Make us your home page
Instagram

State of Florida says Allianz subsidiary committed fraud

TALLAHASSEE — Florida regulators have filed a lawsuit accusing financial services giant Allianz of gutting a Miami property insurer, falsifying its documents and then cashing in on more than $20 million in fees as the company plunged into insolvency.

Coconut Grove-based Magnolia Insurance Co. went belly up in 2010, just two years after it began taking 100,000 policies out of Citizens Property Insurance Corp.

Taxpayers ultimately picked up the tab, and the Department of Financial Services is trying to recoup some of the money from the Munich-based multinational Allianz.

According to a lawsuit filed late last month, subsidiaries of Allianz played a major role in the demise of Magnolia, charging the upstart company excessive fees and misreporting its financial status even as it was going under.

Allianz "intentionally participated in the misreporting and/or misrepresentation of the financial condition of Magnolia," the lawsuit says, for the purpose of "prolonging the existence of the insurance company to continue to secure collection of fees and payments."

Allianz has firmly denied accusations made against it and its subsidiary, Allianz Risk Transfer.

"These claims are totally unfounded," said Hugo Kidston, head of communications for Allianz Global Corporate & Specialty. "We've got a hard-earned reputation to protect, and we fully intend to do so."

Taxpayers have chipped in more than $50 million to cover Magnolia's claims since 2010.

The Department of Financial Services and the chief financial officer's office say Allianz provided a questionable loan to Magnolia, charged "exorbitant" fees, and then began stripping the company of its worth until it eventually folded.

As the company's finances began to deteriorate, Allianz allegedly participated in a scheme to misreport its financial status and keep it afloat, the lawsuit claims.

Kidston denied the allegations in the complaint as "completely false," and said Allianz actually lost millions of dollars on the loan.

Magnolia went belly up despite the fact that there were no hurricanes in Florida between 2008 and 2010 when it was in operation. Its downfall, and the ensuing lawsuit, call into question the practice of allowing smaller "takeout" companies to take over policies from state-backed Citizens.

The goal of the takeouts is to get risk out of Citizens, and reduce the likelihood that homeowners will have to pay "hurricane taxes" after a storm. But in several cases, including Magnolia's, taxpayers have had to pick up the tab anyway, acting as a backstop after smaller private companies become insolvent.

Takeout companies like Poe Financial Group, Northern Capital and HomeWise Insurance all went bust after taking over large chunks of Citizens' policies. The insolvencies cost taxpayers tens of millions of dollars and the policies have often ended up back with Citizens.

Takeouts have intensified in the last year, as a handful of private insurers have taken over more than 300,000 Citizens policies. None of those companies has folded yet and most Citizens takeouts do not end up in bankruptcy or litigation.

Still, the Allianz case highlights the risks involved in shrinking Citizens, even as the company considers providing hundreds of millions dollars in incentives to encourage more takeouts.

The state is seeking more than $20 million in damages from Allianz and has hired counsel from the law firm of Hinshaw & Culbertson to handle the case.

Contact Toluse Olorunnipa at tolorunnipa@MiamiHerald.com.

State of Florida says Allianz subsidiary committed fraud 04/08/13 [Last modified: Monday, April 8, 2013 7:30pm]
Photo reprints | Article reprints

© 2017 Tampa Bay Times

    

Join the discussion: Click to view comments, add yours

Loading...
  1. Pinellas construction licensing board needs to be fixed. But how?

    Local Government

    LARGO –– Everyone agrees that the Pinellas County Construction Licensing Board needs to be reformed. But no one agrees on how to do it.

    Rodney Fischer, former executive director of the Pinellas County Construction Licensing Board Rodney, at a February meeting. His management of the agency was criticized by an inspector general's report. [SCOTT KEELER   |   Times]

  2. New owners take over downtown St. Petersburg's Hofbräuhaus

    Retail

    ST. PETERSBURG — The downtown German beer-hall Hofbräuhaus St. Petersburg has been bought by a partnership led by former Checkers Drive-In Restaurants president Keith Sirois.

    The Hofbrauhaus, St. Petersburg, located in the former historic Tramor Cafeteria, St. Petersburg, is under new ownership.
[SCOTT KEELER  |  TIMES]

  3. Boho Hunter will target fashions in Hyde Park

    Business

    Boho Hunter, a boutique based in Miami's Wynwood District, will expand into Tampa with its very first franchise.

    Palma Canaria bags will be among the featured items at Boho Hunter when it opens in October. Photo courtesy of Boho Hunter.
  4. Gallery now bringing useful art to Hyde Park customers

    Business

    HYDE PARK — In 1998, Mike and Sue Shapiro opened a gallery in St. Petersburg along Central Ave., with a majority of the space dedicated to Sue's clay studio.

     As Sue Shapiro continued to work on her pottery in St. Petersburg, her retail space grew and her studio shrunk. Now Shapiro's is bringing wares like these to Hyde Park Village. Photo courtesy of Shapiro's.
  5. Appointments at Raymond James Bank and Saint Leo University highlight this week's Tampa Bay business Movers & Shakers

    Business

    Banking

    Raymond James Bank has hired Grace Jackson to serve as executive vice president and chief operating officer. Jackson will oversee all of Raymond James Bank's operational business elements, risk management and strategic planning functions. Kackson joins Raymond James Bank after senior …

    Raymond James Bank has hired Grace Jackson to serve as executive vice president and chief operating officer. [Company handout]