“Ordered into receivership.” These words on an April 25 fax froma Tallahassee judge officially put the brakes on the history of aonce-proud family-owned Florida insurance company.

The Florida Department of Financial Services (DFS) thus becamethe court-ordered receiver of the business of Poe Financial Group'sSouthern Family Insurance Co., Atlantic Preferred Insurance Co.,and Florida Preferred Insurance Co. It began, through its Divisionof Rehabilitation and Liquidation, to follow a timetable ofrehabilitation and liquidation that should be nearly complete asthis magazine issue is delivered.

The plan appeared to hit a snag May 9 when CFO Tom Gallagherwent back to court to petition for liquidation of all threecompanies, a step to which all three were refusing consent.Gallagher said in a release that the companies' refusal drainscompany resources that should be directed to pay outstandingclaims.

“These insurance companies have not presented a viable plan toget back on their feet financially,” Gallagher said. “Our focus nowneeds to be getting outstanding hurricane claims paid as quickly aspossible. Once the companies are in liquidation, the department cantap into guaranty funds so claims get paid immediately.”

While in receivership, the Division of Rehabilitation andLiquidation was taking on the work of paying the companies' claims,helping place policies with the few other available privatecompanies, and transitioning remaining insureds into CitizensProperty Insurance Corporation (Citizens).

As receiver in liquidation — if approved by the court — thedepartment would take over the company's operations and liquidateits assets to pay outstanding claims. The Florida InsuranceGuaranty Association (FIGA) is also activated to help pay claims.FIGA is funded by insurers with written premiums in the same linesof coverage.

Not a happy task at any level.

The Poe trio of companies was in financial trouble by the end oflast year, as revealed in solvency reviews by the Office ofInsurance Regulation (OIR) of their financial statements submittedin March. Southern Family stopped writing new and renewal businessin March and entered state supervision, continuing to pay claimsand to seek funding. It agreed to go into rehab in mid-April, thenwent into receivership April 26, followed by Atlantic Preferred onMay 1. Florida Preferred had also agreed to enterreceivership/rehab June 1 if it had not obtained reinsurance bythen.

The OIR, via letter from Commissioner Kevin McCarty to FloridaCFO Tom Gallagher, conveyed it was in the public's interest to makethis information public and seek the court's order — “to makecertain that policyholders have coverage upon the expiration of thereinsurance contracts so that they are fully protected duringhurricane season.”

Gallagher notified agents with policyholders covered by Poe howthe transition would play out. He urged them to try to findplacement in the private market, but relieved them of having topersonally notify each policyholder eventually going into Citizens,making the process automatic.

Take-Out Gamble Was About to Pay Off

Poe gambled on removing some 10,000 policies from Citizens justlast year, and the great majority of its business was in high-riskSouth Florida along both coasts. A $3 million take-out bonus wouldhave been due Poe if it had been able to hold the policies forthree years.

Southern Family primarily wrote commercial residential andpersonal residential coverage, and covered approximately 43,000policyholders. Atlantic Preferred and Florida Preferred togetherprovided coverage to nearly 280,000 homeowners and condominium unitowners, mostly in South Florida.

With much of the business in condos and condo associations thatincurred huge claims from the storms in 2004 and 2005, HurricaneWilma likely dealt the most debilitating blow with its widespreaddamage. Swamped with claims, Poe faced rapidly rising numbers ofclaim complaints since Wilma — a factor that caught insuranceofficials' attention early on.

“It's strictly an issue of storm losses,” Bill Poe Jr., vicechairman for Poe Financial, was quoted in a St. Petersburg Timesarticle as saying in mid-March when they stopped writing business.“It just took our capital.”

William F. Poe Sr., whose original company was Poe &Associates — said to be the largest independent insurance agency inFlorida at its sale in 1994 and the 12th largest in the nation whenit was merged as Poe & Brown in 1993 — served as mayor of Tampafor five years. The company is Tampa-based. In 1996, Poe FinancialGroup was formed, comprising Southern Family, Atlantic, and FloridaPreferred Companies. Also in that year they were among the first toprovide homeowners' coverage to Floridians who had resorted toCitizens following Hurricane Andrew.

Agents' Questions Only Partially Answered

Judge Janet Ferris' order got the receivership underway, but thepractical application of her order left many agents with unansweredquestions regarding policies, commissions, coverage, and more. MarkO'Connell, CEO of the Professional Insurance Agents of Florida,queried Tom Brinkley, DFS' receivership coordinator, and EdPasterick of the National Flood Insurance Plan regarding some ofthe confusion. PIA released the following Q&A to its members onMay 5:

Q: If all three of the Poe companies go into liquidation, willthere be any policy administrative functions still handled by Poeor by Poe staff under the supervision of Citizens?

A: At this time, we are not sure. The Receivers plan is beingdeveloped and must be approved by the court.

Q: With regards to new claims during the transition, whathappens if there is a claim that exceeds the FIGA (FloridaInsurance Guaranty Association) limit? (For example, a house burnsdown now and the claim exceeds FIGA's limits.)

A: If a loss occurs during the period in which FIGA isresponsible for coverage (or if a pre-occurring loss remains unpaidat the time of liquidation), then it will be subject to FIGA'sstatutory cap and applicable deductible.

Q: What is going to happen with policies in which Poe hasalready sent out non-renewals notices? Is that on hold, or willthose policies have to be processed directly through Citizens?

A: Policyholders should pay premiums as normal in order tocontinue their insurance coverage. Policyholders who have receivedrenewal notices for renewal periods beginning prior to July 1,2006, should also pay premiums to continue their coverage after therenewal date, unless they obtain coverage elsewhere.

Under the receivership plan, if approved by the court, thepolicies that are still in force with Southern Family on June 30will be transitioned to Citizens Property Insurance Corporationautomatically by court order until the normal expiration of thepolicy (unless it is cancelled earlier by the policyholder or fornon-payment of premium).

Citizens is aware that policyholders whose policies have normalexpiration dates in July will have limited time in which to receiveany offers of renewed coverage from Citizens and is currentlyworking on a method for notifying these policyholders of theirfuture coverage options.

Q: Poe wrote many condo-unit owner policies that are in the windpool, but they included wind coverage on the HO6 policies. Citizensdoesn't do this, so what will happen to these policies?

A: Our understanding is that Citizens will provide the coverageas it existed under the Poe policy until the expiration of thatpolicy term.

Q: Agents are going to want to know what is happening with theircommissions. If the policies are not cancelled, then will thecommissions be paid and, if so, at what rate? Poe has severaldifferent commission plans. Will Poe's commission agreement stand,or will agents revert to the Citizens schedule?

A: At this time, we do not know the answer to thesequestions.

Q: What happens to the flood policies that Southern Familywrote?

A: Ed Pasterick of the National Flood Insurance Program saidthat they are in the process of discussing ideas with stateofficials. The policies will be moved to another company or broughtinto the NFIP directly. [The answer to this was expected as thisissue was being produced.]