Florida's chief financial officer, Tom Gallagher, has opened a criminal fraud investigation into whether executives at Citizens Property Insurance Corp., the state's insurer of last resort, took bribes to award business to adjusters.
The insurer's CFO, R. Paul Hulsebusch, resigned in September following allegations of kickbacks and other unethical conduct. A lawsuit filed by Texas adjusting firm, Universal Risk, alleges that Hulsebusch accepted at least $28,000 in bribes from another adjusting firm, which later was hired to handle claims for Citizens. Universal is seeking $3.6 million in lost adjusting fees, as well as unspecified punitive damages.
The Florida insurer also is under investigation following numerous complaints by policyholders who said that Citizens failed to handle their claims in an expeditious and fair manner following the 2004 hurricanes. In early November, the Office of Insurance Regulation completed a market conduct exam looking at Citizens' handling of claim payments, and a data validation review was performed to verify the accuracy of the company's hurricane. Examiners identified several weaknesses and directed Citizens to address those areas.
Since then, the company has changed its procedures for out-sourcing claims to adjusting firms and improved the information available to its staff, enabling it to better respond to consumer calls. The exam also included an operational review to evaluate Citizens' operations according to generally accepted accounting practices and good internal controls in keeping accounts, records, methods, and practices relating to insurers.
The alleged ethics breaches are being investigated by the Department of Financial Services Fraud Division and the Auditor General. Citizens released a statement saying that the company was conducting its own investigation.
Earlier in the year, state Senator Ron Klein (D-Boca Raton) asked the state auditor to launch an independent probe into allegations that the insurer had improperly allocated funds to residents of Dade County. "Information we received from the state-run company shows that Miami-Dade received more than $22.5 million from Citizens," said Klein. "Anyone who has a legitimate insurance claim due to hurricane damage is entitled to receive compensation, but I don't understand how more than 6,000 residents in Miami-Dade, where there were no hurricane-force winds, were able to claim and receive $22.5 million for hurricane damages.
"If we find evidence of fraud, people who received false payments need to be prosecuted and those in charge of the pay-outs should be fired," Klein continued.
In addition, Citizens is the defendant in a class action suit filed in Leon County in which clarification is sought on whether Citizens is responsible for paying for hurricane damage caused by flooding.
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