The failure of three Poe Financial Group insurance companies after the hurricanes of 2004-05 marked the largest insurance insolvency in Florida history. The total bill Florida homeowners must pay to cover unpaid Poe claims stands at $790-million and is still rising.
The twist most Floridians didn't know: It wasn't the first time former Tampa Mayor Bill Poe Sr. headed an insurance company that become insolvent and triggered a bailout.
Before there was Southern Family and the two other Poe companies that followed it into bankruptcy, there was the matter of Whiting National.
The first insolvency
Named after a street in downtown Tampa, Whiting National was created by Poe in 1977, its business model centered on selling medical malpractice insurance, mostly to dentists in New York. After it was unable to pay claims, that state liquidated it in 1988. As a standard procedure, Whiting National had its license revoked in Florida because the company also did business here.
Whiting left behind $29.4-million in unpaid claims in New York and nearly $1.5-million in unpaid claims in Florida.
Eight years later, Poe asked for a second chance. And ran into a problem.
When he applied for a Florida license to start Southern Family in early 1996, he was required to fill out a biographical affidavit listing his previous business dealings. One question on the form was whether any business he had been associated with had its license revoked, or had been subject to any bankruptcy, insolvency, rehabilitation or liquidation proceeding while he was there or within a year after leaving.
Poe answered no.
Poe's answer was an honest mistake, his attorneys argued in a letter to regulators, adding that Poe received a license only after he agreed to several regulatory conditions that would keep Southern Family on solid footing.
By August 1996, Poe was granted a Florida license and Southern Family began to aggressively take policies out of state-backed Citizens Property Insurance.
In issuing the license, "the Office of Insurance Regulation … was aware that Mr. Poe was an officer of another company in New York that went into receivership years earlier," OIR spokesman Tom Zutell said. "After an exhaustive background search and contact with the regulator in New York, the department, at the time, was satisfied that Mr. Poe was qualified to operate Southern Family."
Zutell said that at the time Florida law did not contain language that prevented an officer or director of an insolvent insurer from starting a new company. "In 2002, the Legislature passed a law which forbids this," Zutell said, "unless the applicant can demonstrate he was not responsible for the insolvency."
Today, Susanne Murphy is executive vice president of Citizens. In 1996, she was Florida's deputy insurance commissioner. Murphy recalls that Poe disclosed his relationship with Whiting National to regulators.
"But because of his association with (Whiting), our reaction was that we were not able to act positively on his effort to create a new company," Murphy said. "We advised him that unless we had clearance from New York that his actions at Whiting did not result in the insolvency, we couldn't issue a certificate of authority. We required that New York absolve him of responsibility."
In what regulators call an unusual move, they received a letter doing exactly that.
"… there is nothing that has been brought to the attention of the New York Liquidation Bureau that Mr. Poe engaged in wrongdoing of any type related to the referenced insurance company," Special Deputy Superintendent A. Marc Pellegrino wrote, referring to Whiting National.
Pellegrino, who served with the liquidation bureau from 1995 to 1997, could not be reached for comment.
"Frankly, I was surprised we got (the letter)," Murphy said. "A lot of time it's difficult to put together all of the elements that resulted in an insolvency, and it surprised me that he bore no responsibility for that company's financial problems.
"We didn't believe we had a basis to deny his request because we could no longer make a connection between (Whiting) and his new company."
Bill Poe Sr. did not agree to be interviewed for this report. But Poe family spokesman Jeff Tucker said that Whiting National fell victim to a change in New York insurance law that suddenly forced the company to take on large numbers of unexpected claims. The company used up its reserves and became insolvent.
Tucker said Poe agreed to meet the conditions set out by regulators when he re-entered the business.
In August 2006, the Poe Financial Group filed for Chapter 11 bankruptcy reorganization. And in April, the state sued Poe and 19 others, including his wife and five children, alleging they diverted more than $140-million from the Poe insurance companies as they hurtled toward bankruptcy.
As those actions played out, lawyers rushed to beat this month's deadline for unresolved Poe hurricane claims. Tampa attorney Chip Merlin has filed nearly 200 lawsuits in the past month, some for as much as $6-million, mostly on behalf of former Poe policyholders in South Florida.
Despite the state's lawsuit and the liquidation of his Florida companies, Poe continues to sell homeowners insurance through his Poe & Associates Agency. The Tampa company claims "thousands of customers."
Many of those customers will likely see added to their premium an assessment for FIGA, which stands for the Florida Insurance Guaranty Association, a group created by the state that uses policyholder dollars to satisfy unpaid claims from insolvent insurance companies.
In the past two years, that has primarily meant Poe companies.
Regulators last fall signed off on a 2 percent assessment to cover Poe's debt — the third such levy in the past 18 months.
Because of the latest assessment, which began in March, everyone in Florida who buys homeowners or auto insurance is paying an extra $20 for every $1,000 in premium.
Tom Zucco can be reached at email@example.com or (727) 893-8247.