CEO 94-42 -- October 13, 1994

CONFLICT OF INTEREST; VOTING CONFLICT

COUNTY COMMISSIONER'S INSURANCE CLIENT SELLING PROPERTY TO

COUNTY, COMMISSIONER RECEIVING PORTION OF COMMISSIONS FROM

FORMER CLIENT'S INSURANCE RENEWALS, AND COMMISSIONER

VOTING ON MEASURES AFFECTING FORMER CLIENT

To: J. Ross Macbeth, Attorney for Highlands County Board of County Commissioners (Sebring)

SUMMARY:

A prohibited conflict of interest would be created under Section 112.313(7)(a), Florida Statutes, were a business entity which is an insurance client of a county commissioner to sell property to the county in a single transaction, absent the applicability of an exemption under Section 112.313(12), Florida Statutes. The commissioner would hold a contractual relationship with the client, and the sale would constitute "doing business" with the commissioner's public agency. No conflict would be created under Section 112.313(7)(a), and no voting conflict would be created under Section 112.3143(3)(a), Florida Statutes, were a former insurance client of the commissioner to do business with the county or were the commissioner to vote on measures inuring to the gain of the former client. The commissioner would not hold a contractual relationship with the former client and the former client would not be a principal retaining the commissioner. CEO's 94-37, 94-10, 94-5, and 82-50 are referenced.

QUESTION 1:

Does a single transaction, such as the purchase by a county of a specific property, constitute "doing business" under Section 112.313(7)(a), Florida Statutes, such that a prohibited conflict of interest would be created were an insurance client of a county commissioner to sell the property to the county, absent the applicability of an exemption under Section 112.313(12), Florida Statutes?

This question is answered in the affirmative.

By your letter of inquiry, an additional letter, and a telephone conversation between you and our staff, we are advised that C. Guy Maxcy serves as a member of the Board of County Commissioners of Highlands County and that he also is an insurance agent. In addition, you advise that the Commissioner is aware of our two recent opinions concerning public officials who also were insurance agents (CEO 94-10 and CEO 94-37) in which we stated that there is a contractual relationship between an insurance agent and an insurance client under various circumstances. You relate that the Commissioner desires to know whether a single property transaction between the County Commission and an insurance client of his with whom he holds a contractual relationship would constitute "doing business" within the meaning of the first clause of Section 112.313(7)(a), Florida Statutes, such that a prohibited conflict of interest could be created thereby.

Section 112.313(7)(a) provides:

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.

Although "doing business" is not defined in the Code of Ethics for Public Officers and Employees, our view has been that a business entity is doing business with an agency where the parties have entered into a lease, contract, or other type of legal arrangement under which one party would have a cause of action against the other in the event of a default or breach. See, for example, CEO 82-50. We have not restricted the term only to situations in which there is a longstanding, ongoing, or regular course of business between the public agency and the entity dealing with it. In your scenario, as under other agreements to buy and sell, a cause of action would exist in the event of a default or breach. Therefore, the Commissioner's insurance client would be doing business with his public agency by virtue of a sale of a single property to the County.

Further, although the Commissioner would be subject to the requirements of the voting conflicts law [Section 112.3143(3)(a), Florida Statutes] regarding votes concerning the acquisition of his insurance client's property, his compliance with that law, including abstention from voting, would not negate the prohibited conflict under Section 112.313(7)(a). See CEO 94-5, Question 1.

However, if the client selling property to the County is not in the business of selling property, is making a one-time sale to the County, and otherwise is not doing business in the State, the client might not constitute a "business entity" within the meaning of Section 112.313(7)(a) and Section 112.312(5), Florida Statutes, and thus a prohibited conflict might not exist under the first clause of Section 112.313(7)(a). Section 112.312(5) defines "business entity" to mean

any corporation, partnership, limited partnership, proprietorship, firm, enterprise, franchise, association, self-employed individual, or trust, whether fictitiously named or not, doing business in this state.

We are unable to definitively address this issue under the limited facts at our disposal. Thus, should a particular client of the Commissioner who might be an individual (other than a self-employed individual), as opposed to a "business entity," offer property for sale to the County, the Commissioner should seek further advice from us.

Accordingly, we find that a prohibited conflict of interest would be created were the Commissioner to hold a contractual relationship with a business entity which is selling a single property to the County, absent the applicability of an exemption under Section 112.313(12), Florida Statutes.

QUESTION 2:

Would a prohibited conflict of interest be created under Section 112.313(7)(a), Florida Statutes, were a former insurance client of the Commissioner to do business with the County when the Commissioner receives a portion of renewal commissions paid by the insurance company following the transfer of the former client's insurance business to an unrelated insurance agent?

This question is answered in the negative.

In CEO 94-10 and CEO 94-37, we recognized that under the general law of insurance and contracts a contractual relationship can exist between the sole proprietor of an unincorporated insurance agency and the clients of the agency as well as between an insurance agent of an incorporated insurance agency and the clients whose insurance business is handled under that particular agent's insurance licensure. Further, in CEO 94-37 we found that a contractual relationship would not exist between a city commissioner/insurance agent who was an officer, director, stockholder, and employee of an incorporated insurance agency and an insurance client of the insurance agency where the client's insurance business was handled under the insurance licensure of an agent other than the commissioner.

Therefore, we find that the Commissioner would not have a contractual relationship with a former insurance client of his whose insurance business currently is being handled by any other licensed insurance agent, if his insurance agency is incorporated. If his insurance agency is unincorporated and he is its owner or proprietor, he still would have a contractual relationship with a client whose insurance business is handled by his firm, regardless of whether or not the client's business is handled under his insurance licensure, both because the client would have a contractual relationship with the firm as well as with the agent(s) under whose licensure the client's insurance is handled and because the unincorporated firm, unlike a corporation, would not constitute a separate business entity independent from its owners or proprietors. Thus, if the insurance agency is unincorporated and the Commissioner is an owner or proprietor of it, we find that a prohibited conflict would be created if an insurance agent of his insurance agency handles the client's insurance business and the client is doing business with the County.

In addition, we find that the payment from the insurance company to the Commissioner of a portion of the commissions generated by renewals of his former client's insurance would not constitute a contractual relationship between him and his former client but, rather, would constitute dealings between him and the insurance company. Therefore, if that were the only relationship between the former client and the Commissioner, Section 112.313(7)(a) would not be violated if the former client were to do business with the County.

This question is answered accordingly.

QUESTION 3:

Would the Commissioner be required to comply with the voting conflicts law [Section 112.3143(3)(a), Florida Statutes] regarding measures which would inure to the special private gain of a former insurance client, when he continues to receive from the insurance company a portion of the commissions from renewals of the former client's insurance and the client's insurance business is handled by an unrelated insurance agent?

This question is answered in the negative.

Under reasoning similar to our response to question 2, above, we find that compliance with Section 112.3143(3)(a) is not required for measures inuring to the special private gain of the Commissioner's former insurance clients, based upon the part of the statute that addresses gain to one's principal. In situations involving an incorporated insurance agency, the client would be a principal of any insurance agent currently handling his business and would no longer be a principal of the Commissioner. In situations involving an unincorporated insurance agency of which the Commissioner is an owner or proprietor, the client would not be the Commissioner's principal if the client's business is handled by an agent unconnected with the Commissioner's firm. Further, the payment of a portion of renewal commissions would constitute a relationship between the insurance company and the Commissioner, as opposed to making the Commissioner an agent of his former client.

However, were the nature of a measure such that special gain would inure somehow to the Commissioner personally and not merely to his former insurance client, as discussed above, compliance with Section 112.3143(3)(a) would be required.