ACCELERATED BEN. CORP. v. Dept. of Ins., 1D01-853.

• Decision Date: 26 February 2002
• Docket Number: No. 1D01-853.,1D01-853.
• Citation: 813 So.2d 117
• Parties: ACCELERATED BENEFITS CORPORATION, Appellant, v. DEPARTMENT OF INSURANCE, Appellee.
• Court: Florida District Court of Appeals

813 So.2d 117

ACCELERATED BENEFITS CORPORATION, Appellant, v. DEPARTMENT OF INSURANCE, Appellee.

No. 1D01-853.

District Court of Appeal of Florida, First District.

February 26, 2002.

Mark K. Logan of Smith, Ballard & Logan, P.A., Tallahassee, for Appellant.

Michael H. Davidson, Florida Department of Insurance, Tallahassee, for Appellee.

VAN NORTWICK, J.

Accelerated Benefits Corp. (ABC) challenges a final order of the Department of Insurance which revoked ABC's license to operate as a viatical settlement provider. ABC argues that the statute which it was charged with violating, section 626.989(6), Florida Statutes (2000), is unconstitutionally vague on its face and as applied. We do not agree and, therefore, affirm.

In the typical viatical settlement, a terminally-ill policyholder, known as a viator, sells the right to receive the proceeds of his or her life insurance policy to an investor usually through a viatical settlement provider. The viator is paid an amount equal to the discounted value of the death benefits under the insurance policy, which funds are usually required to provide for the viator's medical and living expenses. The investor is responsible for the payment of the premiums under the policy. The investor obtains a return based upon the difference between the death benefits ultimately paid under the policy and the discounted amount paid to the viator, less the costs of any premiums and administrative fees paid by the investor. The viatical settlement company receives a fee or commission depending upon the structure of the transaction. See, generally, Michael Cavendish, Policing Terminal Illness Investing: How Florida Regulates Viatical Settlement Contracts, 74 Fla. B.J. 10 (Feb. 2000); Fiona M. Jones, The Viatical Settlement Industry: The Regulatory Scheme and its Implications for the Future of the Industry, 6 Conn. Ins. L.J. 477 (1999-2000). In Florida, viatical insurance providers are currently regulated pursuant to the Viatical Insurance Act, section 626.991 through 626.99295, Florida Statutes (2001).

As a viatical settlement provider, ABC purchased life insurance policies from viators at a discount of the policies' death benefits and sold the policies to investors at a price between the discounted price paid by ABC and the death benefits under the policy. The Department of Insurance filed an administrative complaint alleging that, with respect to each of the eleven viatical settlements at issue, ABC knew or should have known that the life insurance policies sold by the viators were obtained unethically as a result of a misrepresentation as to the state of health of the viator. The matter proceeded to an administrative proceeding at which the Department submitted evidence, including records maintained by ABC in its ordinary course of business, showing that, in order to obtain the life insurance, certain viators had denied having specific medical conditions, when in fact such medical conditions had been previously diagnosed and known. The Department also introduced evidence that these viators had acknowledged on the application for a viatical settlement that they did have certain medical condition directly contrary to each viator's representations on a life insurance application.

Given this knowledge on the part of ABC, the Department submitted that ABC was obliged to make a report pursuant to section 626.989(6). The Administrative Law Judge (ALJ) agreed, finding in pertinent part, as follows:

It is inconceivable the viators did not know what they were reporting [regarding their health], or that the professionals employed by the [appellant] and its agents should not have seen the inconsistency and recognized the need to report it. This is especially true when it is shown that the [appellant's] employees suggested in writing to the viators that they not contact their insurers or report the sale of their policies during the contestable period [of the policy], and also paid the viator's premiums in the interim.

The ALJ recommended that appellant's license be revoked. The Department agreed and issued a final order so providing. ABC now seeks reversal of the final order, arguing that section 626.989(6) is unconstitutionally vague because it requires a party to divine the intent of a third party.

Section 626.989(6) provides in pertinent part:

Any professional practitioner licensed or regulated by the Department of Business and Professional Regulation, except as otherwise provided by law, any medical review committee as defined in s. 766.101, any private medical review committee, and any insurer, agent, or other person licensed under the code, or any employee thereof, having knowledge or who believes that a fraudulent insurance act or any other act or practice which, upon conviction, constitutes a felony or a misdemeanor under the code, or under s. 817.234, is being or has been committed shall send to the Division of Insurance Fraud a report or information pertinent to such knowledge or belief and such additional information relative thereto as the Department may require.

(Emphasis added).

The standard for determining whether a statute is unconstitutionally vague on its face is "whether the statute gives a person of ordinary intelligence fair notice of what constitutes forbidden conduct." Brown v. State, 629 So.2d 841, 842 (Fla.1994)(citing Papachristou v. City of Jacksonville, 405 U.S. 156, 162, 92 S.Ct. 839, 31 L.Ed.2d 110 (1972)); see also Comm'n on Ethics v. Barker, 677 So.2d 254 (Fla.1996),

and Goin v. Comm'n on Ethics, 658 So.2d 1131 (Fla. 1st DCA 1995). In considering an "as applied" challenge, the court is to consider the facts of the case at hand to determine "whether the statute can be fairly used to proscribe the defendant's [or respondent's] conduct, and the result is not binding on other parties." State v. Kirvin, 718 So.2d 893, 896 (Fla. 1st DCA 1998)(quoting Travis v. State, 700 So.2d 104, 106 (Fla. 1st DCA 1997)). Any doubts as to the constitutionality of the statute must be resolved in favor of its constitutionality. Dep't of Legal Affairs v. Rogers, 329 So.2d 257, 263 (Fla.1976).

In both Barker and Goin, it was argued that an ethics statute,¹ which prohibits a public official from accepting a gift which the public official knows, or should know...