Ex-state senator Locke Burt ending messy 2-year divorce with Royal Palm property insurer
NOTE: This was updated on Monday, May 3, from the original posting. Locke Burt, the former state senator and one-time candidate for Florida Attorney General, was a founder of the Royal Palm Insurance Co. New documents forwarded to me today reveal he’s been in a messy, multi-year business divorce with Royal while serving as president and chairman of another home insurer called Security First Insurance in Ormond Beach. Both Royal and Security First provide homeowners insurance to Floridians. (Locke Burt photo by Bill Serne of the St. Petersburg Times.)
An original blog posting reported on a recent lawsuit filed against Burt by Royal last month in Hillsborough County. Additional documents forwarded by Security First and unreported until now paint a more complex battle between Burt as head of Security First and Royal. I'll try and boil this down a bit.
In late 2008, Security First (headed by Burt) sought arbitration against Royal Palm, arguing Royal had wrongfully and prematurely terminated its 5-year deal in which Security First was to be Royal Palm’s exclusive managing general agent. Last fall, an arbitration panel unanimously concluded that Royal Palm had indeed wrongfully terminated the agreement. A second phase of that arbitration is scheduled for June to determine damages. Security First seeks in excess of $50 million dollars for its contract damages; in excess of $1 million dollars in injury to its reputation, and in excess of $2.6 million dollars for attorneys fees and expenses arising out of Royal Palm’s wrongful termination of the managing general agent agreement.
Royal Palm was also sued by MacNeill Group, a subcontractor of Security First, over the wrongful termination of MacNeill’s program management agreement in 2008. An arbitration panel awarded MacNeill $3.2 million in damages for Royal Palm’s breach of contract. Finally, Royal Palm is in litigation with Guy Carpenter & Co., its reinsurance broker, during the time that Security First acted as managing general agent, concerning an alleged breach of a broker services agreement. That case is pending.
Still with me? Now comes the local lawsuit filed last month by Royal Palm in Hillsborough County. It alleges Burt, while serving as company president and director, paid excessive commissions to a separate company called Ormond Insurance that he controls, and that he charged expenses incurred by his other companies to Royal Palm. Burt resigned as Royal Palm president way back in June 2008. According to Royal Palm’s lawsuit, Burt had attempted -- without approval of Royal Palm's board --- to raise money to buy Royal Palm (it was controlled by Ritchie Risk-Linked LLC, part of a Bermuda investment firm ultimately controlled by U.S. hedge fund manager Thane Ritchie. When efforts at a deal failed, Burt resigned.
The suit also alleges Burt later used deceitful measures to try to push Royal Palm into bankruptcy or acquire it at a bargain-basement all for the purpose of boosting his own competing companies. The lawsuit claims a company whistleblower named Aimee Wight discovered major discrepancies in how big commissions from Royal Palm were paid to Burt's affiliated companies while sharply lesser commissions were paid to Royal Palm investors. Wight, the suit claims, tried but failed to raise a corporate alarm.
Security First, in response, says the Royal Palm lawsuit is little more than legal sour grapes given the arbitration hearings and the panels' existing findings against Royal Palm. Security First denies the lawsuit's allegations.
Royal Palm arrived on the Florida insurance scene in 2006 in the aftermath of Allstate's decision to severely downsize its Florida homeowners policy business. Royal became a principal recipient of ex-Allstate customers. Security First serves 80,000 homeowner policies statewide.
Who thought insurance was a laid back, sedate line of business?
-- Robert Trigaux, Times Business Columnist