The Florida Senate

624.310  Enforcement; cease and desist orders; removal of certain persons; fines.--

(1)  DEFINITIONS.--For the purposes of this section, the term:

(a)  "Affiliated party" means any person who directs or participates in the conduct of the affairs of a licensee and who is:

1.  A director, officer, employee, trustee, committee member, or controlling stockholder of a licensee or a subsidiary or service corporation of the licensee, other than a controlling stockholder which is a holding company, or an agent of a licensee or a subsidiary or service corporation of the licensee;

2.  A person who has filed or is required to file a statement or any other information required to be filed under s. 628.461 or s. 628.4615;

3.  A stockholder, other than a stockholder that is a holding company of the licensee, who participates in the conduct of the affairs of the licensee; or

4.  An independent contractor who:

a.  Renders a written opinion required by the laws of this state under her or his professional credentials on behalf of the licensee, which opinion is reasonably relied on by the department or office in the performance of its duties; or

b.  Affirmatively and knowingly conceals facts, through a written misrepresentation to the department or office, with knowledge that such misrepresentation:

(I)  Constitutes a violation of the insurance code or a lawful rule or order of the department, commission, or office; and

(II)  Directly and materially endangers the ability of the licensee to meet its obligations to policyholders.

For the purposes of this subparagraph, any representation of fact made by an independent contractor on behalf of a licensee, affirmatively communicated as a representation of the licensee to the independent contractor, shall not be considered a misrepresentation by the independent contractor.

(b)  "Licensee" means a person issued a license or certificate of authority or approval under this code or a person registered under a provision of this code.

(2)  ENFORCEMENT GENERALLY.--

(a)  The powers granted by this section to the office apply only with respect to licensees of the office and their affiliated parties and to unlicensed persons subject to the regulatory jurisdiction of the office, and the powers granted by this section to the department apply only with respect to licensees of the department and their affiliated parties and to unlicensed persons subject to regulatory jurisdiction of the department.

(b)  The department and office each may institute such suits or other legal proceedings as may be required to enforce any provision of this code within the respective regulatory jurisdiction of each. If it appears that any person has violated any provision of this code for which criminal prosecution is provided, the department or office shall provide the appropriate state attorney or other prosecuting agency having jurisdiction with respect to such prosecution with the relevant information in its possession.

(3)  CEASE AND DESIST ORDERS.--

(a)  The department or office may issue and serve a complaint stating charges upon any licensee or upon any affiliated party, whenever the department or office has reasonable cause to believe that the person or individual named therein is engaging in or has engaged in conduct that is:

1.  An act that demonstrates a lack of fitness or trustworthiness to engage in the business of insurance, is hazardous to the insurance buying public, or constitutes business operations that are a detriment to policyholders, stockholders, investors, creditors, or the public;

2.  A violation of any provision of the Florida Insurance Code;

3.  A violation of any rule of the department or commission;

4.  A violation of any order of the department or office; or

5.  A breach of any written agreement with the department or office.

(b)  The complaint shall contain a statement of facts and notice of opportunity for a hearing pursuant to ss. 120.569 and 120.57

(c)  If no hearing is requested within the time allowed by ss. 120.569 and 120.57, or if a hearing is held and the department or office finds that any of the charges are proven, the department or office may enter an order directing the licensee or the affiliated party named in the complaint to cease and desist from engaging in the conduct complained of and take corrective action to remedy the effects of past improper conduct and assure future compliance.

(d)  If the licensee or affiliated party named in the order fails to respond to the complaint within the time allotted by ss. 120.569 and 120.57, the failure constitutes a default and justifies the entry of a cease and desist order.

(e)  A contested or default cease and desist order is effective when reduced to writing and served upon the licensee or affiliated party named therein. An uncontested cease and desist order is effective as agreed.

(f)  Whenever the department or office finds that conduct described in paragraph (a) is likely to cause insolvency, substantial dissipation or misvaluation of assets or earnings of the licensee, substantial inability to pay claims on a timely basis, or substantial prejudice to prospective or existing insureds, policyholders, subscribers, or the public, it may issue an emergency cease and desist order requiring the licensee or any affiliated party to immediately cease and desist from engaging in the conduct complained of and to take corrective and remedial action. The emergency order is effective immediately upon service of a copy of the order upon the licensee or affiliated party named therein and remains effective for 90 days. If the department or office begins nonemergency cease and desist proceedings under this subsection, the emergency order remains effective until the conclusion of the proceedings under ss. 120.569 and 120.57 Any emergency order entered under this subsection is exempt from s. 119.07(1) and is confidential until it is made permanent unless the department or office finds that the confidentiality will result in substantial risk of financial loss to the public. All emergency cease and desist orders that are not made permanent are available for public inspection 1 year from the date the emergency cease and desist order expires; however, portions of an emergency cease and desist order remain confidential and exempt from the provisions of s. 119.07(1) if disclosure would:

1.  Jeopardize the integrity of another active investigation;

2.  Impair the safety and financial soundness of the licensee or affiliated party;

3.  Reveal personal financial information;

4.  Reveal the identity of a confidential source;

5.  Defame or cause unwarranted damage to the good name or reputation of an individual or jeopardize the safety of an individual; or

6.  Reveal investigative techniques or procedures.

(4)  REMOVAL OF AFFILIATED PARTIES.--

(a)  The department or office may issue and serve a complaint stating charges upon any affiliated party and upon the licensee involved, whenever the department or office has reason to believe that an affiliated party is engaging in or has engaged in conduct that constitutes:

1.  An act that demonstrates a lack of fitness or trustworthiness to engage in the business of insurance through engaging in illegal activity or mismanagement of business activities;

2.  A willful violation of any law relating to the business of insurance; however, if the violation constitutes a misdemeanor, no complaint shall be served as provided in this section until the affiliated party is notified in writing of the matter of the violation and has been afforded a reasonable period of time, as set forth in the notice, to correct the violation and has failed to do so;

3.  A violation of any other law involving fraud or moral turpitude that constitutes a felony;

4.  A willful violation of any rule of the department or commission;

5.  A willful violation of any order of the department or office;

6.  A material misrepresentation of fact, made knowingly and willfully or made with reckless disregard for the truth of the matter; or

7.  An act of commission or omission or a practice which is a breach of trust or a breach of fiduciary duty.

(b)  The complaint shall contain a statement of facts and notice of opportunity for a hearing pursuant to ss. 120.569 and 120.57

(c)  If no hearing is requested within the time allotted by ss. 120.569 and 120.57, or if a hearing is held and the department or office finds that any of the charges in the complaint are proven true and that:

1.  The licensee has suffered or will likely suffer loss or other damage;

2.  The interests of the policyholders, creditors, or public are, or could be, seriously prejudiced by reason of the violation or act or breach of fiduciary duty;

3.  The affiliated party has received financial gain by reason of the violation, act, or breach of fiduciary duty; or

4.  The violation, act, or breach of fiduciary duty is one involving personal dishonesty on the part of the affiliated party or the conduct jeopardizes or could reasonably be anticipated to jeopardize the financial soundness of the licensee,

The department or office may enter an order removing the affiliated party or restricting or prohibiting participation by the person in the affairs of that particular licensee or of any other licensee.

(d)  If the affiliated party fails to respond to the complaint within the time allotted by ss. 120.569 and 120.57, the failure constitutes a default and justifies the entry of an order of removal, suspension, or restriction.

(e)  A contested or default order of removal, restriction, or prohibition is effective when reduced to writing and served on the licensee and the affiliated party. An uncontested order of removal, restriction, or prohibition is effective as agreed.

(f)1.  The chief executive officer, or the person holding the equivalent office, of a licensee shall promptly notify the department or office that issued the license if she or he has actual knowledge that any affiliated party is charged with a felony in a state or federal court.

2.  Whenever any affiliated party is charged with a felony in a state or federal court or with the equivalent of a felony in the courts of any foreign country with which the United States maintains diplomatic relations, and the charge alleges violation of any law involving fraud, theft, or moral turpitude, the department or office may enter an emergency order suspending the affiliated party or restricting or prohibiting participation by the affiliated party in the affairs of the particular licensee or of any other licensee upon service of the order upon the licensee and the affiliated party charged. The order shall contain notice of opportunity for a hearing pursuant to ss. 120.569 and 120.57, where the affiliated party may request a postsuspension hearing to show that continued service to or participation in the affairs of the licensee does not pose a threat to the interests of the licensee's policyholders or creditors and does not threaten to impair public confidence in the licensee. In accordance with applicable rules, the department or office shall notify the affiliated party whether the order suspending or prohibiting the person from participation in the affairs of a licensee will be rescinded or otherwise modified. The emergency order remains in effect, unless otherwise modified by the department or office, until the criminal charge is disposed of. The acquittal of the person charged, or the final, unappealed dismissal of all charges against the person, dissolves the emergency order, but does not prohibit the department or office from instituting proceedings under paragraph (a). If the person charged is convicted or pleads guilty or nolo contendere, whether or not an adjudication of guilt is entered by the court, the emergency order shall become final.

(g)  Any affiliated party removed from office pursuant to this section is not eligible for reelection or appointment to the position or to any other official position in any licensee in this state except upon the written consent of the department or office. Any affiliated party who is removed, restricted, or prohibited from participation in the affairs of a licensee pursuant to this section may petition the department or office for modification or termination of the removal, restriction, or prohibition.

(h)  Resignation or termination of an affiliated party does not affect the department's or office's jurisdiction to proceed under this subsection.

(5)  ADMINISTRATIVE FINES; ENFORCEMENT.--

(a)  The department or office may, in a proceeding initiated pursuant to chapter 120, impose an administrative fine against any person found in the proceeding to have violated any provision of this code, a cease and desist order of the department or office, or any written agreement with the department or office. No proceeding shall be initiated and no fine shall accrue until after the person has been notified in writing of the nature of the violation and has been afforded a reasonable period of time, as set forth in the notice, to correct the violation and has failed to do so.

(b)  A fine imposed under this subsection may not exceed the amounts specified in s. 624.4211, per violation.

(c)  The department or office may, in addition to the imposition of an administrative fine under this subsection, also suspend or revoke the license or certificate of authority of the licensee fined under this subsection.

(d)  Any administrative fine levied by the department or office under this subsection may be enforced by the department or office by appropriate proceedings in the circuit court of the county in which the person resides or in which the principal office of a licensee is located, or, in the case of a foreign insurer or person not residing in this state, in Leon County. In any administrative or judicial proceeding arising under this section, a party may elect to correct the violation asserted by the department or office, and, upon doing so, any fine shall cease to accrue; however, the election to correct the violation does not render any administrative or judicial proceeding moot. All fines collected under this section shall be paid to the Insurance Regulatory Trust Fund.

(e)  In imposing any administrative penalty or remedy provided for under this section, the department or office shall take into account the appropriateness of the penalty with respect to the size of the financial resources and the good faith of the person charged, the gravity of the violation, the history of previous violations, and other matters as justice may require.

(f)  The imposition of an administrative fine under this subsection may be in addition to any other penalty or administrative fine authorized under this code.

(6)  ADMINISTRATIVE PROCEDURES.--All administrative proceedings under subsections (3), (4), and (5) shall be conducted in accordance with chapter 120. Any service required or authorized to be made by the department or office under this code shall be made by certified mail, return receipt requested, delivered to the addressee only; by personal delivery; or in accordance with chapter 48. The service provided for herein shall be effective from the date of delivery.

(7)  OTHER LAWS NOT SUPERSEDED.--The provisions of this section are in addition to other provisions of this code, and shall not be construed to curtail, impede, replace, or delete any other similar provision or power of the department or office under the insurance code as defined in s. 624.01 or any power of the department or office which may exist under the common law of this state. The procedures set forth in s. 626.9581 do not apply to regulatory action taken pursuant to the provisions of this section.

(8)  CRIMINAL ENFORCEMENT.--It is unlawful for any affiliated party who is removed or prohibited from participation in the affairs of a licensee pursuant to this section, or for any licensee whose rights or privileges under such license have been suspended or revoked pursuant to the Florida Insurance Code, to knowingly act as an affiliated party as defined in this section or to knowingly transact insurance as defined in s. 624.10 until expressly authorized to do so by the department or office. Such authorization by the department or office may not be provided unless the affiliated party or the licensee has made restitution, if applicable, to all parties damaged by the actions of the affiliated party or the licensee which served as the basis for the removal or prohibition of the affiliated party or the suspension or revocation of the rights and privileges of the licensee. Any person who violates the provisions of this subsection commits a felony of the third degree, punishable as provided in s. 775.082, s. 775.083 or s. 775.084

History.--s. 25, ch. 59-205; ss. 13, 35, ch. 69-106; s. 26, ch. 73-334; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 22, 37, 809(1st), ch. 82-243; ss. 5, 187, 188, ch. 91-108; s. 4, ch. 91-429; s. 1, ch. 93-78; s. 9, ch. 95-211; s. 363, ch. 96-406; s. 267, ch. 96-410; s. 1719, ch. 97-102; s. 3, ch. 2003-148; s. 763, ch. 2003-261.