Volume 1, Number 46, November 15, 2004     
 

                        -- Tom Gallagher

GALLAGHER VISITS MEDIATION CENTERS, GIVES STATUS REPORT ON HURRICANE RESPONSE

Florida’s Chief Financial Officer Tom Gallagher visited mediation centers in Punta Gorda and Orlando, which are now open and set up to help hurricane victims resolve claim disputes with insurance companies. More than 600 consumers have requested mediation to resolve a dispute. The first round of meetings have been scheduled to begin Nov. 22.

“For storm victims, getting their insurance claims settled so they can rebuild their homes is the crucial first step on the road to recovery,” Gallagher said. “We’re hoping to make that process easier and faster by offering mediation for consumers having disputes with their insurance companies.”

The mediation centers located at the Charlotte County Justice Center, 350 E. Marion Avenue in Punta Gorda and 8403 South Park Circle, Building 600, Suite 655 in Orlando offer a non-binding and non-adversarial claims settlement process for storm victims that is available at no cost to the consumer.

The mediation program, initiated by Gallagher, establishes a dispute resolution process for citizens who need help with resolving hurricane claims prior to pursuing other more costly options such as going to court. Mediation meetings will be scheduled and facilitated by court-certified mediators provided through the Collins Center for Public Policy. Nearly 45 mediators will be available to handle mediation requests.

Under the program, if a policyholder disputes a claim settlement offer, the insurance company is required to notify the policyholder of his or her right to mediation. The insurance company will then have 21 days to resolve the claim before a mediation meeting can be scheduled. Policyholders can also contact the department at 1-800-22-STORM to request mediation.

According to Gallagher, who was insurance commissioner when Hurricane Andrew devastated Homestead in 1992, more than eighty percent of claims referred to mediation reach settlement, and more than 90 percent reach partial settlement.

An additional mediation sites is now open at 900 U.S. Highway One, River Plaza, Suite 207 in Jupiter, and at least one other site will open in Pensacola to serve panhandle residents affected by Hurricane Ivan. Gallagher plans to visit the Jupiter site within the next two weeks.

Storm victims can learn more about mediation services by logging on to the department’s website at www.MyFloridaCFO.com <http://www.MyFloridaCFO.com> and downloading the “Mediation Program” brochure or by calling the hurricane hotline at 1-800-22-STORM.

Gallagher also gave a hurricane status report on insurance companies’ response to storm victims coping with the recent storms. Following a recent emergency rule setting deadlines for processing claims, the department has received nearly 17 percent fewer calls from consumers experiencing delays when dealing with an adjuster. In addition, out of approximately 12,000 consumers who have complained about adjuster delays, more than 75 percent have since received a response from their insurance company, with one of two positive outcomes: an adjuster visit was scheduled or settlement offered.
 

GALLAGHER RECOMMENDS EXTENDING MORATORIUM ON CANCELLATIONS TO HOMEOWNERS STILL WAITING FOR REPAIRS

At a meeting of Florida’s governor and Cabinet, state Chief Financial Officer Tom Gallagher recommended extending the current moratorium on insurance non-renewals or cancellations for hurricane victims whose homes have yet to be repaired.

“Homeowners who lose their insurance coverage before repairs are complete are uninsurable,” said Gallagher. “For the thousands of hurricane victims who are still waiting for repairs, extending the moratorium on non-renewals and cancellations gives them peace of mind as they rebuild their homes and lives.”

Recognizing that many homeowners are being told they must wait up to six months to schedule repairs due to a shortage of construction contractors, Gallagher has asked the Office of Insurance Regulation to develop an emergency rule prohibiting insurance companies from canceling or non-renewing homeowners insurance coverage until repairs are complete. The rule would be considered at the next scheduled Cabinet meeting, Nov. 23.

Gallagher said this issue may require legislation but wanted an emergency rule to be drafted in anticipation of approval by the governor and Cabinet at their next meeting.
 

 GALLAGHER ISSUES INVESTIGATIVE SUBPOENA

Gallagher announced that he has issued an investigative subpoena against New York-based Marsh & McClennan, one of the nation’s largest insurance brokerages. The subpoena requests documents related to the purchase of property insurance coverage for state-owned buildings.

“While we are currently investigating potential abuses in the insurance industry to protect Florida’s consumers, we are now taking a deeper look at insurance contracts with state agencies and any impact on public dollars,” Gallagher said. “We will not tolerate any abuse of tax dollars.”

Gallagher announced a broader look at the insurance industry as a whole last week, establishing a legal task force to investigate whether any of the activities outlined in New York Attorney General Eliot Spitzer’s recent civil suit are taking place among insurance brokerages and companies in Florida, including bid-rigging, kickbacks and improper fees. Spitzer’s suit alleges civil and criminal misconduct involving insurance brokers steering business to insurance companies for a commission.
 

JUDGE RULES AGAINST MUTUAL BENEFITS IN FAVOR OF SEC

TALLAHASSEE-A federal magistrate judge late today upheld findings by the U.S. Securities and Exchange Commission (SEC) that Mutual Benefits Corporation (MBC), the nation’s largest viatical settlement company, engaged in violations of securities law and defrauded investors.

The Department of Financial Services (DFS) and Office of Insurance Regulation (OIR) cited many of the same allegations in administrative charges filed against the company in May.

“This recommended order goes a long way toward protecting Florida investors by upholding the hard work of SEC investigators and the actions they took,” said Florida’s Chief Financial Officer Tom Gallagher, who oversees DFS. “That in turn lends itself to upholding the findings of state regulators and our aggressive pursuit of those intent on taking advantage of our citizens.”

Kevin McCarty, Commissioner of the Office of Insurance Regulation, agreed and commended both his investigative staff and the SEC for their incredible investigative work.

Barry L. Garber, U.S. Magistrate Judge for the Federal District Court for the Southern District of Florida, recommended granting the SEC's motion for preliminary injunction to stop MBC from continuing its operations in light of these troubling findings by the SEC:

· 90 percent of MBC viators had lived beyond life expectancies.
· 74 percent of policies have a negative escrow balance.
· MBC misused investor funds by paying, in a Ponzi-like fashion, the insurance premiums on older policies with new investors’ monies.
· MBC has been subject to cease and desist orders from at least five state regulatory agencies
· Joel Steinger, defacto CEO of MBC, has a prior criminal conviction for wire and mail fraud.
The Steinger brothers have extensive disciplinary histories.
· The defendants and relief defendants paid themselves millions of dollars pursuant to undisclosed consulting agreements.
· MBC was selling interest in group policies without converting them into individual policies prior to purchase and was not disclosing the corresponding risk of investing in group policies.

U.S. Judge Frederico A. Moreno will issue a final ruling on MBC’s motion after hearing responses to Magistrate Judge Garber’s findings.