Two top executives alone pocketed compensation more than nine times bigger than a $1.26 million state fine over canceled policies against Florida’s largest private-sector insurer, whose parent company conducted its annual meeting last week at an oceanfront resort two states away.
A reporter who is not a shareholder was not allowed inside Universal Insurance Holdings Inc.’s annual meeting Thursday in Hilton Head Island, S.C., but executives agreed to talk to The Palm Beach Post afterward. Universal has more than 66,000 customers in its largest market, Palm Beach County.
“I want to make this clear: We’re not happy if people suffer or have issues,” said Sean Downes, president and CEO. “If people tell the truth, we pay claims.”
Downes received $6.7 million in total compensation last year, documents presented to shareholders show. Outgoing president Bradley Meier got $5 million.
Back in Florida, Ronald Ward said he is still living in a 29-foot trailer in his yard. He said Universal Property & Casualty Insurance Co. refused to pay for a house fire that caused more than $90,000 of damage. Universal voided the policy because an agent failed to note in an application years before that he had been a co-signer on a delinquent credit account for his elderly father, he said — a debt that was resolved.
“It’s a nightmare you just can’t wake up from,” Ward said.
50 percent net income increase
Whatever the fallout from cases like Ward’s, the bottom line has been growing fatter for the company. The publicly traded parent of Florida’s largest insurer after state-run Citizens with 542,000 customers reported a 50 percent increase in net income to $30 million in 2012.
The Omni Hilton Head Oceanside Resort bills itself as a luxury hotel that offers an 11-mile lagoon system ideal for kayaking and canoeing, bike trails, 25 tennis courts and three championship Hilton Head golf courses with 54 holes of golf. Also featured: three pools, two beachside hot tubs and private cabanas.
Florida regulators fined the insurer a little more than a week ago for practices including one the state’s insurance consumer advocate has called “reprehensible.” Robin Westcott said it jeopardizes the homes and life savings of people like Ward, who is disabled, and his wife, a special-ed teacher who had been hoping to retire soon in Gainesville. They and others, including a Delray Beach couple interviewed by The Post in March, said they paid premiums for years but when they really needed the company after a serious fire or water damage, they were told their policies were no good because of errors or omissions in an application.
One Hobe Sound homeowner said the company interviewed his neighbors and asked about his wife’s passport after a fire four months earlier that made local TV news. Within a day after he was quoted in The Post, he said, he got a call from the company saying it would cut a check for more than $200,000.
Downes said he can’t discuss individual cases because of customer privacy, but a special investigations unit at the company reviews all claims involving sinkholes, fire and any cases involving a public adjuster. Problems with accuracy in applications affect only a small percentage of customers, he said, but the majority should not have to pay for those who are not truthful.
But if used car dealers can run credit checks in five minutes, why can’t Universal review its applications within 90 days rather than waiting until customers file claims? Downes said not all information can be known at the time of application, such as whether someone is running an unreported business from a home.
90 days to follow rules
Insurance Commissioner Kevin McCarty on May 30 ordered the company to follow state regulations, including “performing complete underwriting” on policy applications within 90 days. Regulators cited more than 250 examples where the company failed to follow state rules on denying claims and canceling policies. They found repeat violations from a 2005 exam.
The state issued a $1.26 million fine. “For far too long, this company unjustly denied claims and forced consumers into financially devastating situations,” Florida Chief Financial Officer Jeff Atwater said. He praised the work of state insurance consumer advocate Westcott, who called it a “win” for consumers.
But in February, McCarty’s office also approved a 14.1 percent rate increase for Universal, which has $765 million in annual written premiums. The parent company’s first quarter 2013 net income jumped 21 percent to $12 million over the same period last year, a boost bigger than the fine.
Last year’s annual meeting was held not far from the company’s headquarters in Fort Lauderdale. Universal has about 40,000 customers in other states including 12,000 in South Carolina, where it chose to meet this year to focus on growth opportunities, Downes said. Company officials met with about 20 agents during the trip, he said.
The change of venue is not likely to prove a financial hardship to board members. In 2012 they were paid $85,000, plus another $15,000 for those chairing a committee, and they were reimbursed for costs and expenses related to board meetings.
West Palm lawyer on board
Among the new board members approved at Thursday’s meeting was Darryl L. Lewis, 48, an attorney and shareholder with the firm of Searcy Denney Scarola Barnhart & Shipley in West Palm Beach. A native Kentuckian and former judge advocate general attorney in the U.S. Army Reserve, Lewis’ “legal experience and deep knowledge of the Florida business market will make him a valuable member of our board,” according to material sent to shareholders.
As an attorney in personal injury and wrongful death cases, Lewis often finds himself on the opposite side of a courtroom from various kinds of insurers, but he said he hopes to offer colleagues the opportunity to “see things from another perspective.” He’s learning about various issues, but would “always have concerns” if he thought the company were not operating in the best way it could, he said.
Meanwhile, business has been good not only for executives but sometimes family members too. Universal has paid about $1.9 million since 2010 to Downes and Associates, a multi-line insurance adjustment corporation based in Deerfield Beach that performs claims adjusting work. Downes & Associates is owned by Dennis Downes, the father of Universal president and CEO Sean Downes. The amounts paid “are no less favorable to the company than can be obtained from third parties on an arm’s-length basis,” company documents maintain.
Outgoing president and CEO Meier, who received total compensation of about $5 million in 2012, is scheduled to continue receiving a base salary of $575,000, health benefits and a car and phone allowance through 2015 while providing advisory and consulting services.
Universal has also kept it in the corporate family for many insurance services — for example, a reinsurance company funded by the parent corporation received a 25.1 percent guaranteed profit from Universal Property and Casualty, as regulators saw it. “Because the reinsurer is always guaranteed a profit, there is no complete transfer of risk,” McCarty’s order said. A Universal spokesman disputed there was ever a guarantee of profit, but in any case the contract provision was removed in 2012 and the company found other reinsurance in the open market in 2013, according to regulators.
In a letter to agents, Universal said the state review contained unspecified “inaccuracies.” It has 21 days to request a hearing, though Downes did not formally say whether the company will contest the state action.
“We’re looking first and foremost to create dialogue, a meeting of the minds to remedy the situation,” Downes said.
Homeowners like Ward say their dialogue with Universal didn’t turn out so great for them: “They just waited to see if they could find a reason to say you made a mistake.”
What The Post Found
Post insurance writer Charles Elmore reported in March that Universal had taken in premiums for years but canceled policies when customers filed claims, citing a problem when they applied.