Citizens exec quits amid kickback claims
By JONI JAMES and JEFF HARRINGTON
Published September 15, 2005
TALLAHASSEE - The chief operating officer of Florida's insurer
of last resort has resigned amid allegations laid out in a
Texas lawsuit that he sought kickbacks from insurance adjusters
after last year's hurricanes.
R. Paul Hulsebusch, 39, left Citizens Property Insurance
Corp. Friday, less than two days after a Texas company suing
Hulsebusch said it forwarded damaging information about him
to the state-backed insurer. Universal Risk Insurance Services
of Houston, claims its information shows Hulsebusch accepted
at least $25,000 in goods as a bribe from a competing adjuster
that ended up winning a lucrative contract with Citizens.
Hulsebusch was tapped to overhaul the claims operation last
year after Citizens received thousands of complaints for its
slow and mistake-prone response to handling claims from hurricanes
Charley, Frances, Ivan and Jeanne.
A Citizens spokesman confirmed Hulsebusch's resignation Wednesday
but declined further comment.
Responding to calls from the Times, Citizens executive director
Bob Ricker said in a statement Wednesday the insurer takes
the allegations seriously and has launched an investigation.
"This claim will be thoroughly reviewed, and at the
conclusion of this investigation, all necessary steps will
be taken to ensure that all Citizens employees maintain the
highest level of professionalism," Ricker said.
Hulsebusch, as well as the adjuster alleged to have paid
the bribe, could not be reached for comment. Messages seeking
comment were left on an answering machine at a home Hulsebusch
maintains in Pennsylvania and on his mobile phone. Someone
answering the phone at the Pennsylvania address later Wednesday
said Hulsebusch was traveling but had been given the message.
The allegations come 11 months after Ricker hired Hulsebusch
as a consultant to turn around Citizens' embarrassingly sluggish
claims processing after the 2004 hurricanes. In February, he
was hired permanently as the chief operating officer with a
$150,000 salary. An insurance executive from a New Jersey company,
Hulsebusch blamed the delay in processing hurricane claims
on Citizens' network of third-party adjusters, saying they'd
defected to other companies that were paying more.
But the Houston lawsuit, filed in March but amended Wednesday
with the bribery allegations, offers another version of what
went so terribly wrong last year when thousands of Citizens
policyholders waited for months and months to get their claims
processed.
Universal Risk claims it was Hulsebusch's haphazard management
and his system of rewarding adjuster contracts based on bribery
that was at fault. The firm is seeking $3.6-million in lost,
past and future profits and an unidentified amount of punitive
damages from Citizens, Hulsebusch and Quantum Claim Services,
which allegedly paid the bribe. Neither Quantum's attorney
nor company owner Rodney Harrell of Richmond, Texas, who is
a defendant, could be reached for comment.
The allegations come as the insurer faces increased public
scrutiny.
By law, the state-created insurer must charge the highest
rates in the market. But its policyholders complained about
customer service more than any other's after last year's hurricanes.
What's more, all Florida property owners will see a 7 percent
surcharge on their annual premium this year to help Citizens
recover from a $515-million deficit caused by hurricane claim
payouts. The cost for someone with a $1,300 premium is roughly
$90.
State Chief Financial Officer Tom Gallagher, who appointed
the Citizens board in charge during last year's hurricanes,
could not be reached for comment. His spokeswoman said she
wasn't familiar with the case and noted that while Gallagher
appointed the Citizens board, he had no role in picking the
staff.
It's the second time in a decade the state's insurer of last
resort has come under scrutiny on allegations its executives
were dealing in self-interest.
In 1995, federal and state grand juries investigated the
state's Joint Underwriting Association - Citizens' predecessor
- after allegations surfaced that executives at an affiliated
business had been using the state insurer's offices and resources
to build a private business. Gallagher, then the state's elected
insurance commissioner, had appointed the head of the JUA who
allowed the executives at the affiliated business to work on
private business. No criminal charges were filed.
The current controversy has its roots, according to Universal,
in the panic of last year's hurricane season. Universal claims
it responded in good faith when Hulsebusch called seeking as
many adjusters as it could spare to help process Citizens'
mounting claims.
Universal said the rate schedule agreed to over the phone
with Hulsebusch before sending adjusters to Florida was never
honored nor was a written contract forthcoming. Nonetheless,
Citizens gave Universal the responsibility to assess more than
1,000 claims. Universal lost much of that work after Quantum
paid "a series of bribes to Paul Hulsebusch ... in return
for substantial work assignments resulting in substantial revenue
for Quantum and substantial lost revenue to Universal Risk," the
lawsuit charges.
Universal Risk's attorney, Scott Rothenberg, said Universal
had deployed adjusters in Florida when Hulsebusch approached
Universal asking for a kickback of 3 percent of the adjustment
fees.
"The request was made and it was refused," Rothenberg
said. "All of a sudden virtually every claim Universal
was adjusting was reassigned."
Even before the lawsuit, Citizens had come under fire for
its hurricane response and its growing role in the state's
insurance market because hurricanes and sinkholes have caused
many private insurers to stop writing policies, particularly
in Tampa Bay areas.
The 2004 hurricanes exposed and exacerbated staffing shortages,
training problems and systemic flaws within the company. One
of Citizens' biggest stumbling blocks: it didn't have a large
core of in-house adjusters and had to rely on hired, independent
adjusters to meet with hurricane victims. But those adjusters
often shoved Citizens' claims to the back of their "to-do" list.
First, they investigated claims by private insurers that were
more strategically important to them and paid better.
Gallagher, who is seeking the Republican nomination for governor
in 2006, threatened to take over the company if it didn't clean
up its act.
Meanwhile, state legislators and a task force recommended
a overhaul, including beefing up Citizens' claims department
to avoid relying on out-of-state adjusters so heavily after
a catastrophe.
Ricker, Citizens executive director, turned to Hulsebusch
to get the job done, making him Citizens' point person to parry
questions from a state task force over what the company was
doing to improve its claims handling.
"Citizens has turned the corner on claims resolution," Ricker
said in February, attributing the success to management changes. "Our
number one focus is closing hurricane claims."
Joni James can be reached at jjames@sptimes.com or
850 224-7263.
Jeff Harrington can be reached at harrington@sptimes.com or
(727) 893-8242. |
