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Charging applicants for a specific ancillary coverage or product without their informed consent is a violation of Florida statutory law and can cause an insurance agent to lose his or her license.

In the following case, the agent sold –without adequate explanation–coverages neither requested nor desired by customers who only wanted the least expensive minimum legally required coverages. Although the agent had the prospective insureds sign forms indicating informed consent, these were never read nor clearly explained to the insureds. They testified that if they had been told the coverages were not required, they would not have purchased them. The agent was suspended for her actions and sent back to the trial court to determine if the punishment was too severe.Avoid suspension by always explaining coverages to the insured, ascertaining that they understand what they are buying, and try to only sell them coverages they want.In Beckett v. Dep’t of Financial Services (No. 1D07-2831, Fla.App. 05/12/2008), the Florida Court of Appeal dealt with an improper sales technique known as “sliding.” The statutory definition of sliding is “[c]harging an applicant for a specific ancillary coverage or product, in addition to the cost of the insurance coverage applied for, without the informed consent of the applicant.” (Florida Statutes ? 626.9541[1][z]3)Insurance agent Paula Evelyn Beckett obtained review of an amended final order of the Department of Financial Services (“the Department”), which suspended her insurance license for 12 months. Beckett contended the Department erred in accepting the administrative law judge’s (ALJ) finding that she sold ancillary insurance products without obtaining her customers’ informed consents, a practice known as sliding and labeled an unfair or deceptive practice under section 626.9541(1)(z)3, Florida Statutes (2004).The Court of Appeal concluded there was no error in the ALJ’s findings and affirmed the Department’s order in part, reversed it in part, and sent the case back to the trial court with directions that the Department reconsider appellant’s penalty.The customer who purchased the travel protection plan signed “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). Each form listed the travel protection plan and hospital indemnity as optional. 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 $60 for the travel protection plan for the customer who purchased this coverage. None of this language is printed in particularly small print on the forms, and it is not buried in the middle of a long paragraph.The three customers all essentially testified they had approached Beckett 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 they left Beckett’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 customer testified that the application process was quick. One customer admitted to having been “in a rush to leave,” and another testified that Beckett seemed to be “in a bit of a hurry.” They recalled that Beckett gave them the application materials and asked them to sign in several places. One testified that Beckett’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 was certain that if Beckett had explained that the additional coverage purchased was optional, the customers would not have purchased it.Beckett testified that although she did not specifically remember her transactions with the three customers who testified, she has a general routine when selling auto insurance: She always includes the accident medical protection plan in an initial quote, even if the customer has not requested it, and sometimes includes the travel protection plan, also known as rental coverage, in the quoted price. Beckett admitted she typically does not inform 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.” Beckett 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. Beckett 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 finding that the customers’ testimony regarding their transactions with Beckett was credible. The ALJ also found that Beckett’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 Beckett 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, “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 anticipate the inclusion of ancillary products . . . .”The ALJ made the additional finding that while Beckett 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 it unlikely that the customers had taken the time to read the application materials thoroughly. Instead, they seemed to rely on Beckett to provide them the coverage they requested. Notably, the ALJ found that Beckett “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 Beckett 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. The ALJ concluded there was no basis for a compulsory suspension or revocation of Beckett’s license. In the next sentence of the recommended order, the ALJ emphasized that “[t]he question is whether [Beckett] 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), it was his duty to determine whether Beckett’s explanation was sufficient to render the customers’ consent “informed.” The ALJ found that, based on the evidence presented, the aggrieved customers were not “fully made aware of the additional products they purchased.” Accordingly, the ALJ found that the Department had sufficiently proven sliding. He recommended a 60-day suspension of Beckett’s license.The Department issued an amended final order, accepting the finding that Beckett had engaged in sliding but rejected the finding that the Department had not proven the violations of section 626.611.The Department concluded that the ALJ’s determinations concerning Beckett engagements in sliding, but without violating the provisions of section 626.611, were factual findings. However, it noted that a finding regarding whether a person has violated a statutory provision depends upon a proper interpretation of that provision. The proper interpretation of the term “informed consent” is at issue in this appeal.The first statute at issue is section 626.9541(1)(z), which defines “sliding” and categorizes it as an unfair method of competition or an unfair or deceptive act.Chapter 626 does not provide a definition of “informed consent” or prescribe particular procedures for an insurance agent to follow to ensure that he or she has obtained a customer’s informed consent. According to principles of statutory construction, however, when terms are not defined in a statute, the plain and ordinary meaning of those terms applies.Beckett contended that the term “informed consent,” as applied to her case, is unconstitutionally vague. This means that it does not, on its face, give a person of ordinary intelligence fair notice of what conduct is forbidden. The Court of Appeal disagreed, finding that the sliding prohibition was appropriately applied to Beckett’s conduct violated the statute that required that insurance agents provide an oral assurance to customers that ancillary products are optional.If the legislature had intended to require particular means or procedures for obtaining informed consent, it could have done so. For the Department to impose upon Beckett a specific procedure to follow to ensure that she has received informed consent from her customers would be an extension of the statute by construction, which is improper. At the same time, the court recognized that in most circumstances, it would be difficult for an insurance agent to ascertain whether a customer understands the optional nature of the products without oral communication.The ALJ’s findings demonstrate that Beckett was guilty of sliding because she took no steps to ensure that the customers understood the materials. The finding is supported by the facts, which reflect that Beckett neither encouraged her customers to read the application materials nor told them the products were optional, all the while knowing that most customers do not understand insurance or read explanatory materials.In a proper case, the written materials Beckett used could be deemed sufficient to guarantee that the customers gave informed consent. In this case, the ALJ found that the written materials were not effectively used to obtain informed consent. This is supported by substantial evidence. As a result, the Court of Appeal affirmed the portion of the amended final order adopting the ALJ’s finding that Beckett engaged in sliding.Turning now to the Department’s rejection of the ALJ’s finding that the Department failed to prove a violation of section 626.611, the court concluded that the Department improperly substituted its judgment for that of the fact finder. The Department noted that, under section 120.57(1)(l), Florida Statutes (2006), there are only two circumstances under which an agency may reject or modify an ALJ’s factual finding: where the finding is not supported by competent, substantial evidence, or where “the proceedings on which the findings were based did not comply with the essential requirements of the law.” The Department’s order reflects an understanding of the competent, substantial evidence standard, but it reflects a misunderstanding of the second basis for rejecting factual findings. Under section 120.57(1)(l), an agency may reject a factual finding only if it is not supported by competent, substantial evidence or if there was a procedural irregularity in the proceedings before the ALJ. In this case, the court concluded that the Department ruled that the ALJ had failed to comply with the essential requirements of the law. Because there has been no suggestion of a procedural irregularity, the Department’s ruling on this point was found to be erroneous.When an agent engages in sliding, the Department has discretion over whether to take action against the agent’s license. When an agent demonstrates a lack of fitness or trustworthiness to engage in the business of insurance, under section 626.611(7), the Department is required to either suspend or revoke the agent’s license. The court found the statutory distinction is a representation that the legislature recognized that some instances of sliding would not rise to the level of a demonstration of unfitness or untrustworthiness. While an instance of sliding may satisfy the demonstration prohibited under section 626.611(7), sliding is not a per se demonstration of unfitness or untrustworthiness.The Florida Court of Appeal found that this case provides an example of the distinction between the two sections. While Beckett failed in her duty to inform her customers that some of the products they were purchasing were not required by law, the ALJ’s findings reflect that she had not intentionally misrepresented the nature of the products or intentionally prevented the customers from discovering the truth.Because the ALJ did not depart from the essential requirements of the law, and there was otherwise no error in the finding that the Department failed to prove violations of section 626.611, this finding should not have been disturbed. Therefore, we reverse the portion of the amended final order that modifies this finding. Finally, because the 12-month suspension of Beckett’s license was predicated, in part, on violations that did not occur, the case must be remanded to the Department for reconsideration of the appropriate penalty.Barry Zalma, Esq., CFE, is a California attorney specializing in expert witness testimony and consulting with plaintiffs and defendants on insurance coverage, claims handling and bad faith. He founded Zalma Insurance Consultants, Culver City, Calif., in 2001 and serves as its senior consultant. He can be reached at [email protected]. His consulting practice’s Web site is www.zic.bz.

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