A senator’s lucrative but questionable insurance sideline

To people in public office, the difference between "doing good" and "doing well" can be the difference between doing right and doing wrong.

Florida legislators said they were doing good for the public when they made it harder for policyholders to sue their insurance company over denied claims. They asserted that it would relieve market turmoil, attract new companies and reduce the nation's highest homeowner rates. That's highly debatable, because the law (last session's HB 837) doesn't require companies to pass along their savings. But that's their story and they're sticking to it.

Now, at least one legislator who voted for that bill aims to do well by cashing in. Republican Sen. Joe Gruters approached colleagues about investing in a start-up company, Village Protection Insurance. A solicitation he forwarded described a "unique and lucrative opportunity for investors."

Gruters, 46, of Sarasota, is a CPA and former chairman of the Republican Party of Florida who was state co-chairman of Donald Trump's first Florida campaign in 2016. The senator reported a net worth of $2.8 million last year.

Deepening the distrustOther companies are also luring legislators to invest, according to the Miami Herald and the Tampa Bay Times.

You might be asking, "Is this legal?" The answer is yes. But it's wrong on two important levels: Public opinion and public policy.

Public opinion of politicians and distrust of institutions is dangerously low throughout the nation. Among the reasons, Pew Research reported, is that 63% of those polled believe that all or most elected officials run for office to make a lot of money.

What Gruters proposes deepens the distrust.

Sen. Jason Pizzo, D-Hollywood, alluded to it when he said why he wouldn't invest in Gruters' company or in any other.

"I just don't want to be directly involved with profiting off of what is less restrictive, or more favorable, conditions for insurers," Pizzo told the Times and Herald. The appearances "probably aren't great," but he said policyholders wouldn't care if their rates come down.

Insurance is highly regulated by a division of the Florida Department of Financial Services, which executes the laws that legislators pass and depends upon them for its appropriations. For legislators to also be investors creates the possibility of improper influence on regulators and self-dealing through lawmaking.

There's nothing new about state legislators angling to enrich themselves from their positions.

In the 1960s, a Miami company, State Fire & Casualty was known to be in financial difficulty, but state Insurance Commissioner Broward Williams held off on declaring it insolvent and putting it into receivership. The reason, as it appeared, was that the chairman of the House Insurance Committee, Rep. Carey Matthews, a Miami Democrat, was the insurer's general counsel.

Acceptable 'by current standards'The scandal led to a U.S. Senate investigation, Williams' electoral defeat in 1970 and Matthews' indictment in 1971 on 19 counts of securities, mail and wire fraud. He resigned from the Legislature, pleaded guilty to one count and got five years' probation.

Over the years, many legislators have been licensed insurance brokers.

Rep. J. Hyatt Brown, a Daytona Beach Democrat and House speaker in 1977-78, headed a brokerage that became the sixth-largest in the country. Although the state insurance division can revoke licenses, that aspect of regulation is not nearly as extensive as its authority and responsibility to assure the financial soundness of the companies they represent.

Even there, experts say, investments by Gruters and other legislators would not cross a legal or ethics barrier.

But public opinion is much different.

"At its worst interpretation, Gruters' behavior is probably deemed acceptable by current standards," said Bonnie Williams, a former executive director of the Florida Commission of Ethics, in an email to the Sun Sentinel Editorial Board.

She added that if the legislation was controversial — as the insurance bills were — "a legislator would be hard-pressed to argue that his subsequent interest was a coincidence."

The optics look badThe bar to reach a conflict of interest in the Florida Legislature is intentionally very high because they can hold outside jobs, according to Ben Wilcox, research director of Integrity Florida, a watchdog group. He noted that legislators often sponsor bills and serve on committees that could benefit their own personal income. Senate rules require senators to vote unless a bill would provide them a "special private gain or loss."

What Gruters is doing would not be a conflict of interest under Senate rules. But the optics look bad to Floridians struggling with sky-high insurance premiums.

"I'm sure he will spin it by saying he's trying to make insurance more affordable, but to the public, it will look like he is seeking to profit from homeowners desperate to find affordable insurance coverage," Wilcox said.

The Legislature is scheduled to convene for 60 days a year, but legislative service is increasingly time-consuming, with frequent special sessions, committee meetings in the months preceding the session and frequent public appearances and gatherings with constituents. Legislators are paid $29,697 a year.

As a result, Florida's low-salaried "citizen legislature" is highly unrepresentative of how most Floridians live. A 2018 study by the Tampa Bay Times found that nearly half the legislators serving were lawyers or chief executives. Only nine reported lawmaking as their primary income source, but few could survive on that paltry salary.

This imbalance will continue as long as Florida perpetuates the myth that governing the third-largest state is not important enough to be full-time work — and so will the temptation for legislators to do well for themselves.

An editorial from the South Florida Sun Sentinel.