CEO 94-10 -- March 10, 1994
CONFLICT OF INTEREST; VOTING CONFLICT
COUNTY COMMISSIONER'S INSURANCE
CLIENTS DOING BUSINESS WITH COUNTY
To: (Name withheld for lack of consent.)
A prohibited conflict of interest would be created under Section 112.313(7)(a), Florida Statutes, absent the applicability of an exemption under Section 112.313(12), Florida Statutes, were businesses which are insurance clients of a county commissioner's insurance agency to contract with the county commission to provide goods or services to the county. Under the facts of this opinion, the commissioner would hold a contractual relationship with business entities doing business with his agency.
In addition, the commissioner would be prohibited from voting and be subject to the other requirements of Section 112.3143(3)(a), Florida Statutes, regarding measures that would inure to the special private gain of insurance clients or of persons with whom the commissioner jointly owns an office building. His insurance clients would constitute "principals by whom he is retained" and coowners of an office building would come within the definition of "business associate." CEO's 81-59, 83-50, 84-80, 85-5, 85-62, 90-71, 91-61, 93-10, and 93-19 are referenced.
Would a prohibited conflict of interest be created were a county commissioner's insurance client to do business with the county?
Under the circumstances presented, absent the applicability of an exemption, your question is answered in the affirmative.
By your letter of inquiry and a telephone conversation between you and our staff, we are advised that you serve as a member of the Board of County Commissioners of Clay County. In addition, you advise that you are the sole proprietor and one hundred percent owner of an unincorporated insurance agency that writes workers compensation, general liability, automobile, and other insurance for many home, automobile, and business accounts in Northeast Florida. Some of the businesses that purchase insurance through your agency may in the future provide various goods or services to the County via contracts with the County Commission, you advise. Further, you advise that the profit of the insurance agency derived from commissions paid from insurance companies is your primary source of income.
You and two other individuals are the licensed insurance agents working at your insurance agency, with insurance being placed primarily with three insurance companies, you advise. In addition, you advise that you "are mainly responsible for [your] agency's large accounts," that approximately ninety-five percent of your agency's customers have very little contact with you personally "unless they have a claim or a problem with their insurance account," and that you employ an office manager and clerical staff.
You advise that most renewals of insurance coverage originally obtained through your firm and related paperwork take place directly between insureds and insurance companies and not through your agency; however, as long as a policy is in force your agency has a duty to service the insured's account and keep records, and thus you "remain an agent of the insured throughout the term of the policy." You maintain that you are an agent of customers (insureds) who seek insurance through your agency and that, in many instances, you likely are an agent of the insurance company as well.
The Code of Ethics for Public Officers and Employees provides in relevant part:
CONFLICTING EMPLOYMENT OR CONTRACTUAL RELATIONSHIP.--No public officer or employee of an agency shall have or hold any employment or contractual relationship with any business entity or any agency which is subject to the regulation of, or is doing business with, an agency of which he is an officer or employee . . .; nor shall an officer or employee of an agency have or hold any employment or contractual relationship that will create a continuing or frequently recurring conflict between his private interests and the performance of his public duties, or that would impede the full and faithful discharge of his public duties. [Section 112.313(7)(a), Florida Statutes.]
The first clause of this statute would prohibit your holding a contractual relationship with a business entity doing business with the County Commission (your public agency).
We find that, absent the applicability of an exemption under Section 112.313(12), Florida Statutes, this prohibition would be violated were a business which has insurance coverage purchased through or serviced by your insurance agency to do business with the County. You, as a sole proprietor doing business as an insurance agency, would have a contractual relationship with the customers of your agency, including business customers doing business with the County.
While an insured certainly has a contractual relationship with the insurance company, the insured (or insurance customer) can also have a contractual relationship with the insurance agency through which he purchases insurance. This particularly would appear to be the case when a customer deals with an independent business (insurance agency) for the purpose of meeting his insurance needs and the business agrees to obtain insurance for the customer or undertakes to provide insurance-related services for the customer. See Cat 'N Fiddle, Inc. v. Century Insurance Company, 213 So. 2d 701 (Fla. 1968) [broker or agent entrusted by owner with duty of keeping owner's property insured, taking out policies thereon, and authorized to obtain other insurance in lieu of expired or cancelled policies is general agent of owner]; Robinson v. John E. Hunt & Associates, Inc., 490 So. 2d 1291 (Fla. 1st DCA 1986) [insurance agent may be held liable for failure to provide insurance coverage pursuant to oral contract even though agency has received no premium from applicant]; and Monogram Products, Inc. v. Berkowitz, 392 So. 2d 1353 (Fla. 2nd DCA 1980) [insured's action alleging that the agent's negligence and breach of an alleged oral contract resulted in inadequate insurance coverage for fire loss].
As to the issue of when a contractual relationship or a principal/agent relationship between an insurance customer and an insurance agency begins and ends, we note that the Florida Supreme Court stated in Cat 'N Fiddle, Inc., supra, at pages 704 and 705, quoting from a case from another jurisdiction:
It is a well-settled rule that a broker or agent employed by an owner to procure a policy of insurance on property is not authorized to accept notice of the cancellation of such policy. His employment is at an end when he procures the insurance, and the subsequent notice to him by the insurance company of the cancellation of its policy is no notice to the insured. . . . It is equally well settled that when a broker or agent is instructed by an owner with the duty of keeping the owner's property insured, taking out policies thereon, and authorized to obtain other insurance in lieu of expired or canceled policies, the broker or agent is the general agent of the owner in these respects as to the latter's insurance, and notice to him of cancellation of a policy, provided he substitutes therefor another policy for a like amount, is notice to the insured.
The Court in Cat 'N Fiddle, Inc., supra, went on to state:
The record indicates that Hurst was more than an agent for the limited purpose of procuring insurance on the Petitioner's property. From the record and testimony of Mr. McGee, the organizer and equitable owner of Petitioner, it appears that Hurst not only was charged with procuring insurance in the first instance, but also was entrusted, minimally speaking at least, with the task and duty of seeing that Petitioner's insurance coverage was maintained. We conclude, therefore, that the agency relationship between Petitioner and Hurst was not merely a special agency which terminated when the insurance in question was procured . . . .
Section 112.313(12), Florida Statutes, contains several exemptions that will negate a conflict under Section 112.313(7)(a), including an exemption for "business awarded under a system of sealed, competitive bidding to the lowest or best bidder." Please note that the competitive bid exemption, in order to be applicable, requires that you file a statement (CE Form 3A) with the County Supervisor of Elections, prior to or at the time of the submission of the bid.
Accordingly, we find that a prohibited conflict of interest would be created were one of your insurance clients to do business with the County Commission, unless one of the exemptions in Section 112.313(12) is applicable.
Further, please be advised that in addition to conflicts under Section 112.313(7)(a) that would result from your holding contractual relationships with business entities doing business with the County Commission, conflicts likely would result if business entities which are insurance clients of your insurance agency simultaneously were subject to the regulation of the County Commission. If, for example, a business served by your insurance agency has to obtain a permit from the County Commission, then "regulation" by the County Commission might very well exist. However, if the permit, or the application for the permit, were issued, argued, and heard by or before a department or agency of the County separate and distinct from the County Commission (for example, the County building inspector's office) then the County Commission would not be "regulating" that business entity and there would be no conflict. In addition, the enactment of ordinances or other instances of local legislative activity by the County Commission would not constitute "regulation" that would trigger a prohibited conflict under Section 112.313(7)(a). If you think that a conflict might be present due to the County Commission's "regulation" of a client of your insurance agency or if you forsee the development of such a situation, please contact us for an opinion regarding that particular situation.
Does the voting conflicts law prohibit your voting on a measure to change the zoning on property in which an insurance client of yours owns approximately a one-third interest?
This question is answered in the affirmative.
By our staff's telephone conversation with you, we are advised further that one of your insurance clients is a homeowner who obtains a portion of his personal insurance through your agency, that he also is an officer and approximate fifty percent stockholder in a company that owns an apartment complex, and that you are the agent for the provision of some of the insurance for the company/apartment complex. In addition, you advise that this client is an approximate one-third owner in some property that is not insured through your agency. You desire to know your duties under the voting conflicts law should the property that is not insured through your agency become the subject of a measure before the County Commission to change zoning of the property.
Section 112.3143(3)(a), Florida Statutes, provides:
No county, municipal, or other local public officer shall vote in his official capacity upon any measure which would inure to his special private gain; which he knows would inure to the special private gain of any principal by whom he is retained or to the parent organization or subsidiary of a corporate principal by which he is retained, other than an agency as defined in s. 112.312(2); or which he knows would inure to the special private gain of a relative or business associate of the public officer. Such public officer shall, prior to the vote being taken, publicly state to the assembly the nature of his interest in the matter from which he is abstaining from voting and, within 15 days after the vote occurs, disclose the nature of his interest as a public record in a memorandum filed with the person responsible for recording the minutes of the meeting, who shall incorporate the memorandum in the minutes.
As an elected, local, public officer, this is the portion of the voting conflicts law applicable to you. You must comply with its provisions regarding measures which would inure to your special private gain or to the special private gain of any of the other enumerated persons or entities (including a principal by whom you are retained).
In the past, we have taken the view that, absent special circumstances, an insurance agent is the agent of an insurance company and is not the agent of the insured. See CEO 81-59. However, upon further reflection, examination of caselaw, review of your scenario, and recognition of the day-to-day operations of insurance agencies, we are persuaded that such "special circumstances" are not uncommon, and thus that in situations such as yours, where the customer requests that an agency take care of his insurance needs, the insurance agency is an agent retained by the customer (the principal) even though the agent also may be an agent of the insurance company. See Cat 'N Fiddle, Inc., Robinson, and Monogram Products, Inc., supra.
Therefore, since a zoning or land use change inures to the special private gain of the owners of the property (see, for example, CEO 84-80, CEO 85-5, and CEO 85-62), we find that a voting conflict would be present requiring your abstention, declaration, and filing of a memorandum in accordance with Section 112.3143(3)(a), regarding the zoning change measure. The fact that you do not provide insurance for that particular piece of property does not change the fact that you are an agent retained by the client and that the client will be specially affected by the zoning change measure.
This question is answered accordingly.
Does the voting conflicts law prohibit your voting on a measure to place a "side road" through the property of an insurance client of yours?
This question is answered in the affirmative.
We are advised further that an insurance client of yours owns approximately eighteen acres of land that has frontage on an existing major roadway and that the property is currently zoned "commercial." In addition, you advise that the client desires to have a publicly-owned "side road" placed through the property in order to make travel safer for residents in the area. The future development of the property is set in such a way that the client will make no more or no less profit from the property regardless of whether the side road is built. You question whether your voting on measures necessary to the placement of the side road would require your abstention, declaration, and filing of a memorandum under the voting conflicts law.
For the reasons stated previously, we find that the insurance client would be a principal by whom you are retained. Further, we find that improvements to property or condemnation of property constitute special gain or loss (see CEO 91-61, CEO 93-10, and CEO 93-19). In addition, due to statutory infrastructure concurrency standards requiring that improvements be made as a condition of development of property, the placement of a side road through the property might very well constitute gain to the owner in that it might constitute a required infrastructure concurrency improvement that the owner did not have to pay for. Therefore, we conclude that you should abstain, declare, and file as to such measures.
What are your duties under the voting conflicts law regarding measures that would affect two persons with whom you jointly own an office building?
The voting conflicts law would apply to such measures if they would inure to the special private gain of one or both of the persons and if one or both of the persons were a "business associate" of yours. "Business associate" is defined at Section 112.312(4) to mean
any person or entity engaged in or carrying on a business enterprise with a public officer, public employee, or candidate as a partner, joint venturer, corporate shareholder where the shares of such corporation are not listed on any national or regional stock exchange, or coowner of property.
We find that being a coowner of an office building with another does make that person one's "business associate." This is so not merely because the persons are coowners of property, but also because the joint ownership of such a property (an office building) necessarily amounts to being engaged in or carrying on a business enterprise.
Therefore, you should abstain, declare, and file CE Form 8B regarding measures that would inure to the special gain of one or both of the persons with whom you own the office building.
Nevertheless, be advised that certain measures are merely "preliminary and procedural" measures and, as such, do not trigger a voting conflict. See, for example, CEO 83-50. However, also be advised that any measure that is essential to keeping a project or matter alive is not merely preliminary or procedural. See, for example, CEO 93-10. Further, be advised that if a measure inures to the gain of a sufficient number of persons, there will be no voting conflict. See, for example, CEO 90-71 and our opinions cited therein.