CEO 93-24 -- July 15, 1993
CONFLICT OF INTEREST
STATE SENATOR PERSONALLY REPRESENTING
COMPANY BEFORE JOINT UNDERWRITING ASSOCIATION
To: The Honorable W. Lockwood Burt, State Senator, District 16 (Ormond Beach)
SUMMARY:
A prohibited conflict of interest would not be created were a State Senator's firm to provide insurance consulting services to a company seeking to do business with the Residential Property and Casualty Joint Underwriting Association, including the Senator's personal representation of the company before the Association. The Senator would not have an employment or a contractual relationship with an agency or business entity subject to the regulation of his agency (the Legislature) within the meaning of Section 112.313(7)(a), Florida Statutes, and the Senator's firm's activities are not linked to his legislative position such that a continuing or frequently recurring conflict or impediment to duty would be created. Article II, Section 8(e), Florida Constitution, and Section 112.313(9)(a)3, Florida Statutes, would not be violated by the Senator's personal representation of the company before the Association because the Association is not a "state agency." CEO's 91-8, 91-1, and 87-43 are referenced.
QUESTION:
Would a prohibited conflict of interest be created by your firm's provision of insurance consulting services to a company seeking to do business with the Residential Property and Casualty Joint Underwriting Association, including your personal representation before the Association's board of directors and committees on behalf of the company, where you serve as a State Senator?
Under the facts set forth in this opinion, your question is answered in the negative.
By your letter of inquiry, we are advised that you are a State Senator serving on the Senate Committee on Commerce, which has jurisdiction over legislation pertaining to insurance and the Department of Insurance. We also are advised that you are an officer, director, and majority shareholder of a corporation which has been engaged in various aspects of the insurance business since 1960. Among other things, you relate, your firm acts as an agent and consultant for various domestic and foreign insurance and reinsurance companies, markets insurance policies to local insurance agents and potential insureds, and, acting as a reinsurance broker, seeks and obtains reinsurance for the insurers it represents.
In response to the impact Hurricane Andrew had on the residential property and casualty insurance market in Florida, you relate, the Legislature passed Committee Substitute for House Bill 33-A (Chapter 92-345, Laws of Florida), which created the Residential Property and Casualty Joint Underwriting Association. You relate that the Association was created to provide an insurance source for applicants who are unable to obtain residential property and casualty insurance in the voluntary market and that all insurers authorized to write residential property and casualty insurance in Florida are required to be members of the Association. The Association, pursuant to Chapter 92-345 (as amended by Chapter 93-401, Laws of Florida), you advise, is operated under the supervision of a thirteen-member board of governors which consists of five members designated by the insurance industry, the insurance consumer advocate appointed under Section 627.0613, Florida Statutes, five consumer representatives appointed by the Insurance Commissioner, and two insurance industry representatives appointed by the Insurance Commissioner. A board member may be removed only for cause, you advise. Further, you relate that the operations of the Association are financed by annual assessments upon its members and by premium and investment income and that the Association does not receive public funds to finance its operations. In addition, you advise that Chapter 92-345 created Section 627.351(6)(j), Florida Statutes, which provides that the Association "is not a state agency, board, or commission" and that ". . . for the purposes of s.199.183(1), the [Association] shall be considered a political subdivision of the state and shall be exempt from the corporate income tax and the insurance premium tax."
We are advised further that the Association presently is considering the designation of brokers, insurers, and reinsurers to obtain and provide reinsurance coverage to the Association, and that a wholly-owned subsidiary of your corporation, a licensed reinsurance intermediary, has entered into a consulting agreement with another reinsurance broker which intends to seek to do business with the Association. You advise that this broker/brokerage firm ("company") is seeking to be appointed "Broker of Record" for the Association, in order to work to locate insurance or reinsurance firms willing to provide coverage to the Association. You relate that, as consultant to the company, your firm (and you personally) would, among other things, provide input, background information, advice, and technical assistance to the company regarding the Association and the Florida insurance market in general; consult and confer with the members of the Association's board of directors and committees on behalf of the company; consult with domestic insurers regarding the Association; and contact direct writers of reinsurance to market reinsurance of the Association to them.
You inquire whether the situation described above would be prohibited by the Code of Ethics for Public Officers and Employees (specifically Section 112.313(7), Florida Statutes) or by Article II, Section 8(e), Florida Constitution.
Section 112.313(7) and Article II, Section 8(e) provide in relevant part respectively:
CONFLICTING EMPLOYMENT OR CONTRACTUAL RELATIONSHIP.--
(a) 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. . . .
2. When the agency referred to is a legislative body and the regulatory power over the business entity resides in another agency, or when the regulatory power which the legislative body exercises over the business entity or agency is strictly through the enactment of laws or ordinances, then employment or a contractual relationship with such business entity by a public officer or employee of a legislative body shall not be prohibited by this subsection or be deemed a conflict.
SECTION 8. Ethics in government.--A public office is a public trust. The people shall have the right to secure and sustain that trust against abuse. To assure this right:
(e) . . . . No member of the legislature shall personally represent another person or entity for compensation during term of office before any state agency other than judicial tribunals. Similar restrictions on other public officers and employees may be established by law.
In addition, Section 112.313(9)(a)3, Florida Statutes, a parallel provision to Article II, Section 8(e), provides in relevant part:
. . . . No member of the Legislature shall personally represent another person or entity for compensation during his term of office before any state agency other than judicial tribunals or in settlement negotiations after the filing of a lawsuit.
We find that the first clause of Section 112.313(7)(a), Florida Statutes, is not implicated under your scenario because any "regulatory power" that your public agency (the Legislature) would have over any of the business entities or agencies involved would be "strictly through the enactment of laws," as specified in Section 112.313(7)(a)2, Florida Statutes. See, for example, CEO 91-8. Further, under your scenario, you do not have an employment or a contractual relationship with an agency or business entity which is doing business with the Legislature--your public agency.
Under the second clause of Section 112.313(7)(a), we find no prohibited conflict. As the members of the Legislature are expected to serve as citizen-legislators on a part-time basis and must be employed elsewhere to support themselves and their families, each private employment or business endeavor of a legislator presents the potential for conflicts of interests. Accordingly, we examine the nature and duties of the legislator's private employment or endeavor to determine whether it would present a prohibited conflict of interest. In CEO 91-1, we found that a prohibited conflict of interest would be created under the second clause of Section 112.313(7)(a) were a State Senator to contract with a professional association that lobbies the Legislature to speak to the association's professional groups regarding legislative issues, to contribute articles on legislative issues to the association's publications, and to advise the association's executive committee and board of governors regarding legislative and political education activities of the association. In that opinion, as well as in other opinions cited within it, we expressed our concern that a legislator's private endeavors not involve lobbying the Legislature or encompass activities related to lobbying. Further, in that opinion, the subject matter of the Senator's proposed employment arose out of his public position and related directly to issues that might have been expected to come before him in his official capacity. Your situation is fundamentally different than that in CEO 91-1 in that you will be lobbying the Association and not the Legislature and in that your firm's insurance consulting expertise arises independent of your legislative position, from a long business history of providing insurance and insurance-related services.
Regarding the representation during term of office provisions, the crucial inquiry is whether you personally would be engaging in the representation before a state agency. Therefore, we find, without the need for further discussion of the meaning of these provisions, that representation by employees of your firm (as opposed to representation by you personally) would not be prohibited, even before state agencies, by Article II, Section 8(e) or by Section 112.313(9)(a)3.
In addition, we are persuaded, due to our reasoning set forth in CEO 87-43, that the Association is not a "state agency." In fact, except for its limited designation as a political subdivision of the State pursuant to Chapter 92-345, Laws of Florida (for purposes of its exemption from intangible personal property taxation under Chapter 199, Florida Statutes), the Association does not appear to be a governmental entity at all. We find that, like the Florida Joint Underwriters Association discussed in CEO 87-43 and except for its limited "political subdivision" designation, the Association is a non-governmental entity made up of private insurance companies which, under requirements of law, must participate in and be members of the Association. Therefore, we find that the two provisions do not prohibit your personal, compensated representation before the Association.
However, we remind you that the Department of Insurance is a "state agency" for purposes of Article II, Section 8(e) and Section 112.313(9)(a)3. Therefore, these provisions prohibit you from personally representing your company or clients of your company before the Department of Insurance or any other State-level agency, while you are in office. Please note that "represent," as defined in Section 112.312(22), Florida Statutes, means actual physical attendance in an agency proceeding, writing letters and filing documents, and personal communications with the officers and employees of the agency.
Your question is answered accordingly.