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Volume 3, No. 5 - May 2014

Case Notes

Bureau of Investigation

The following are instances in which licensees or other persons violated the Florida Insurance Code and the administrative action the Department has taken against them. Note: All administrative investigations are subject to referral to the Division of Insurance Fraud for criminal investigation.

Case: A referral received from the Division of Rehabilitation and Liquidation indicated that delinquency proceedings began against National Group Insurance Company as a result of the parent company, National Group, being placed in receivership in Puerto Rico. When the Division of Rehabilitation and Liquidation began their process with National Group Insurance Company they learned that a Miami-based insurance agency that was acting in the capacity of a Managing General Agent for National Group had a backlog of four months in issuing new business policies. In addition, the agency was refusing to submit the premiums due National Group which was more than $1,000,000 because National Group was placed in rehabilitation in Puerto Rico. The Florida Department of Financial Services was appointed Receiver of National Group in Coral Gables for the purposes of rehabilitation. The Division of Rehabilitation and Liquidation informed our Bureau of Investigation that the agency had paid all of the monies owed to National Group except for a remaining balance of $500,000, in premiums and unearned commissions. The agency entered into a settlement repayment agreement with the Division of Rehabilitation and Liquidation. Subsequently, legal counsel for a large insurance company notified the Department that they had met with the agency's president and co-owners of the agency who owed them $376,317.14 in premiums. During their meeting, the president and co-owners informed the legal counsel that they had misappropriated premiums for other companies to pay the Department's Division of Rehabilitation and Liquidation the monies the agency owed the receiver. The President further stated that they owed $570,000 in unearned commissions, which they had only been able to pay $200,000 and another $150,000 for unearned commissions for a separate month. The Department received two other referrals where this agency owed one insurance company $315,000 in premiums and another insurance company $210,000; all of these premiums were allegedly misappropriated as well. Furthermore, several premium finance companies were also affected for the agent's failure to return unearned premium. Lastly, the Department was notified by the Division of Rehabilitation and Liquidation as the receiver for National Group that the agency defaulted in payment and the Receiver made a demand for the unpaid balance of $297,268.63.
Disposition: The co-owner/vice president/agent in charge of the agency and agency were permanently banned from the business of insurance in Florida. In addition, cease and desist orders were issued against the unlicensed agency's president, as well as the agency.

Case: A general lines agent falsified several wind mitigation forms, and submitted them to the respective insurance companies. In one instance, the agent included photos depicting storm shutters that did not belong to the homeowner. Even more egregious, the homeowners received premium discounts on their homeowners' insurance policies based on wind mitigation inspections that never took place.
Disposition: License suspended for one year. He was arrested and charged for insurance fraud.

Case: An investigation of a life, health and variable annuity agent revealed that she submitted two life insurance applications on individuals whom she had never met with prior to or during the sale to earn commissions. According to the documents provided by a company SIU investigator, the agent submitted the two applications with fraudulent applicant signatures, incorrect health information, and she also provided saliva samples that were not from the named insureds.
Disposition: License suspended for 12 months.

Case: A debit life agent used her personal check to pay her company $742.56 for premiums she had collected from multiple consumers. Her check was returned for NSF and she was subsequently terminated. An audit of her book of business showed an additional $413.19 of premiums she had collected and failed to report. The insurer made restitution to each of the consumers but was unable to get the agent to repay the monies. The agent said that she knew she had to make the deposit but had left the money at home so that was why she had used her personal check and said that she had taken a payday loan and was unaware that they had charged her account for monies she owed them.
Disposition: License revoked.

Case: A consumer filed a complaint with the Division of Insurance Fraud that a general lines agent failed to forward all premiums paid to him on to the company for an automobile policy. The consumer subsequently was involved in a not-at-fault accident, and found out that their policy had cancelled for nonpayment. Our investigation was able to prove that the agent received sufficient, timely payments from the consumer, resulting in what would have been coverage past the date of the accident. The final result was that the claim was honored with $10,732.95 in funds paid out by the insurer.
Disposition: Fined $10,000.

Case: An investigation of a public adjuster revealed that she failed to maintain a surety bond, as required for licensure as a public adjuster, failed to designate a primary adjuster, failed to put her name on a contract, and had not updated her address with the Department.
Disposition: Fined $2,500 and placed on probation for six months.

Case: The Department was informed of an action taken against a life & annuity agent by the Financial Industry Regulatory Authority (FINRA). The agent failed to cooperate with FINRA during an investigation by not completing an on-the-record interview regarding a client. He failed to give testimony on whether he provided a client with documents overstating the client's account value. Therefore, FINRA barred him from associating with any FINRA member in any capacity. In addition, the agent failed to report this action to the Department within the 30 day requirement per Florida Statutes. The agent also failed to update his contact information with the Department within 30 days of it changing.
Disposition: License suspended for 12 months.

Case: The Bureau of Investigation was notified by the Division of Rehabilitation and Liquidation that a final judgment was issued against an insurance agency for unearned commissions due to the receivership of Northern Capital Insurance Company. The Receiver was due $1,924.70 plus pre-judgment interest of $99.19 and post judgment interest. The customer representative, who was listed as the only officer and president of the agency, entered into a Settlement Stipulation for Consent Order and agreed to pay an administrative penalty of $1,000. However, the customer representative failed to pay the penalty.
Disposition: License suspended for two months and must pay the $1,000 penalty before the license can be reinstated.

Case: The Department was notified that a final judgment was entered against a bail bond agent by a Clerk of Court. The bail bond agent continued to execute bonds while the judgment remained outstanding for the forfeiture of a bond executed by him. The Department received further information that the agent had continued executing bonds with a second unpaid judgment. Because the agent executed multiple bail bonds while judgments remained unpaid for more than 35 days without depositing the amount of the judgment with the Clerk of the Court, he entered into a Settlement Stipulation for Consent Order and was placed on probation for one year and ordered to pay a $1,500 administrative penalty. However, he failed to pay the Department the administrative penalty.
Disposition: License suspended for two months and must pay the $1,500 penalty before the license can be reinstated.