EDITORIAL: Another bad deal from Citizens [The Miami Herald]

May 29--No doubt many readers instinctively flinch when they see yet another story in The Miami Herald involving Citizens Property Insurance. Unfortunately, the expectation of bad news is often proved right. Case in point: a unique, retroactive deal with an upstart insurance company based in St. Petersburg that raises a lot of questions.

Under this unusual arrangement, Heritage Property and Casualty Insurance Company will be allowed to take control of 60,000 policies that belonged to Citizens from January to June 28 of this year (hence the retroactive aspect). In return, the company will receive $52 million, which is not bad for a company that only opened for business last August.

The quid pro quo, such as it is, requires Heritage to pay Citizens for any claims arising from these policies during the six-month period. But, according to the news reports in The Herald, the company can cherrypick policies that have no claims at all, thus making it an extremely lucrative arrangement because of the minimal prospect that any of those policies constitute a liability.

Adding to the questions about Citizens' latest misadventure is the appearance of impropriety because the company donated $110,000 to Gov. Rick Scott's campaign in March. Prior to that, in October, only two months after it opened its doors, the company donated $30,000Republican Party of Florida.

"Sadly, Tallahassee is for sale," Rep. Mike Fasano, R-New Port Richey, a frequent critic of Citizens, tweeted about the deal.

Gov. Scott's office immediately distanced itself from the embarrassing controversy last week. His chief of staff, Adam Hollingsworth, complained that, "Citizens appears to be tone-deaf in earning public confidence." He also denied any assertion that the governor influenced the decision on behalf of Heritage.

On Friday, Speaker of the House Will Weatherford, R-Wesley Chapel, a rising figure in state politics, added his voice to the chorus of critics, angry over the failure to Citizens to give the Legislature advance notice and criticizing other aspects of the decision.

In addition to the terms of the deal, there's plenty to criticize.

--The proposal was voted on shortly after it was unveiled, with little publicity. It was approved by a vote of 3-2, with two others on the 8-member board absent and one abstaining. Rep. Weatherford said the questionable action was "hastily pushed through a sharply divided board."

--Rep. Fasano alleges that Heritage violated state insurance rules by contacting agents and policyholders prior to May 23, when the company officially received approval.

--Heritage President Richard Widdiecombe has a track record of fines and violations from insurance regulators. Two of the companies he ran racked up hundreds of violations and thousands of dollars in fines for breaking insurance rules, including failure to pay claims in a timely manner, using unlicensed insurance adjusters and misleading advertisement.

Citizens is on a mission to reduce its liabilities by shedding policies. But it's going about it the wrong way. Rep. Weatherford is right when he says Citizens fails to understand that it has a greater responsibility to the public.

The Legislature needs to do a better job of riding herd on the state's insurer of last resort. And Gov. Scott needs to make it clear that his 2011 call for Citizens to downsize didn't include giving away millions of dollars to upstart insurance companies with dubious leadership.

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