A Leon County jury on Friday cleared the accounting firm Deloitte & Touche of any liability in the collapse of Tampa’s Poe Insurance Group, setting back state efforts to recoup more than $850 million in losses stemming from a flurry of hurricanes in 2004 and 2005.
The Florida Department of Financial Services sued Deloitte in 2010, alleging the firm either “willfully or negligently” ignored multiple “red flags” that indicated the looming insolvency of its client, a consortium of companies founded by former Tampa Mayor Bill Poe, who died last year.
“It was the department’s belief that Deloitte & Touche was at fault in this matter and ultimately cost Florida’s taxpayers hundreds of millions of dollars,” said DFS spokeswoman Ashley Carr in an email. “However, the jury carefully weighed the evidence and reached an alternative conclusion. Ultimately, it is the people of Florida who lost today.”
DFS oversees the state’s insurance industry and took over for the three Poe companies — Southern Family, Atlantic Preferred and Florida Preferred — after they became insolvent in 2005, leaving behind nearly $1 billion in unpaid claims. The Florida Insurance Guaranty Association was forced to pay the claims by assessing insurance policy holders throughout the state.
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The six-member jury sided with Deloitte, a global auditing giant based in the United Kingdom, in blaming the costliest insurance collapse in Florida history on Mother Nature.
“We are gratified that the jury confirmed this 2005 insolvency was caused by an unprecedented series of eight hurricanes in 15 months, not by an accounting issue,” said Deloitte spokesman Jonathan Gandal in a statement.
The state will now continue its litigation against the Poe Financial Group. The state sued the insurer in 2008 contending its three companies were unable to pay claims because they were “left as empty shells” after the Poe family raided more than $34 million in reserves. The lawsuit alleges Poe, the former mayor, transferred more than $20 million to himself as the hurricanes were hitting the state.
As the litigation has dragged on, the state has paid $7.1 million in fees to the firm of Richard Lydecker, the state’s attorney on the case. He said Friday that the jury’s verdict on Deloitte has no bearing on the Poe case.
“The auditor case was harder,” Lydecker said. “We weren’t arguing that they were the wrong doers. We were arguing that they should have been the whistleblowers on the wrong doers.”
But Bill Poe Jr., who is now president of PFG, said Friday’s verdict bodes well for his family.
“I can’t predict what the future holds for us,” said Poe. “But I’m very pleased that a jury could come to an understanding that Deloitte didn’t do anything wrong in the eyes of civil law.”
Poe said his family’s estate has no money left. He disputes allegations by DFS and Lydecker that the family took money out of the company during the crisis, and argues that instead the family put over $70 million in an effort to save the companies.
In August and September 2004, Hurricanes Charley, Frances, Ivan and Jeanne struck Florida, causing Poe huge losses. In 2005, four more hurricanes hit Florida — Dennis, Katrina, Rita and Wilma — causing more losses.
That last one, Wilma, which formed in the Gulf of Mexico and slashed east across the state from Naples to Fort Pierce in October 2005 hit Poe’s finances the hardest.
At the time when the first of the storms struck, Poe’s insurance companies had more than 300,000 policies that generated more than $500 million of gross written premiums every year, making it the third largest private insurer in the state behind State Farm and Allstate.
But while those companies had out-of-state policy premiums untouched by the hurricanes that kept them afloat during 2004 and 2005, the Poe companies were exclusively Florida policies.
“I have to get with my attorneys and find out what happens now,” Poe said. “We’ll be ready to meet the challenge.”