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Volume 4, No. 11 - November 2015

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 Fort Lauderdale based immigration bond agency engaged in deceptive advertising, paid commissions to persons not properly licensed to receive them, and failed to report administrative actions taken by other states.
Disposition: Agency fined $17,500; the two agency owners were fined $8,750 each.

Case: Investigators were notified that a Bail Bond agent was terminated by a surety company for failing to remit premiums collected on issued bail bonds. Because he was terminated by the surety company, he sought appointments with other companies; however, in his appointment documents for those companies, he failed to disclose he owed premium to the surety company that terminated him, and in fact, signed the “Oath Statement” making multiple material misrepresentations in an effort to obtain appointments. The bail bond agent ultimately remitted the outstanding premiums to the surety company.
Disposition: Fined $3,000, one year probation.

Case: The investigation resulted from a complaint from another agent alleging a general lines agent charged the agent's former client an agency fee in addition to the premium. Investigators determined the agent, who was also the agent in charge and owner of the agency, charged consumers a "consulting fee" in lieu of accepting commission from the broker he submitted the business to. Commissions are part of the premium rate charged, and the commission was still being paid out to the broker. The agent said it was "an industry norm" to charge consumers a fee in lieu of collecting commissions. An audit determined the agency charged 20 clients unlawful "consulting fees" over the prior three years, amounting to $48,977. The agency issued refund checks to the affected consumers.
Disposition: Fined $4,000.

Case: An investigation was initiated on a life, health and variable annuity agent after the Department was alerted by the son of an elderly couple in their 80's. The agent had motivated the couple to cancel their existing life insurance policies which they had held for many years, and convinced them to buy a “Last to Die” policy. The agent failed to submit 1035 exchange forms for the replacement, which created a taxable event for the consumers. After the consumers contacted the new insurance company they realized the agent had misrepresented the benefits of the change, and discovered the agent had also altered application documents to secure the issuance of the new life insurance policies. Investigators brought the agent's acts to the attention of the company, which refunded all premiums paid for the new policy to the consumers, however, the consumers still sustained a $4,490 tax penalty.
Disposition: License suspended one year.

Case: The case was opened after investigators became aware an administrative action had been taken against a life, health, and variable annuity agent by the Financial Industry Regulatory Authority (FINRA). Over a period of three years, FINRA found the agent made more than 2000 discretionary trades in the account of a single customer without the customer’s prior written consent. The agent also made an unsuitable recommendation that the customer invest $1.1 million in a gold and precious minerals mutual fund. As a result, FINRA suspended the agent for four months and he was ordered to pay a $25,000 fine, which included the disgorgement of $11,000 in commissions received. The agent failed to notify the Department of the enforcement action within 30 days as required.
Disposition: License suspended three months.

Case: A case was opened on a bail bond agent after investigators were notified that a Final Judgment had been issued against him by a county Clerk of Courts. The Judgement was not satisfied until 30 days after it was due. Investigators audited the bail bond agent's records and found that he had continued to execute bail bonds while the judgment remained outstanding for more than 35 days.
Disposition: Fined $1,500.

Case: Investigators received several complaints from the Department’s Division of Consumer Services indicating consumers had paid an insurance agency for homeowners insurance coverage but never received a policy. Investigators determined the insurance agency had closed its doors. One consumer made a down payment to the agency for homeowners insurance and was given an Acord Evidence of Property Insurance form indicating coverage was in place, but investigators determined the insurance was never put in force. Another consumer’s home suffered damages by wind-driven rain and was not covered because the agency never placed homeowner's coverage. That consumer sued the insurance agency and obtained a Final Judgment against it in the amount of $115,293.17. To date the consumer has not recovered any funds from the closed agency.

An attorney acting as Trustee on behalf of the insurance agency which filed bankruptcy, reported that during the bankruptcy proceeding it came to light that the principals, both general lines agents, had accepted premium payments from 51 customers but failed to forward the premiums to the appropriate insurance companies. The Trustee filed an Adversary Complaint to Avoid and Recover Fraudulent and/or Preferential Transfers and for Other Relief against the agents. The complaint alleges that just before the insurance agency filed bankruptcy, the principals misappropriated fiduciary funds for their own purposes, purchasing family vacations to two destinations out of the country among other personal purchases. The Trustee alleged the duo misappropriated the agency's remaining assets for personal gain.
Disposition: The agent in charge was permanently barred and removed from the insurance business. The Division of Insurance Fraud arrested and charged her with Insurance Funds/Diversion, Uttering Forged Instruments and Grand theft 3rd Degree.

Case: During an investigation following up on the revocation of a bail bond agent, investigators discovered another bail bond agent was aiding and abetting the revoked agent by opening an agency in his own name and posting bonds at the jail for the revoked agent. The investigation revealed the revoked agent leased the office space from the other bail bond agent, was the only signor on the checking account, and had a Face Book account advertising the bail bond agency under his name. Investigation revealed that the agent aiding the revoked agent had no ownership or any type of control over the agency. Although the aiding bail bond agent had named the agency after himself, the revoked bail bond agent was the de facto principal operating the agency and transacting bail bond business. The subject of the investigation told investigators the revoked agent had set up cameras within the agency so he would know if Department investigators came into the office, with plans to exit out a back door. An accounting of the agency's bank records determined that all checks and cash from the agency were deposited into a bank account owned by the revoked agent and all bills related to agency operations were paid from the same account.
Disposition: License suspended 18 months.

Case: Investigators learned that Federal felony charges had been filed against a life, health and variable annuity agent. The agent was charged with five counts of Fraud by Wire, Radio, or Television. The agent pled guilty to one count of Fraud by Wire, Radio, or Television and was sentenced to 63 months in prison.
Disposition: License revoked.

Case: Investigators learned that an auto warranty agent-firm was sending mailers to Florida consumers advising them that their vehicle warranties were expiring. However, in many instances, the vehicle warranties were not expiring and some consumers didn't even have a vehicle warranty.
Disposition: Fined $4,000.