutes, which provides that all premiums

belonging to insurers and received by an agent shall be trust

funds received by the agency in a fiduciary capacity, and the

agent shall account for and pa y these funds to the insurer;

section 626.611(7), which prohibits any agent from demonstrating

a lack of fitness or trustworthiness to engage in the business

of insurance; section 626.611(9), which prohibits any agent from

exhibiting fraudulent or dishones t practices in the conduct of

insurance business; section 626.611(10), which prohibits any

agent from misappropriating, converting, or unlawfully

withholding money of insureds and received in the conduct of

insurance business; and section 626.621(2), which provides that

any violation of the Insurance Code in the conduct of insurance

business is a violation of law.

Count IX alleges that, on January 26, 2009, Respondent

signed check number 2665 in the amount of $176.25 and payable to

United Finance . The chec k was drawn on a Wachovia Bank account

in the name of Carol City. The memo line bore the language

"Allison Johnson," and the check was issued to pay the premium

on policy number 2129427. United Finance presented the check

for deposit, but, on January 28, 2009, the bank returned the

check to United Finance due to insufficient funds.

Count IX alleges that Respondent thus violated section

626.561(1), Florida Statutes, which provides that all premiums

belonging to insurers and received by an agent shall be trust

funds received by the agency in a fiduciary capacity, and the

agent shall account for and pay these funds to the insurer;

section 626.611(7), which prohibits any agent from demonstrating

a lack of fitness or trustworthiness to engage in the business

of insurance; section 626.611(9), which prohibits any agent from

exhibiting fraudulent or dishonest practices in the conduct of

insurance business; section 626.611(10), which prohibits any

agent from misappropriating, converting, or unlawfully

withholding money of insureds and received in the conduct of

insurance business; and section 626.621(2), which provides that

any violation of the Insurance Code in the conduct of insurance

business is a violation of law.

Respondent timely requested a formal hearing.

A t the hearing, Petitioner called three witnes ses and

offered into evidence 29 exhibits : Petitioner Exhibits 1 - 29 .

Respondent called one witness and offered into evidence no

exhibits. All exhibits were admitted except for Petitioner

Exhibits 9 and 17, wh ich were proffered. As for Petitioner

Exhibit 18, all of page 59 except paragraph 1 is admitted for

the truth, and pages 60 - 61 are not admitted for the truth, but

as notice to Respondent.

The court reporter filed the transcript on January 4, 2013.

Petiti oner filed its proposed recommended order on February 4,

2013.

FINDING S OF FACT

1. At all relevant times, Respondent has held a 2 - 20

license as a property and casualty agent. At all relevant

times, Respondent was the agent in charge of Carol City; in

fac t, he was the lone agent employed by the agency. At all

relevant times, Respondent was the lone signatory on Carol

City's Wachovia banking account described below.

2. Respondent was first issued a 2 - 20 license in 1993. By

Consent Order dated September 25, 2006, and approved October 17,

2006, Respondent agreed to cease and desist from making excess

charges for insurance and from selling ancillary products with

the informed consent of the insurer, to pay an administrative

fine of $3000 and restitution of about $1600 to four customers,

and to one year of probation. This is the sole discipline

imposed on Respondent's license over 20 years.

3 . At all material times, Respondent was an appointed

agent with United Auto. In this case, Carol City effectively

r emitted premiums directly to United Auto or, for customers who

chose to finance their premiums, indirectly to United Auto by

remitting premiums directly to United Finance, a premium -

financing affiliate of United Auto.

4. As relevant to this case, the subj ect insurance

transactions are simple. Customers of Carol City purchase

insurance underwritten by United Auto. As an appointed agent of

United Auto, Respondent causes United Auto to commit to coverage

upon Carol City's receipt of the premium payment from the

customer (and the execution of certain documents that are

irrelevant to this case). If the customer chooses not to

finance the premium, the customer pays the premium to Carol

City, which deposits the customer's check and issues a Carol

City check in the same amount, net of co mmission, to United

Auto. If the customer chooses to finance the premium, t he

customer pays the premium downpayment to Carol City, which

deposits the customer's check and issues a Carol City check in

the same amount, net of commi ssion, to United Finance. United

Finance then advances the full premium payment to United Auto

and collects insta l lment payments from the insured .

5. At some point, the payment process changed. United

Auto and United Finance electronically swept Carol C ity's bank

account for the payments due each company, relieving Carol City

of the responsibility of issuing separate checks to each

company. This change in payment processing is irrelevant to

this case.

6. As detailed below, Carol City issued a number of bad

checks to United Auto and United Finance. Respondent's defenses

are essentially that Carol City's checks were dishonored

because: 1) customers' checks to Carol City were dishonored and

2) the electronic sweeping of the Carol City account did not

pro vide Carol City an opportunity to follow the usual procedure

to avoid liability to its insurers when customers' checks to

Carol City were dishonored.

7. These defen se s find no support in the evidence . First,

the evidentiary record includes nine handwritt en Carol City

checks, corresponding to the nine counts, that failed to clear

when presented for payment by United Auto or United Finance . In

other words, these transactions occurred before electronic

sweeping was implemented , at least by United Auto and U nited

Finance .

8. Second, a t all times -- both before and after the

institution of the electronic - sweeping process -- United Auto and

United Finance maintained a procedure by which Carol City could

void any transaction if the customer's premium - payment chec k to

Carol City failed to clear. In this procedure , as provided by

section 626.9201(2)(a), Florida Statutes , the insurance

transaction is void ab initio, once the agent provides statutory

notice to the customer whose initial premium payment has been

disho nored. United Auto requires the agent to send the insurer

a copy of the bad check and a cop y of the certified notice

letter to the cus tomer , after which United Auto will void the

policy, and the agency and agent will have no liability to

United Auto or Un ited Finance.

9 . Respondent testified vaguely that he thought that he

had complied with this policy - cancelation process, but clearly

he had not. He produced no documentary evidence of his having

ever attempt ed to advise United Auto or United Finance th at

Carol City's customers had given Carol City bad checks. And

Respondent had many months during which he might have advanced

this contention, if it had been true.

10. Instead, rather than following th e liability - avoidance

procedure outlined above or e ver advising United Auto or United

Finance of dishonored customers' checks , Respondent allowed

United Auto's liabilities to these customers to become fixed and

allowed Carol City's liabilities toward United Auto and United

Finance to remain unsatisfied. B y failing to follow the

statutory procedure that would have allowed United Auto to

relieve itself of liability to any customers who had failed to

pay their initial premium , Carol City obligated itself to pay

United Auto and United Finance for this coverage that Carol City

allowed its customers to obtain, even if they had not paid for

it .

11. After becoming dissatisfied with Carol City's

instalment remittances of the unpaid balance due from the

failure of its checks to have cleared , United Auto and United

F inance obtained a judgment against Carol City for an amount

probably a little in excess of $10,000. After becoming

dissatisfied with Carol City's payments on this judgment, United

Auto and United Finance levied on C arol City's office

furnishings. After l osing possession of its computers and

office furniture, Carol City or Respondent promptly satisfied

the a mount still due on the judgment.

12 . The dishonored checks that Carol City issued to United

Auto or United Finance, the amounts, the last four digits of the

United Auto policies corresponding to these remittances , and the

dates of the checks are:

Check No. Amount Policy Nos. Date of check

2640 $2233.82 6792 12/27/08

2643 $ 898.60 7231 12/30/ 08

7155

7060

7232

6707

2650 $ 658.04 7558 1/6/09

7642

7 557

7385

7910

2648 $ 151.90 4852 1/5/09

2660 $1788.97 7986 1/17/09

8057

8322

2988

9323

7990

2659 $2197.92 7845 1/19/09

2661 $ 713.57 7989 1/20/09

8810

8433

8694

8056

2663 $ 505.61 9191 1/22/09

9092

9302

9290

2665 $ 176. 25 9427 1/26/09

TOTAL $9324.68

1 3 . The bank records of Carol City for January and

February 2009 show a large number of $35 charges for returned

checks and overdrafts, as well as a number of returned deposited

items. Although it is impossible, on this record, to determine

if any of these returned deposits pertain to any of the 29

policy transactions detailed in the preceding paragraph, such a

finding would be irrelevant because of Respondent's above -

described failure to avail hims elf of the available policy -

cancelation procedure. Likewise, although the imposition of

extraordinary $35 charges may explain wh y specific Carol City

checks did not clear, such a finding would also be irrelevant

because it would not excuse the dishonoring of Carol City's

checks to United Auto and United Finance.

1 4 . Petitioner has proved that Respondent collected

initial premiums from Carol City's customers in 29 transactions ,

caused United Auto to commit to insurance coverage to these

customers , and eith er: 1) Respondent did not remit these

successfully collected premiums to United Auto or United Finance

or 2) when the initial premium payments by Carol City's

customers were dishonored, Respondent failed to take the

necessary steps to void the committed i nsurance coverage and

relieve United Auto, Carol City, and himself of any further

liability.

CONCLUSIONS OF LAW

1 5 . The Division of Administrative Hearings has

jurisdiction. §§ 120.569 and 120.57(1), Fla. Stat.

1 6 . Among the various statutes that Respon dent is alleged

to have violated, the most pertinent is section 626.611(7),

which calls for compulsory suspension or revocation for a

" [ d ] emonstrated lack of fitness or trustworthiness to engage in

the business of insurance."

1 7 . Petitioner must prove t he material allegations by

clear and convincing evidence. Department of Banking and

Finance v. Osborne Stern and Company, Inc. , 670 So. 2d 932 (Fla.

1996).

1 8 . Petitioner has proved that Respondent has demonstrated

a lack of fitness or trustworthiness to engage in the business

of insurance. He collected, but failed to remit, nearly $10,000

of premiums. To whatever extent customers' checks for these

initial premiums were dishonored, Respondent did not invoke the

statutory procedure to allow United Auto t o invalidate the

policies that Respondent had already caused it to issue. By

failing to do so, Respondent allowed United Auto to remain

liable on these policies, even though it had not been paid the

initial premiums for these policies and regardless wheth er Carol

City had been paid the initial premiums for these policies.

1 9 . Florida Administrative Code R ule 69B - 231.080(7)

provides for a six - month suspensi on for a violation of section

62 6.611(7). In its proposed recommended order, Petitioner

argues per suasively for this penalty.

RECOMMENDATION

I t is

RECOMMENDED that the Department of Financial Services enter

a final order finding Resp ondent guilty of violating section

626.611(7) and suspending his license for six months.

DONE AND ENTERED this 14th day of February, 2013, in

Tallahassee, Leon County, Florida.

S

ROBERT E. MEALE

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 48 8 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 14th day of February, 2013.

COPIES FURNISHED :

Orrin R. Beilly, Esquire

The Law Office of Orrin R. Beilly, P.A.

The Citizens Buil ding, Suite 705

105 South Narcissus Avenue

West Palm Beach, Florida 33401 - 5529

David J. Busch, Esquire

Department of Financial Services

Division of Legal Services

612 Larson Building

200 East Gaines Street

Tallahassee, Florida 32399 - 0390

Julie Jones, C P, FRP, Agency Clerk

Division of Legal Services

Department of Financial 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.