07-2831 PAULA EVELYN BECKETT v. DEPARTMENT OF FINANCIAL SERVICES

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State: Florida

Court: Florida First District Court

Docket No: 07-2831

Case Date: 05/12/2008

Preview:IN THE DISTRICT COURT OF APPEAL FIRST DISTRICT, STATE OF FLORIDA PAULA EVELYN BECKETT, Appellant, v. CASE NO. 1D07-2831 DEPARTMENT SERVICES, Appellee. _____________________________/ OF FINANCIAL NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND DISPOSITION THEREOF IF FILED

Opinion filed May 12, 2008. An appeal from an order of the Department of Financial Services. L. Michael Billmeier, Jr., and Clyde W. Galloway, Jr., of Galloway, Brennan & Billmeier, Tallahassee, for Appellant. James A. Bossart, Division of Legal Services, Tallahassee, for Appellee.

LEWIS, J. Paula Evelyn Beckett, Appellant, seeks review of an Amended Final Order of the Department of Financial Services ("the Department"), which suspended her insurance license for twelve months. Appellant contends the Department erred in

accepting the Administrative Law Judge's ("ALJ") finding that she sold ancillary insurance products without obtaining her customers' informed consent, a practice known as "sliding" and labeled an unfair or deceptive practice under section 626.9541(1)(z)3, Florida Statutes (2004). Appellant further contends the Department erred in rejecting or modifying the ALJ's finding that the Department did not prove by clear and convincing evidence that she had demonstrated a lack of fitness or trustworthiness to engage in the business of insurance pursuant to section 626.611(7), Florida Statutes (2004), or had engaged in fraudulent or dishonest practices pursuant to section 626.611(9), Florida Statutes (2004). Because there was no error in the ALJ's findings, we affirm the Department's order in part, reverse it in part, and remand with directions that the Department reconsider Appellant's penalty. The instant action began when the Department filed an administrative complaint, alleging that Appellant sold ancillary insurance products to three customers without their informed consent and that her actions constituted grounds for suspension or revocation of her license under sections 626.611 and 626.621(6), Florida Statutes (2004). Appellant and the three customers testified at an administrative hearing. The customers' signed insurance application materials were admitted into evidence. These materials revealed that all three of the customers had purchased an optional accident protection plan and that one of the customers had also purchased an optional travel 2

protection plan. The accident protection plan application contains two signature lines, one indicating acceptance of the coverage and one indicating rejection. Each of the customers who testified signed the line indicating acceptance of the accident protection plan. There are several lines of italicized print above the signature line. One of those lines reads, "I am electing to purchase an optional coverage that is not required by the State of Florida." The customer who purchased the travel protection plan signed a form entitled "American Bankers Insurance Company Optional Travel Protection Plan." The title of this form is in bold lettering, and the words "Optional Travel Protection Plan" are underlined. This form also contains the statement, "Purchasing the Optional Travel Protection Plan is not a condition of purchasing your automobile liability policy." This statement is printed just a few lines above the signature line. Each of the three customers who testified also signed a form titled "Insurance Premium Financing Disclosure Form," which categorizes the coverages as "Insurance you are REQUIRED by law to have," "Other insurance which you MAY be required by law to have," and "OPTIONAL insurance coverage." (emphasis in original). On each of these forms, the travel protection plan and hospital indemnity are listed as optional coverage, along with several other items. There is a price next to each item. 3

If the coverage is not being purchased, the price is listed as "$0." There is a price of $110 next to hospital indemnity on each of these forms, and a price of $60 for the travel protection plan on the form for the customer who purchased this coverage. None of the language quoted in this paragraph is printed in particularly small print on the forms, and it is not buried in the middle of a long paragraph. Additionally, each customer signed a handwritten document known as a "pen sheet," although none of them remembered doing so. At the top of each pen sheet, the phrase "Mandatory Cov" is written. Immediately below those words appear the acronyms "PIP" and "PD,"with brief descriptions and prices. Immediately below "PIP" and "PD" appears the phrase "optional cov," with a list of various coverages below. Many of the items listed as optional coverages are crossed out, but the words "med plan" and "rental" appear as optional coverage on each pen sheet. On one of the pen sheets appears the phrase "FLA TAG INS. ONLY" (emphasis in original). This phrase is circled, underlined, and marked with an asterisk. The three customers all gave essentially the same testimony regarding their transactions with Appellant. Specifically, they testified that they had approached Appellant and requested the minimum auto insurance to satisfy the requirements of Florida law. One customer testified that she also requested "comp[rehensive] and collision" insurance because her vehicle was financed. The customers testified that 4

they left Appellant's office with the understanding that they had purchased only the insurance they requested and that they did not realize they had purchased additional, optional insurance coverage until one of the Department's investigators contacted them. Each of the customers testified that the application process was quick. One customer admitted to having been "in a rush to leave," and another customer testified that Appellant seemed to be "in a bit of a hurry." The customers recalled that Appellant gave them the application materials and asked them to sign in several places. One customer testified that Appellant's description of the paperwork "was, basically, `Sign it here.'" They all testified that they had signed the insurance application materials without reading them. Each of the customers was certain that if Appellant had told her the additional coverage she purchased was optional, she would not have purchased it. Appellant testified that although she did not specifically remember her transactions with the three customers who testified, she has a general routine she follows when selling auto insurance. She testified that she always includes the accident medical protection plan in an initial quote, even if the customer has not requested it. She further testified that she sometimes includes the travel protection plan, which is also known as rental coverage, in the quoted price. Appellant admitted 5

she typically does not inform the customers that the accident medical protection plan is included in the initial quote but that she goes over the handwritten pen sheet orally with each customer "exactly the way it's written." Appellant further testified that most of her customers do not understand insurance but that she explains each coverage to them. She provided examples of the explanations she would give to a typical customer. Appellant also testified that she does not prevent customers from reading the paperwork they sign and is willing to answer any questions they may have. After the hearing, the ALJ issued a Recommended Order, specifically finding that the customers' testimony regarding their transactions with Appellant was credible. The ALJ also found that Appellant's routine explanation of the insurance coverages was "somewhat superficial," even though she knew most of her customers did not understand insurance and did not fully review the application materials. He further found that Appellant sometimes deviated from her routine. The ALJ noted that the documents relating to the travel protection plan and the accident medical protection plan were clearly labeled and that "[a] person of normal intelligence would be able to read the labels and probably ascertain that such plans were optional coverages." However, the ALJ further found that "such [a] person would need to be able to distinguish and differentiate between the minimal insurance coverage documentation and the documents addressing additional coverage . . . [and] would probably need to 6

anticipate the inclusion of ancillary products . . . ." The ALJ made the additional finding that while Appellant did not prevent customers from thoroughly reading the application materials, she also did not encourage them to do so and that while she would respond to questions, she would not offer unsolicited information that might help the customers better understand their purchases. The ALJ found that it was unlikely that the customers had taken the time or made the effort to read the application materials thoroughly. Instead, the ALJ found, they seemed to rely on Appellant to provide them the coverage they requested. Notably, the ALJ found that Appellant "intentionally provided [the customers] more than they asked for, leaving it to them to distinguish the coverages." Ultimately, the ALJ found that the Department had failed to prove that Appellant had demonstrated a lack of fitness or trustworthiness to engage in the business of insurance or that she had committed fraudulent or dishonest practices within the meaning of section 626.611. Accordingly, the ALJ concluded that there was no basis for a compulsory suspension or revocation of Appellant's license. In the next sentence of the Recommended Order, the ALJ emphasized that "[t]he question is whether [Appellant] added ancillary products to the three aggrieved customers' orders without their informed consent." The ALJ then noted that, under Thomas v. State of Florida, Department of Insurance and Treasurer, 559 So. 2d 419 (Fla. 2d DCA 1990), 7

it was his duty to determine whether Appellant's explanation was sufficient to render the customers' consent "informed." As to this issue, the ALJ found that, based on the evidence presented, it was clear that the aggrieved customers were not "fully made aware of the additional products they purchased." The ALJ went on to find, "Although [Appellant] did not fraudulently misrepresent the quotes she provided to each customer, she did not effectively inform them as to ancillary products contained in the insurance documents." Accordingly, the ALJ found that the Department had sufficiently proven sliding. He recommended a sixty-day suspension of Appellant's license. The Department issued an Amended Final Order, accepting the finding that Appellant had engaged in sliding but rejecting the finding that the Department had not proven the violations of section 626.611. In rejecting this finding, the Department ruled that the ALJ had failed to follow "the essential requirement of law that inferior tribunals must follow the applicable precedent of superior tribunals." The Department then opined that under Thomas, the ALJ was required to find violations of section 626.611(7) and (9) because the insurance transactions in the instant case were indistinguishable from the transaction in Thomas, and the Thomas court upheld findings that the appellants had violated those statutory sections. The Department ruled that because the ALJ found "intentional wrongdoing" by Appellant, her actions 8

constituted violations of sections 626.611(7) and (9). The Department opined that the ALJ had reached conflicting conclusions and that the ALJ had ruled that an agent who intentionally engages in sliding "is nonetheless fit and trustworthy to hold an insurance license, and that intentional sliding is not dishonest." The Department further concluded that sliding is a per se violation of section 626.611(7). In consideration of the modified factual findings, the Department suspended Appellant's license for twelve months, rather than the sixty days recommended by the ALJ. The Department properly concluded that the ALJ's determinations that Appellant had engaged in sliding but had not violated the provisions of section 626.611 were factual findings. See J.J. Taylor Cos., Inc. v. Dep't of Bus. & Fin. Regulation, Div. of Alcoholic Beverages & Tobacco, 724 So. 2d 192, 193 n.2 (Fla. 1st DCA 1999). However, it must be noted that a finding regarding whether a person has violated a statutory provision depends upon a proper interpretation of the provision. See Whitaker v. Dep't of Ins. & Treasurer, 680 So. 2d 528, 530, 532 (Fla. 1st DCA 1996) (reversing a finding that an insurance agent had refused to insure applicants because the finding could not withstand a proper construction of the statutory definition of "refusal to insure"). The proper interpretation of the term "informed consent" is at issue in this appeal. Therefore, we first consider whether the ALJ and the Department properly interpreted that term and then whether the ALJ's 9

findings as to each relevant provision were treated appropriately in the Department's Amended Final Order. Although agencies typically have wide discretion in interpreting statutes they administer, "this discretion is somewhat more limited where the statute being interpreted authorizes sanctions or penalties against a person's professional license." Elmariah v. Dep't of Prof'l Regulation, Bd. of Med., 574 So. 2d 164, 165 (Fla. 1st DCA 1990). Such statutes "are deemed penal in nature and must be strictly construed, with any ambiguity interpreted in favor of the licensee." Id. In particular, agencies are not permitted to extend the requirements of such statutes by construction. Capital Nat'l Fin. Corp. v. Dep't of Ins. & Treasurer, 690 So. 2d 1335, 1337 (Fla. 3d DCA 1997). This restriction on agency discretion is necessary to ensure that those whose conduct is regulated by such statutes have fair notice of what conduct is proscribed. Id. (quoting Fla. Indus. Comm'n v. Manpower, Inc. of Miami, 91 So. 2d 197, 199 (Fla. 1956) and City of Miami Beach v. Galbut, 626 So. 2d 192, 194 (Fla. 1993)). The first statute at issue in this case is section 626.9541(1)(z), which defines "sliding" and categorizes it as an unfair method of competition or an unfair or deceptive act. An insurance agent can engage in sliding in three distinct ways. See

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