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State: Poe Diverted Millions

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By RUSSELL RAY

The Tampa Tribune

Published: April 2, 2008

Updated: 04/18/2008 11:45 am

TALLAHASSEE - The insolvency of Poe Financial Group, a Tampa-based insurer, and the millions of dollars in assessments that followed was the result of "intentional and fraudulent actions" by Poe's top executives, the state Department of Financial Services said in a civil lawsuit against the company.

The agency said Tuesday that it is seeking more than $100 million from the affiliates and officers of Poe's three insurance companies, including William F. Poe Sr., a former mayor of Tampa.

The 2006 collapse of Atlantic Preferred, Southern Family and Florida Preferred marked the largest insurance failure in Florida's history. All told, Florida policyholders are expected to pay $790 million in assessments to cover Poe's unpaid claims.

DFS, the court-appointed receiver of the Poe companies, says it has proof that company executives diverted millions in assets, money that could have been used to pay thousands of unresolved claims.

The lawsuit, filed late Friday in Leon County Circuit Court, is "our attempt to get assets that we think are still out there," said DFS spokeswoman Tara Klimek. "We still have about $123 million in claims to pay."

So far, about $1.2 billion in Poe claims have been paid.

In a prepared statement, William Poe Sr. said Tuesday that he sued DFS two years ago, contending that the state's seizure of his companies wasn't lawful. The DFS lawsuit, he said, wasn't surprising.

"We assumed all along the state would attempt to fight our claims any way it could," Poe said. "We view this action as an attempt to try and intimidate our side before our case goes to jury trial later this year."

The lawsuit said that prior to being seized by DFS in 2006, Poe Financial executives launched a "fraudulent scheme" to distribute millions of dollars in dividends to officers, directors and affiliates of the Poe companies. The state also contends Poe officers received "unearned" commission payments and premiums and misled state regulators about the financial status of the companies.

"Florida's insurance consumers were forced to foot the bill when the Poe Companies became insolvent so that policyholders could have their claims paid," Florida Chief Financial Officer Alex Sink said in a statement. "We will aggressively pursue any opportunity to recoup additional funds to reduce the assessments levied against Florida's insurance consumers."

When an insurance company can't pay its claims, the cost is recovered from the state's private insurers. Florida law allows those insurers to pass that cost on to customers in the form of an assessment on all auto and homeowners policies.

As a result of Poe's collapse, assessments have been levied against all auto and homeowners policies in Florida to pay the failed insurer's outstanding claims. In 2006, DFS liquidated the companies' assets to pay claims resulting from the hurricanes of 2004 and 2005. Beyond that, assessments will be used to pay the claims of the now-insolvent companies.

Poe's collapse has led to three 2 percent assessments on customers' premiums. Each assessment, or surcharge, amounts to about $20 for every $1,000 of premium.

Poe's financial difficulties were evident long before the start of the 2005 hurricane season. The 2004 season, in which four hurricanes hit Florida, left the companies with a net loss of more than $100 million.

But instead of limiting or reducing the companies' exposure, Poe officials sought to add tens of thousand of new policyholders in 2005. State insurance regulators approved Poe's 2005 expansion plan, despite warnings from rating agencies and other industry groups that the Poe companies were overexposed and risked insolvency should a major hurricane hit Florida.

Reporter Russell Ray can be reached at rray@tampatrib.com or (850) 222-8382.

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