As I reported last week, Palm Coast Travel and its companies, including Smartcruiser.com, are headed to a hearing with a Florida administrative law judge to determine if it sold unlicensed travel insurance. This is an important story, because fake “trip protection” policies are known to have been sold to people across the country for years, potentially costing travelers millions of dollars in lost vacations.
So what’s next for Palm Coast Travel?
There are two possibilities. First, the judge could rule the agency didn’t sell unlicensed insurance. But that’s unlikely, given the customers who have already complained to state regulators that they were sold these allegedly illegal policies. Second, the court could find Palm Coast Travel guilty of selling bogus insurance.
(Full disclosure: Palm Coast Travel is suing one of its customer and me for writing about this issue.)
What it means for the industry
In order to get an idea of what may await Palm Coast Travel and Smartcruiser.com, it’s useful to review the cases that have already been settled and the punishments that were imposed. Late last year, three travel agencies signed consent agreements with the state’s chief financial officer. The state also suspended the license of another travel agent. More on that in a minute.
On the surface, these orders seem trivial. One agency, High Performance Travel (PDF) was fined $1,000. Two others — Cruise Supermarket (PDF) and Cruise Options (PDF) paid just $2,500 in fines. (Related: Internal report shows Palm Coast Travel had $27,787 in outstanding travel insurance.)
But take a closer look at the consent orders, and you’ll see there’s nothing small about them. Here are a few relevant excerpts from one of the orders:
1. Stop selling unlicensed insurance.
Respondent shall immediately CEASE AND DESIST representing Prime Travel Protection, Inc., and any other unauthorized insurer.
2. Apply for a resident travel firm license.
Within fifteen (15) days of entry of this Consent Order, Respondent shall apply for a Section 626.321(l)(c), Florida Statutes, resident travel firm (2-41) license. Respondent shall not transact the business of insurance until either Respondent or an individual within Respondent’s travel firm is licensed pursuant to Section 626.32I(l)(c), Florida Statutes.
3. Pay restitution.
As to any client that previously purchased travel insurance through the Respondent from an unauthorized insurer and whose travel is prospective, Respondent shall, within sixty (60) days following the issuance of this Consent Order, at the client’s option either:
1) Refund the premium paid by the client for the unauthorized travel insurance; or
2) Subject to either Respondent or an individual within Respondent’s travel firm having a travel insurance (2-41) license, transfer any client that is still insured through an unauthorized insurer to an authorized insurer with any additional costs associated with the foregoing borne by the Respondent … Respondent shall, within sixty (60) days following the issuance of the Consent Order in this case, make complete financial restitution regarding all unpaid valid travel insurance claims resulting from Respondent having placed clients with an unauthorized insurer.
4. Get an insurance license.
Respondent shall be responsible for and ensure that all employees who sell insurance are only selling the insurance for which the Respondent is licensed and appointed to sell, and that the employees only sell said insurance pursuant to the direction or control of the Respondent.
5. Pay a fine.
Respondent shall pay an administrative penalty in the amount of TWO THOUSAND FIVE HUNDRED DOLLARS ($2,500.00) within thirty (30) calendar days of the entry of this Consent Order. Failure of Respondent to pay the administrative penalty within the specified limit shall result in the denial of Respondent’s application for licensure or the immediate suspension of Respondent’s license and eligibility for licensure in this state without further proceedings for a period of sixty (60) calendar days, whichever is applicable.
6. Be placed on probation.
Upon issuance of the resident travel firm (2-41) license, Respondent shall be placed on probation, pursuant to Section 626.691, Florida Statutes, for a period of two (2) years. As a condition of probation, Respondent shall comply with all the terms and conditions of this Consent Order and shall strictly adhere to all provisions of the Florida Insurance Code and Rules of the Department.
What if the agency fails to hold up its side of the bargain?
If, during the period of probation, the Department has good cause to believe that Respondent has violated the terms or conditions of this probation, it shall initiate administrative action to suspend or revoke Respondent’s license and appointments, or it may seek to enforce the Consent Order in Circuit Court, or take any other action permitted by law … Any person who knowingly transacts insurance or otherwise engages in insurance activities in this state without a license, or while the licensees) is suspended or revoked, commits a felony of the third degree.
But those are just the actions the state has taken against the agency. How about travel agents? For more on that, consider the case of Cynthia Burdige, who is reportedly an employee of Bruce Travel in Plantation, Fla. Florida regulators suspended her license for six months. Here’s the order (PDF).
What, exactly, does that mean?
During the period of suspension, CYNTHIA DRUBIN BURDIGE shall not engage in or attempt or profess to engage in any transaction or business for which a license or appointment is required under the Florida Insurance Code or directly or indirectly own, control, or be employed in any manlier by any insurance agent or agency or adjuster or adjusting firm.
Bear in mind that these are the agents and agencies that cooperated with Florida’s Department of Financial Services. Imagine what will happen to the ones that don’t.
Florida’s regulatory arsenal
I asked a source at DFS to describe the department’s options when agencies don’t cooperate. (Here’s our guide to resolving your consumer problem.)
The [administrative law judge] can enter a cease and desist order and, if the [the judge] finds that Palm Coast Travel knew or reasonably should have known that the travel insurance product it sold was in violation of section 626.901, Fla. Stat., hold the company liable to its customers for the full amount of the claim or loss not paid.
In addition, if Palm Coast, or its owner or employee, holds a travel insurance agent license, the [judge] could suspend or revoke the license, place the licensee on probation, impose a fine up to $3,500 and/or require a penalty in the amount of any commission received. (Florida Statutes Section 626.681(1).) Any violation of the cease and desist order entered could result in a $50,000 fine.
Finally, the Department may pursue these agencies with litigation that may include not only the present administrative matters pursuant to Section 120.57(1), Florida Statutes, but also civil litigation pursuant to Sections 626.904 – 626.912, Florida Statutes.
That’s not all. Did you catch all of those references to Access America in the new notice of intent issued by Florida regulators?
Access America certainly did. I asked the company to comment about the allegation that somehow, its legitimate travel insurance policies were “transferred” to these allegedly unlicensed policies. The company, which is normally quite talkative, told me, “The matter is currently under review by our management team and we are going to reserve further comment at this time.”
It’s one thing to be punished by the State of Florida. But you really don’t want to get on the wrong side of Access America, which is the largest travel insurance provider in the world.