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7-1004-20346-2 |
STATE OF
OFFICE OF ADMINISTRATIVE HEARINGS
FOR THE DEPARTMENT OF COMMERCE
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In the Matter of the Insurance Producer License of Robert Pavlatos and the Resident Individual Proprietor Agency License of All Sports Insurance |
FINDINGS OF FACT, CONCLUSIONS AND RECOMMENDATIONS |
This matter was scheduled for
Evidentiary Hearing before Administrative Law Judge (ALJ) Richard C. Luis on
April 20, 2009 at the Office of Administrative Hearings in
The Department of Commerce is represented by Christopher M. Kaisershot, Esq. John D. Kelly, Esq., represents Respondents Robert Pavlatos and All Sports Insurance.
On May 12 and May 13, 2009, counsel for the parties executed a Stipulated Statement of Undisputed Facts, with attachment (referenced at Finding 12).
The transmittal letter of the Stipulated of Undisputed Facts (“Stipulation”) and attachment states, in pertinent part:
“As
discussed, the parties have agreed to submit the matter via stipulated facts in
lieu of a hearing. Specifically,
pursuant to ¶ 16 of the
Stipulation and Minn. Rule 1400.7800C (2007), the Department of Commerce and
Respondents Robert Pavlatos and All Sports Insurance (“Respondents”) agreed
that the Stipulation shall be made part of the record and waived the right to
present further evidence or testimony at the hearing. Likewise, pursuant to ¶ 17 of the Stipulation, the parties agreed that you may issue your
report, including findings of fact, conclusions of law, and recommendation to
the Commissioner of Commerce pursuant to Minn. Stat. § 14.50 (2008), and Minn.
Rule 1400.8100 (2007), without further delay.”
Whether disciplinary action should be taken against the Respondents for
violation(s) of Minn. Stat. §§ 45.27, subd. 7(a)(4), 60K.43, subds. 1(4), 1(5),
1(8) and 1(10), and
Based on the proceedings herein, the Administrative Law Judge makes the following:
1. On March 26, 1982, the Department issued Robert Pavlatos a resident insurance producer license, No. 592563. On October 1, 2003, the Department issued All Sports Insurance a resident individual proprietor agency license, No. 20413600. Respondent’s licenses are currently active, although they were summarily suspended at the commencement of the above-entitled administrative action on March 26, 2009.
2. On August 20, 2008, the Department received a complaint against Respondents from Premium Finance Specialists (“PFS”) concerning Respondents’ failure to remit premium payments. Specifically, PFS claimed that in 2007, it paid Respondents more than $20,000 for two insurance policies that were never issued and/or were cancelled.
3. On or about November 7, 2007, Respondents executed a Promissory Note that required them to pay $20,154.60 to PFS. The Promissory Note called for Respondents to make ten payments of $2,015.46.
4. On December 13, 2007, Respondents tendered a $10,007.31 check to PFS in payment of the Promissory Note. Respondents’ check was returned for insufficient funds.
5. On January 2, 2008, Respondents tendered a $10,077.31 check to PFS in payment of the Promissory Note. Respondents’ check was returned for insufficient funds.
6. On January 8, 2008, Respondents tendered a $10,077.31 check to PFS in payment of the Promissory Note. Respondents’ check was returned for insufficient funds.
7. On March 31, 2008, Respondents tendered a $3,706.09 check to PFS in payment of the Promissory Note. Respondents’ check was returned for insufficient funds.
8. On April 8 and 15, 2008, Respondents made payments totaling $11,135.06 to PFS, some which was applied to interest and late fees. Respondents have failed to make any further payments to PFS and are in breach of their Promissory Note. Respondents continue to owe PFS a balance of at least $10,077.31 received in the course of doing insurance business.
9. On November 12, 2008, the Department received a complaint against Respondent from American Insurance Alliance (“AIA”). AIA indicated that it is an insurance broker that placed business with insurance companies for Respondents’ clients. AIA stated that Respondents failed to pay it $107,329.12 for approximately 35 insurance policies that Respondents had ordered and that AIA placed for Respondents’ clients.
10. On December 3, 2008, Respondents conceded to the Department that they owed $107,329.12 to AIA as set forth in its complaint. To date, Respondents have failed to make any payments towards their obligations to AIA.
11. AIA also reported that Respondents owed at least $64,389.52 to 17 insureds for failing to refund premiums after the policy had cancelled or accepting premium payments from their clients and not forwarding the payments to AIA or the insurance company.
12. On December 3, 2008 and March 26, 2009, Respondents acknowledged the accuracy of AIA’s assertions and calculations, which are set forth in the attachment hereto (Attachment A). To date, Respondents have refunded premiums totaling $29,784.09 (i.e., $15,926.09 to Rock Ice Pavilion, $5,824.00 to Eagles Ice-A-Rena, $5,500.00 to Fogerty Arena, and $2,534.00 to Johnstown Arena). As such, Respondents continue to owe their clients at $34,605.43 for overpayment or diversion of premiums received in the course of doing insurance business.
13. Respondents have issued premium refund checks to at least three different clients that were returned for insufficient funds.
14.
Respondents’ failure to forward insurance
premiums has resulted in numerous clients operating without insurance. One of those clients,
15. AIA also identified several insureds to which Respondent had sent forged insurance documents, including reinstatement notices, insurance binders, and declarations pages. During an inspection conducted by the Department at Respondents’ business offices, the Department discovered materials in Respondents’ files that Respondents used to create the forged documents. Respondents admitted to the Department that they sent bogus insurance documents to some of their clients who had paid premiums directly to Respondents.
16. The parties agree that this Stipulated Statement of Undisputed Facts shall be made part of the record pursuant to Minn. Rule 1400.7800C (2007), and the parties waive the right to present any additional evidence or testimony at the hearing.
Based on the Findings of Fact, the Administrative Law Judge makes the following:
1. The Administrative Law Judge and the Commissioner of Commerce have jurisdiction herein pursuant to Minn. Stat. §§ 14.50, 45.027 and 60K.43.
2. The Notice of Hearing was proper, and the Department has fulfilled all procedural requirements.
3. Any Finding of Fact more properly termed a Conclusion is adopted as such.
4. Any Conclusion more properly termed a Finding of Fact is adopted as such.
5.
Respondents withheld, misappropriated, or
converted funds of more than $20,000.00 intended to pay two premium payments
received from PFS. Thereafter, the
Respondents failed to comply with their Promissory Note to return these funds
to PFS, and continue to owe to PFS at least $10,077.31. Respondents breached their fiduciary duties,
improperly withheld, misappropriated, or converted monies received in the
course of doing insurance business, and otherwise engaged in acts that
demonstrated incompetence, untrustworthiness or financial irresponsibility, in
violation of Minn. Stat. §§
45.027, subd. 7(a)(4), and 60K.43, subds. 1(4) and 1(8)(2008) and
6.
The Respondents failed to pay AIA $107,329.12
for approximately 35 insurance policies placed for Respondents’ clients. In so doing, the Respondents engaged in acts,
each of which constitutes a separate violation of law, demonstrating
incompetence, untrustworthiness or financial irresponsibility, in violation of
Minn. Stat. §§ 45.027, subd. 7(a)(4), 60K.43, subd. 1(8) and
7.
Respondents withheld, misappropriated, or
converted funds from 17 clients totaling at least $64,389.52. Each such misuse of funds constitutes a
separate violation of the law.
Respondents continue to owe the clients between $25,935.43 to $48,464.43
for overpayment or diversion of premiums.
The diversion of premiums caused numerous clients to operate without
insurance coverage. One such client
suffered hurricane-related losses of approximately $50,000.00 because
Respondents failed to forward that client’s premium payments to the insurance
company. Respondents breached their
fiduciary duties and engaged in fraudulent, coercive or dishonest practices,
misrepresented the terms of insurance contracts or applications for insurance,
and improperly withheld, misappropriated, or converted monies received in the
course of doing business, in violation of Minn. Stat. § 60K.43, subds. 1(4), 1(5), and 1(8) (2008), and
8.
The Respondents’ tendering of refund checks to
PFS and at least three clients that were returned for insufficient funds
constituted separate breaches of fiduciary duties and engagement in acts, each
of which constitutes a separate violation of law, demonstrating incompetence,
untrustworthiness, or financial irresponsibility, in violation of Minn. Stat.
§§ 45.027, subd. 7(a)(4) and 60K.43, subd. 1(8) (2008), and
9.
The Respondents’ forgery of insurance documents,
including reinstatement notices, insurance binders, and declarations pages, and
provision of bogus insurance documents to their clients, including the forging
of the name of another to insurance documents, constituted engaging in fraudulent,
coercive, or dishonest practices within the meaning of Minn. Stat. §§ 60K.43, subd. 1(8) and subd. 1(10)
(2008), and
Based on the Conclusions, the Administrative Law Judge makes the following:
IT IS RECOMMENDED that the Order of SUMMARY SUSPENSION of Insurance Producer License No. 592563 and Resident Individual Proprietor Agency License No. 20413600, held by Respondents Robert Pavlatos and All Sports Insurance respectively, CONTINUE in effect, until such time as the Commissioner of Commerce issues a Final Decision in this matter; and
IT IS RECOMMENDED FURTHER that appropriate disciplinary action be taken against the Insurance Producer License of Robert Pavlatos and the Resident Individual Proprietor Agency License of All Sports Insurance, based on the Findings of Fact and Conclusions.
Dated this _30th_ day of June, 2009.
/s/ Richard C. Luis
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RICHARD C. LUIS Administrative Law Judge |
Reported: Submitted on Stipulated Facts
This report is a
recommendation, not a final decision.
The Commissioner of Commerce will make the final decision after a review
of the record. The Commissioner may
adopt, reject or modify the Findings of Fact, Conclusions, and
Recommendations. Under Minn. Stat. §
14.61, the final decision of the Commissioner shall not be made until this
Report has been made available to the parties to the proceeding for at least ten
days. An opportunity must be afforded to
each party adversely affected by this Report to file exceptions and present
argument to the Commissioner. Parties
should contact Kevin Murphy, Deputy
Commissioner, Attn: Sue Jensen, Minnesota Department of Commerce,
If the Commissioner fails to issue a final decision within 90 days of the close of the record, this report will constitute the final agency decision under Minn. Stat. § 14.62, subd. 2a. In order to comply with this statute, the Commissioner must then return the record to the Administrative Law Judge within 10 working days to allow the Judge to determine the discipline to be imposed. The record closes upon the filing of exceptions to the report and the presentation of argument to the Commissioner, or upon the expiration of the deadline for doing so. The Commissioner must notify the parties and the Administrative Law Judge of the date on which the record closes.
Under Minn. Stat. § 14.62, subd. 1, the agency is required to serve its final decision upon each party and the Administrative Law Judge by first class mail or as otherwise provided by law.
The Stipulated Facts (“Stipulation”) filed in this matter support a revocation of the Licenses of Mr. Pavlatos and All Sports Insurance.
The amount of monies misappropriated, and the dire consequences of misappropriation in the situations noted make such a severe sanction appropriate.
Looking at the facts in a light most favorable to the Respondents, incompetence and financial irresponsibility are demonstrated in sufficient degree to warrant the harsh penalty of revocation.
The ALJ makes no comment on the appropriateness of additional sanctions, such as fines.
R. C. L.